Journal of Business Models (2014), Vol. 2, No. 1 pp. 6-18

The Practice of Creating and Transforming a Business Model

Petri Ahokangas1 & Jenni Myllykoski2

Abstract

Purpose: The paper explores the dynamics of business model creation and
transformation as practices.

Design/methodology/approach: The paper is conceptual and exploratory in nature and
builds on the practice / action learning approach.

Findings: The paper presents an action research based framework for approaching
and understanding business model creation and transformation as practices. These
practices are rooted in managerial and entrepreneurial experience through the
exploration and exploitation of business opportunities and competitive advantages.

Practical implications: From a managerial and entrepreneurial perspective, the findings
of the paper highlight the role and dynamism of the business context and of continuous
assessment of the business model in business model creation and transformation.

Originality/value: The paper proposes a novel framework for business model creation
and transformation and sees them as practices. It also connects business models to
opportunity and advantage exploration and exploitation.

Keywords: Business model creation, business model transformation, practices, business opportunities, competitive advantage.
1: Oulu Business School, Department of Management and International Business, petri.ahokangas@oulu.fi
2: Oulu Business School, Department of Management and International Business

Please cite this paper as: Ahokangas, P. & Myllykoski, J. 2014, ‘The Practice of Creating and Transforming a Business Model’, Journal of Busi-
ness Models, Vol. 2, No. 1, pp. 6-18.

Journal of Business Models (2014), Vol. 2, No. 1 pp. 6-18

1. INTRODUCTION

The term business model has become one of the
keywords of contemporary business (Zott, Amit, and
Massa, 2011; Onetti et al., 2012). The term denotes not
only a practical tool but also an object of analysis in
research (Zott et al., 2011). However, understanding the
dynamic side of business models—especially how they
are created or changed in practice—by referring solely to
existing research, is problematic from two standpoints.
First, while there have been many attempts to define
the concept (see Zott et al., 2011 and Onetti et al., 2012)
and as many to capture the essence of business models
(see Linder and Cantrell 2000; Chesbrough, 2010;
McGrath, 2010; Sosna et al., 2010; Osterwalder and
Pigneur, 2010), we find a research gap arising from the
fact that scholars have paid surprisingly little attention
to the processes of creating and transforming business
models despite there being an implicit assumption of
an underlying process dimension in the business model
concept. Second, the dynamics between the business
model concept and the relevant business context—
sometimes referred to as the business environment—
where it is applied appears often rather obscure in
the prior research. The business context has in most
cases been reduced to customers, channels, partners,
and suppliers, focusing on value creation and capture
(Osterwalder and Pigneur, 2010; Zott and Amit, 2010).
Again, we find a research gap attributable to only a few
research papers having systematically considered the
dynamics of the development of the business model
in its business context (Markides, 2006; Teece, 2010).

Given the above considerations, we argue that there is a
need for a research approach that enables the contextual
unfolding of the dynamics of business model creation
and transformation. We want to emphasize the ways
in which managers and entrepreneurs perceive the
situations in which business models are created and
transformed, and the processes involved. In this paper,
we adopt the experiential learning perspective, which
offers a new way of looking at business model creation
and transformation as parallel practices of visioning,
strategizing, performing, and assessing (Torbert, 1991;
Meyer, 2003; Torbert 2004). These parallel practices
build upon the territories of experience—the outside
world, self-sensed behaviors and feelings, the realm of
thought, and the realm of vision/attention/intention

(Torbert and Taylor, 2008)—that influence managers
and entrepreneurs when they make judgments
concerning action. Scholars have noted that it can
be difficult to learn from action without a continual
shifting of awareness between and among these
territories (Fisher and Torbert, 1995; Meyer, 2003).
Further, the practice-oriented thinking applied in this
paper introduces a fresh view on what is meant by
the business context, as it highlights the focal actors’
knowledge and experience relevant to action, and
indeed, experience and knowledge are rooted in action.

By referring to both the creation and transformation of
business models, we want to highlight that there is an
experiential and time difference between the original
creation of the business model and its subsequent
transformation or change—even though the basic idea
of the business model as a concept remains the same.
The practices of visioning, strategizing, performing,
and assessing involve the territories of managerial/
entrepreneurial experience, and through these practices
the business model can lead the company to competitive
advantage when exploiting a business opportunity in a
business context. Reflecting this processual approach,
we adopt a strong orientation toward practices, where
action (Tikkanen et al., 2005), business context (Teece,
2010), and experiential learning (Sosna et al., 2010)
all play an important role when researching business
models and, especially, when researching the dynamics
of creating and transforming business models.

From these starting points, this conceptual paper seeks
to explore the following question: How can business
model creation and transformation be approached as
practices? The term practice can itself be approached
from several standpoints. In this paper we build
mostly on the practice-based perspective (Sole and
Edmondson, 2002; Swan et al., 2007, Corradi et al.,
2010), which emphasizes the collective, situated, and
provisional nature of knowledge, connotes doing, and
involves the awareness and application of both explicit
(e.g., theories, concepts, tools, procedures) and tacit
(e.g., rules of thumb, shared worldviews, capabilities)
elements of knowledge in the social, historical, and
structural contexts in which action takes place. Thus,
we assume that business models are seldom the
creations of, or transformed by, single individuals but
are instead created and transformed by a group of

Journal of Business Models (2014), Vol. 2, No. 1 pp. 6-18

individuals, since they require doing, i.e., action, and
are rooted in the experience and knowledge of the focal
actors.

This paper aims to contribute by specifically discussing
business models from the creation/transformation
point of view, and by rooting that discussion in the fields
of strategy and entrepreneurship. We begin by reviewing
the business model literature from three standpoints
by looking at how the business model concept has been
approached in earlier research, how business models
have been seen from a processual perspective, and how
the context of business models has been understood.
We continue by connecting the business model to the
concepts of business opportunity and competitive
advantage by paying particular attention to the
exploration and exploitation of both opportunity and
competitive advantage as the key elements of business
model creation and transformation. We propose a
framework for approaching business model creation
and transformation as a managerial or entrepreneurial
practice. The proposed framework relates business
model creation and transformation practices to the
exploration and exploitation of business opportunities
and competitive advantages. We conclude by
discussing the theoretical and managerial implications
and the limitations of our research.

2. CREATING AND TRANSFORMING
BUSINESS MODELS IN EXTANT
RESEARCH

Business models in current
literature
Among the vast number of different definitions of the
business model concept (Zott et al., 2011 and Onetti
et al., 2012), two central issues appear repeatedly:
the business model as a representation of the logic
of value creation and capture (Shafer et al., 2005;
Teece, 2010), and the structure, architecture, or
framework of the business (Teece, 2010; George and
Bock, 2011; Mason and Palo, 2012). These two areas
aspects enable the business model concept to connect
abstract-level strategy (i.e., theoretical thinking) to
its implementation on a practical level (i.e., action)
(Osterwalder and Pigneur, 2002; Richardson, 2008).

The reason the concept of the business model has
attracted such attention among practitioners and
academics is down to its impact on a firm’s competitive
advantage; especially in today’s turbulent, global
business environment (Richardson 2008; McGrath
2010; Teece 2010). A business model connects the firm
and its external business environment, customers,
competitors, and society (Teece, 2010). A business
model can act as a pathway to competitive advantage
(Teece, 2010; Zott et al., 2011) built upon a business
opportunity. For example, Zott and Amit (2010) see
the exploitation of a business opportunity as the
overall objective of the firm’s business model. In the
opportunity landscape, a business model can be viewed
as the cognitive link between an entrepreneurial
appraisal of the opportunity and its exploitation (Fiet
and Patel, 2008).

Since the emergence of the business model concept
within the e-business context (see Timmers 1998;
Amit and Zott, 2001; Osterwalder 2004; Wirtz,
Schilke and Ullrich, 2010), the business model
literature has generally been focused on identifying
the central elements of the business model construct
(see for example, Onetti et al., 2012; Shafer et al.,
2005; Richardson, 2008; Osterwalder and Pigneur,
2010; Zott and Amit, 2010; Mason and Spring, 2011).
Owing to the amount of attention paid to business
model elements, business models have usually
been regarded as static descriptions. However,
a more dynamic and processual approach to the
business model is needed to match today’s complex,
turbulent, and uncertain business environment
(Kagermann, Osterle and Jordan, 2011). An important
notion by Morris et al. (2005) is that the business
model is never static but develops continuously
through specification, refinement, adaptation,
revision, and reformulation. Thus, when adopting
or building a view of the business model, not only
the content (i.e., the “what”), but also the process
(i.e., the “how”) aspects of the business become
important (Zott et al., 2011).

Business model creation and
transformation processes
A processual approach calls for a closer examination
of the business model creation and transformation

Journal of Business Models (2014), Vol. 2, No. 1 pp. 6-18

processes. Business model creation has usually
been regarded as a complex and dynamic process
characterized by uncertainty, experimentation, and
learning (Chesbrough, 2010; McGrath, 2010; Teece,
2010). For new businesses, the business model can
be fairly informal and implicit, but it evolves gradually
through trial and error (Morris et al., 2005). In their
case study, Sosna et al. (2010) divided the evolution of
a business model into two phases: The first involves
experimentation and exploration, and the second is
the exploitation phase. Both are closely connected to,
and shaped by, experiential learning. For established
businesses, the transformation of an existing business
model brings special challenges to the creation stage of
a new business model. For example, an organization will
often be forced to deal with conflicts (e.g., relationship
conflicts) and trade-offs between the old and new ways
of doing business (Markides, 2006). The new business
model may even demand that existing businesses
be cannibalized in the course of the transformation
process (Teece, 2010). Transforming the business
model means changing the organization as well (Linder
and Cantrell, 2000), and the activities and logic related
to the new business model can be incompatible with
the status quo (Markides, 2006; Chesbrough, 2010).
Owing to such difficulties, established organizations
have favored an incremental form of business model
transformation (Linder and Cantrel, 2000) in which,
once again, experimentation and learning are crucial
(McGrath, 2010; Sosna et al., 2010). As an alternative,
firms have also been found to trial multiple business
models at the same time (Brown and Gioia, 2002). Thus,
for both new and established businesses the need to
evaluate the suitability of the business model means
that it has to be evaluated against the business context
and further calibrated in order to find an optimal fit
with the environment (Teece, 2010). It appears evident
that the business context has a major impact on both
business model creation and transformation.

Table 1 summarizes the current literature on the
creation and transformation of a business model,
building on the three elements of change proposed by
Pettigrew (1990): content, process, and context. When
analyzing the business model literature through these
elements, an interesting finding that arises is that the
meaning of the context to business models has rarely
been discussed, as the major part of the literature has

focused on the content aspects to the extent that the
process aspects of the business model remain relatively
underexplored.

Business model: from opportunity
to competitive advantage
The processes through which new business models
are created, and existing ones transformed, take place
in a business context. The contemporary business
model literature provides two concepts relating
business models with the external business context,
i.e., competitive advantage and business opportunity.
As discussed, a business model can act as a pathway
to competitive advantage (Teece 2010; McGrath 2010;
Zott et al. 2011) built upon a business opportunity.
Second, Zott and Amit (2010) see the exploitation of
a business opportunity as the overall objective of the
firm’s business model. Consequently, more detailed
discussion of the business model, and these two
key concepts, business opportunity and competitive
advantage, is merited. The business opportunity
and competitive advantage are the key constructs to
connect the business model to the dynamics of the
business context when we are discussing business
model creation and transformation as managerial or
entrepreneurial practices.

The opportunity-seeking behavior and processes are
described in the field of entrepreneurship (Alvarez and
Barney, 2007 and 2010; Shane and Venkataraman,
2000). Eckhardt and Shane (2003: 336) define
entrepreneurial opportunities as “situations in
which new goods, services, raw materials, markets
and organizing methods can be introduced through
the formation of new means, ends, or means-ends
relationships.” The discussion around opportunities
has largely focused on the ways in which entrepreneurs
become involved with new opportunities (whether
they are discovered or created), but what happens
afterwards has rarely been discussed. Identifying an
opportunity is not enough since the opportunity must
then be realized (Mainela and Puhakka, 2009).

Ardichivili et al. (2003) are among the few scholars
to have discussed opportunity identification and
development as a process. Their basic argument is
that elements of opportunities are recognized, but

Journal of Business Models (2014), Vol. 2, No. 1 pp. 6-18

Table 1. Business model creation and transformation.

Business model creation Business model transformation

Content
Business model conceptualizations:
• an “architecture” (e.g. Timmers, 1998; Teece, 2010), a “recipe” (e.g. Baden-Fuller and Morgan,

2010; Sabatier et al., 2010), a “narrative” (Magretta, 2002; George and Bock, 2011), “cognitive
map” (Chesbrough, 2010), a “design” (Smith, Binns and Tushman, 2010) or “actualization of deci-
sions and actions” (Tikkanen et al., 2005) for competitive advantage.

Business model definitions:
• “A business model defines how the enterprise creates and delivers value to customers, and then

converts payment received to profits” (Teece, 2010; 173).
• “...a representation of a firm’s underlying core logic and strategic choices for creating and

capturing value within a value network” (Shafer et.al., 2005: 202).
• “...the design of organizational structures to enact a commercial opportunity” (George and Bock

2011: 99).

Business model elements:
• Strategic choices, Value Network, Create value, Capture value (Shafer et al., 2005)
• Value proposition, The value creation and delivery system, value capture (Richardson, 2008)
• Focus (what?), modus (how?), locus (where?) (Onetti et al, 2012)

• No internal limitations to business model
content

• Linked with external opportunity
• Innovativeness, novelty, efficiency, inimitability

(e.g. Teece, 2010; Zott and Amit, 2010; George
and Bock, 2011)

• Possible conflict with existing and new BM
content à cognitive barrier for inventing
new BM

(e.g. Markides, 2006; Chesbrough, 2010)

Process
• Adapting / reacting to emergent changes in environment (Wirtz et al. 2010) vs. Proactively lead-

ing the industry evolution (Demil and Lecocq, 2010).
• Sequential, continuous process: specification, refinement, adaptation, revision, and reformula-

tion (Morris et al., 2005), exploration – exploitation duality (Sosna et al., 2010).
• Experimenting, learning and managerial cognition shape the process (Sosna et al., 2010)

• Design elements: content, structure and
governance

• Breaking down the existing logic within the
market

• Implementation as important as the content
• Uncertainty shape the process

(e.g. Chesbrough, 2010; Teece, 2010; Zott and
Amit, 2010)

• Change of cognitive frames needed
• Cannibalization of the existing BM
• Timing important
• Incremental vs. radical change
• Continuous process

(e.g. Shafer et al., 2005; Chesbrough, 2010; Mc-
Grath, 2010; Teece, 2010; Hacklin and Wallnöfer,
2012).

Continues on next page

Journal of Business Models (2014), Vol. 2, No. 1 pp. 6-18

Table 1. Business model creation and transformation.

Context
• Uncertain, turbulent, dynamic with increased power in business networks / ecosystems (Kager-

mann et al., 2011), competitive advantage being temporary (D’Aveni et al., 2010).
• Business models are calibrated in context (Teece, 2010) and developed in interaction with their

social context including the society, competitors and customers (Tikkanen et al., 2005)

• Possibility of disrupting the current market
with a new BM

(e.g. Chesbrough, 2010; Teece, 2010)

• Threat of newcomers with novel BMs
• Possible channel conflicts

(e.g., Chesbrough, 2010; McGrath, 2010; Teece,
2010)

the actual opportunities are made, not found. This in
turn is based on a cyclical and iterative process that
involves the recognition, evaluation, and development
of opportunity. Ardichivili and colleagues describe
how initially opportunities are just simple concepts,
but are elaborated as the development process
proceeds. Through a more precise definition of market
needs, customer benefits, users, and resources, the
opportunity progresses first to become a business
concept, and then ultimately matures into a business
model. The key strength of their approach is that it goes
beyond the first stage of the process, the discovery of
the opportunity (see Shane and Venkataraman, 2000),
and examines how that opportunity is developed into
a real, established business. The important notion is
that realizing the opportunity involves designing and
implementing a business model (George and Bock,
2011).

However, success in the implementation of the business
model is not enough to create a competitive advantage:
The business model itself has to meet customer needs
and be non-inimitable, as successful business models
tend to be imitated rather quickly (Teece, 2010). Thus,
if a firm is to establish a competitive advantage based
upon an opportunity, its business model has to be
differentiated, effective, and efficient. Furthermore,
the elements of the business model have to work
as a system (Teece, 2010), one that extends beyond
organizational boundaries and involves the exchange

partners of the focal firm (Zott and Amit, 2010; Nielsen
and Bukh, 2011).

The business model concept fosters a new, dynamic
approach within strategic management in terms of
competitive advantage. McGrath (2010) discussed
two traditionally recognized views of competitive
advantage: industry positioning and the resource-
based or dynamic capability views. She argued
that in today’s economy, competitive advantages
are rarely sustainable and therefore continuous
engagement with changing customer value creation,
as well as experimentation with new business models
(Chesbrough, 2010), are necessary to complement
the long-term development of an industry position,
resources, and capabilities. The business model as a
concept is closer to action, and therefore working on
the business model improves the conditions managers
work under when making decisions during the ongoing
search for temporary competitive advantage in
turbulent environments (McGrath, 2010).

In this field of opportunities and competitive advantage,
it is important to address the processual dynamics
of organizational development through the concepts
of exploration and exploitation originating from
March’s seminal work on organizational learning and
adaptation (1991 and 2006). We argue that the tension
between exploration and exploitation can improve
our understanding and descriptions of the processes

Continued from previous page

Journal of Business Models (2014), Vol. 2, No. 1 pp. 6-18

of business model creation and transformation.
Exploration refers to the pursuit of what might come
to be known through creativity, experimentation, and
learning. Exploration is characterized by activities
intended to recognize new ideas and opportunities
that could become the foundation of future sources
of competitive advantage. In contrast, exploitation is
defined as the “application of established competence
to problems” (March 2006: 205), which is centered
on the refinement, focusing, and efficiency-based
routines that are the foundation of the current
competitive advantage (March, 1991). Operating in
an environment that is unfamiliar and ever changing
requires both exploration and exploitation, but owing
to limited resources within organizations there is a
tension between the two and it is hard to find a balance
between them (March, 1991 and 2006).

Exploration and exploitation can be seen as two
interconnected processes running during the creation
or transformation of the business model, where
exploration leads to exploitation through learning,
experimentation, and an explicit exploitation decision.
Thus, exploration can be seen as a “seeking” process
and exploitation as a “doing” process (see Shindehutte
and Morris, 2009). In this paper, we propose to connect
the processes to the interplay between business
opportunities and competitive advantage. Following
this, the seeking of opportunities (i.e., exploration)
follows a decision to exploit those opportunities (see
Choi and Shepherd, 2004). Similarly, we argue that the
creation of competitive advantage can be divided into
exploration and exploitation phases, in other words,
exploration of the competitive advantage leads to
exploitation through experimentation, learning, and an
exploitation decision. Thus, we identify the exploration
and exploitation of opportunity, and of advantage,
as processes running in parallel with the creation and
transformation of a business model.

3. BUSINESS MODEL CREATION
AND TRANSFORMATION AS
PRACTICES

As in all organizational action, it is important to note
that in reality there can be fundamental differences
in business model creation and transformation, both

between firms and within firms over time. We argue
that the business model becomes fully comprehensible
only by attaching it conceptually to action in its business
context. This can be seen as one of the primary reasons
why there is no consensus over the definition of a
business model in the earlier research because without
a contextual understanding, the definition of the
concept inevitably remains vague.

The territories of experience approach elaborated by
Torbert (1991 and 2004) and Meyer (2003) offers a
novel way to systematically approach business model
creation and transformation as an organizational
practice; visioning, strategizing, performing, and
assessing business models in context. In this context,
visioning is concerned with the long-term intentions,
futures, purposes, and aims of the business; strategizing
with planning and implementing the content and
process of the business model; performing with doing
business with the business model; and assessing with
the observed consequences and effects of action.
Managers’ and entrepreneurs’ specific experiences of
applying and developing business models (action) can
be expected to stimulate reflection upon experience
(Kolb, 1984; Saunders, 1997; Meyer, 2003), thus leading
to a refined understanding of business models, their
conceptualizations, and the contexts of the businesses
in question.

Any attempt to better understand business model
creation and transformation means relating them
to the practices—visioning, strategizing, performing,
and assessing—that illuminate the exploration and
exploitation of the opportunities and advantages
of the business. Figure 1 below depicts a conceptual
framework for approaching business model creation
and transformation as practices. We argue that from
a practical (managerial or entrepreneurial) point
of view, business model visioning is related to the
exploration of opportunity and advantage; business
model strategizing to the exploration of advantage and
exploitation of opportunity; business model performing
to the exploitation of opportunity and advantage;
and business model assessing to the exploitation of
advantage and exploration of opportunity. In addition,
we argue that business model creation as a practice
starts and ends with visioning, whereas the practice
of business model transformation starts and ends

Journal of Business Models (2014), Vol. 2, No. 1 pp. 6-18

with performing. These practices are examined in more
detail below.

Picture 1. Business model creation and transformation
as practices.

To start with visioning, business model creation as a
practice can be seen to be concerned with the future
(McGrath, 2010) as it is about creating something new.
It requires questioning whether the organization or the
team has the opportunity and the advantages required
to do business. The embryonic business model needs to
be framed collectively by those involved in the possible
future events envisioned (Mayer, 2003) and that frame
can then used to explore the opportunity and possible
advantages needed or at hand. Potentially there can
be numerous opportunity–advantage combinations to
be considered as possible options for doing business.
During strategizing, the opportunity is shaped into a
real business model description (Ardichivili et al., 2003)
once the business opportunity to be exploited has been
chosen, but the advantages required to make doing
business viable may not be evident. The focal actors’
lack of experience of the situation may thus strongly
influence business model creation. Only in the act of
performing is the chosen business model tested against
the exploited business opportunity and advantages
at hand (Sosna et al., 2010). During performing, the
feedback from action can lead to a change of any
of the practices related to the business model, be
that a change of the business model, the strategy in
question, or a change of emphasis in terms of what is
important to those involved (Torbert and Taylor, 2008).

In the assessing phase, the consequences of action
based on the business model and the competitive
advantages exploited are evaluated against business
opportunities in a wider sense, not only against
the exploited opportunity but also against possible
alternative opportunities. During this process, the
boundary between assessing and visioning practices
may become blurred since all meaningful assessment
of a business model should be made with an eye to the
future, too.

Starting with performing, the practice of business
model transformation is concerned with the
organizational liabilities stemming from doing business
with an existing business model (Markides, 2006) that
exploits the earlier chosen business opportunity with
existing advantages. The pressures to change the
practices related to the business model, to change the
business model or strategy itself, or the attention of
those involved are determined by the type and quality
of feedback (Torbert and Taylor, 2008) available.
Assessing can be seen as a crucial element of business
model transformation (Teece, 2010), as the scope and
scale of the re-explored business opportunities, the
respective business model, and exploited advantages
may exhibit planned or emergent systemic resistance.
Moreover, the business context, boundaries, and
properties of the business model system may be
difficult to change due to their complexity and
dependencies, especially in uncertain and dynamic
business contexts. In the visioning process, the concern
with the future of the business model may vary across
its different elements. In addition, there may be
conflicting views on the future scale and scope of the
re-explored business opportunities and advantages
held by the firm, all stemming from prior action. In a
similar manner, strategizing can be dependent on prior
action and experience, leading to a more limited set of
options for planning the implementation or for doing
business. Thus, the border between strategizing and
performing may become blurred for those charged with
ending the cycle of business model transformation.

To summarize, we argue that the creation of a business
model as a practice differs from the transformation of
a business model as a practice. The practice of business
model creation exists in a business context that may
not be well known by those involved with that practice,

Journal of Business Models (2014), Vol. 2, No. 1 pp. 6-18

therefore the opportunity and the advantages for
business model creation may remain elusive and
undiscovered for some time. In the practice of business
model transformation, the liabilities stemming from
the existing business model may provide a business
context that is too constrained for those involved,
and the business opportunities and advantages may
be considered fixed. In addition, the business model
creation and transformation practices have different
starting and end points. In one sense, business
model creation can be regarded as conceptually
closer to entrepreneurial behavior, since it starts with
opportunity-seeking behavior in the form of visioning.
On the other hand, business model transformation
resembles the traditional view of experiential learning
in an organizational business context, where the cycle
is started by performing (with the existing business
model) and continues with assessing, visioning, and
strategizing (Meyer, 2003; Mead, 2008). In sum, the
key difference between the two practices is rooted in
the managerial and entrepreneurial experience rooted
in action in a business context.

4. DISCUSSION AND CONCLUSIONS

This study discusses business model creation and
transformation as practices, and presents a framework
for approaching and understanding business models
from the perspective of action. We relate business
model creation and transformation as practices to
the exploration and exploitation of both business
opportunity and competitive advantage in firms, and
argue that the business model as a concept becomes
fully comprehensible only through action in the business
context where it is created. We see business model
creation and transformation practices as comprising
visioning, strategizing, performing, and assessing with
the goal of reaching a competitive advantage regarding
a business opportunity. In addition, we relate visioning,
strategizing, performing, and assessing to opportunity
exploration and exploitation as well as to advantage
exploration and exploitation in a specific business
context.

The exploration and exploitation of opportunities and
advantages contribute to the evolution of the business
model in a unique way. In practice, they help us to
understand why business model transformation is so

complex for established companies. Ensuring balance
and creating a fit between business opportunities
and competitive advantage, as well as fostering both
exploration and exploitation, present major challenges
for companies. Furthermore, neither business
opportunities nor competitive advantages remain
static, meaning that exploration and exploitation are
continuous and involve uncertainties for managers
and entrepreneurs. We argue that the complexity and
uncertainty inherent in today’s business environment
(yet which are largely absent from current business
model conceptualizations) may be revealed by the
framework presented in this paper. In addition, we
believe that the framework will help researchers
to capture the difference between business model
creation and transformation processes as the creation
of a new business model is free of the burden of the
exploitation of current or previous advantages. We
suggest this is a step forward from addressing only
business model innovation.

The visioning, strategizing, performing, and assessing
processes bring a much needed action perspective
to business-model-related processes. The driver
of these practices that eventually shapes business
model creation and transformation is experiential
learning. Learning and unlearning make the processes
continuous; they foster the modification of the existing
business model and also create the basis for the
exploitation of opportunities and advantages, as well
as further exploration related to possible new (or yet to
be transformed) business models (Sosna et al., 2010).

To conclude, the ramifications of the practice-
based approach to business model creation and
transformation that we have presented include at least
three interconnected notions for future research. First,
we find a need to define the concept of the business
model from a new perspective, that of action. We
argue that business models have, in earlier research,
often been presented as static and fixed even though
the dynamism of all business has been recognized.
We see that the contributions of Chesbrough (2010),
Demil and Lecocq (2010), Zott et al. (2011), Onetti et
al. (2012), and Sosna (2012) have paved the way to
seeing business model creation and transformation
as processes of experimentation and action, but the
practice-based conceptualization of the business

Journal of Business Models (2014), Vol. 2, No. 1 pp. 6-18

model is still in its infancy. Second, with the adoption
of the practice-based approach, a longitudinal,
systemic, and systematic view of business model
creation and transformation is unfolding. Chesbrough
(2010) argued that business models are often far from
clear to managers; they typically involve trial and error
and require experimentation. This highlights our third
interconnected notion, the role of the business context
where the business model is created or transformed
and the experience of the managers and entrepreneurs
involved. Discussing opportunities, Ardichivili et al.
(2003) conceptualized business concepts as maturing
into business models in a business context. Similarly,
Teece’s (2010) argument that business models need to
be calibrated illustrates the important role played by
context, but to date no coherent contextual model or
perspective has been presented within business model
research.

From the managerial or entrepreneurial viewpoint, this
paper has several implications. First, it is important
to note that the relationship between a firm’s
business model and the business context is dynamic
and, therefore, that all business models require
continuous assessment against the business context
and subsequent adjustment or improvement to retain
competitiveness. Second, the conceptual model
presented in this paper reveals the difficulties related

to business model creation and transformation, which
in turn can help managers and entrepreneurs to better
understand the threats and barriers to doing business.
Finally, the visioning, strategizing, performing, and
assessing practices utilized in the framework highlight
the importance of managerial action and experiential
learning.

The limitation of this research is that it presents a
conceptual model of business model creation and
transformation and does not present empirical data.
Empirical, longitudinal research on the business
model creation and transformation processes would
increase our understanding of those practices. We
find that the concept of the business model in the
context of understanding organizational dynamics
remains promising, especially when combined
with organizational action, business context, and
experimental learning. Adopting an action-oriented
and practice-based approach to business model
conceptualization opens up a processual dimension
and brings the concept closer to managerial and
entrepreneurial practice. Furthermore, when viewed as
encompassing the concepts of business opportunity
and competitive advantage, the business model
clearly has potential to advance our knowledge of
contemporary business practices.

REFERENCES

Alvarez, SA., Barney, JB. (2007). Discovery and creation: alternative theories of entrepreneurial action. Strategic
Entrepreneurship Journal,1: 11-26.

Alvarez, SA., Barney, JB. (2010). Entrepreneurship and epistemology: The philosophical underpinnings of the study of
entrepreneurial opportunities. The Academy of Management Annals, 4 (1): 557-583.

Amit, R., Zott, C. (2001). Value creation in e-business. Strategic Management Journal, 22: 493-520.

Ardichivili, A., Cardozo, R., Ray, S. (2003). A theory of entrepreneurial opportunity identification and development. Journal
of Business Venturing, 18: 105-123.

Baden-Fuller, C. and Morgan, MS. (2010). Business models as models. Long Range Planning, 43 (2-3): 156 -171.

Brown, M.E. and Gioia, DA. (2002). Making things click: Distributive leadership in an online division of an offline organization.
The Leadership Quarterly, 13 (4): 397-419.

Chesbrough, H., (2010). Business model innovation: opportunities and barriers. Long Range Planning, 43 (2-3): 354 – 363.

Choi, YR., Shepherd, DA. (2004). Entrepreneur’s decisions to exploit opportunities. Journal of Management, 30 (3): 377-395.

Journal of Business Models (2014), Vol. 2, No. 1 pp. 6-18

Corradi, G., Gherardi, S., Verzelloni, L. (2010). Through the practice lens: Where is the bandwagon of practice-based studies
heading? Management Learning, 41 (3): 265–283.

D’Aveni, RA., Dagnino, GB., Smith, KG. (2010). The age of temporary advantage. Strategic Management Journal, 31: 1371-
1385.

Demil, B., Lecocq, X. (2010). Business model evolution: In search for dynamic consistency. Long Range Planning, 43 (2-3):
227-246.

Eckhardt, JT., Shane, SA. (2003). Opportunities and entrepreneurship. Journal of Management, 29 (3): 333-349.

Fiet, JP., Patel, PC. (2008). Forgiving business models for new ventures. Entrepreneurship Theory and Practice, 32 (4): 749-
761.

Fisher, D., Torbert, WR. (1995). Personal and organizational transformations: The true challenge of continual quality
improvement. London: McGraw-Hill Book Company.

George, G., Bock, AJ. (2011). The business model in practice and its implications for entrepreneurship research.
Entrepreneurship Theory and Practice, 35 (1): 83-111.

Hacklin, F., Wallnöfer, M. (2012). The business model in the practice of strategic decision making: insights from a case
study. Management Decision, 50 (2): 166-188.

Kagermann, H., Osterle, H., Jordan, JM. (2011). IT-driven business models. Global case studies in transformation.

John Wiley and Sons, Inc.: New Jersey.

Kolb, D. (1984). Experiential learning: experience as a source of learning and development. Prentice-Hall: Englewood Cliffs,
NJ.

Linder, J., Cantrell, S. (2000). Carved in water: Changing business models fluidly. Accenture institute for strategic change.

Mainela, T., Puhakka, V. (2009). Organising new business in a turbulent context: Opportunity discovery and effectuation
for IJV development in transition markets. Journal of International Entrepreneurship, 7 (2): 111-134.

Magretta, J. (2002). Why business models matter. Harvard Business Review, May: 86-92.

March, J. (1991). Exploration and exploitation in organizational learning. Organization Science, 2 (1): 71-87.

March, J. (2006). Rationality, foolishness, and adaptive intelligence. Strategic Management Journal, 27: 201-214.

Markides, C. (2006). Disruptive innovation: In need of better theory. Journal of Product Innovation Management, 23 (1):
19-25.

Mason, K., Spring, M. (2011). The sites and practices of business models. Industrial Marketing Management, 40: 1032-1041.

Mason, K., Palo, T. (2012). Innovating markets by putting business models to work. Paper presented at the 28th IMP
Conference, Italy.

McGrath, RG. (2010). Business models: A discovery driven approach. Long Range Planning, 43 (2-3): 247–261.

Mead, G. (2008). Muddling through: facing the challenges of managing a large-scale action research process. In: Reason,
P. and Bradbury, H. The SAGE handbook of action research. Participative inquiry and practice. SAGE: Thousand Oaks, CA.

Meyer, JP. (2003). Four territories of experience: a developmental action inquiry approach to outdoor-adventure experiential
learning. Academy of Management Learning and Education, 2 (4): 352-363.

Morris, M., Schindehutte, M., Allen, J. (2005). The entrepreneur’s business model: toward a unified perspective. Journal of
Business Research 58: 726-735.

Nielsen, C., Bukh, PN. (2011). What constitutes a business model: the perception of financial analysts. International Journal
of Learning and Intellectual Capital, 8 (3): 256–271.

Journal of Business Models (2014), Vol. 2, No. 1 pp. 6-18

Onetti, A., Zucchella, A., Jones, M., McDougall-Covin, P. (2012). Internationalization, innovation and entrepreneurship:
business models for new technology-based firms. Journal of Management and Governance, 16 (3): 337-368.

Osterwalder, A., Pigneur, Y. (2002). An e-business model ontology for modeling e-business. Paper presenter at the 15th
Electronic Commerce Conference, Bled.

Osterwalder, A. (2004). The business model ontology – a proposition in a design science approach. Ph.D. Thesis, University
of Lausanne.

Osterwalder, A., Pigneur, Y. (2010). Business Model Generation. John Wiley and Sons: New Jersey.

Pettigrew, A. (1990). Longitudinal field research on change: theory and practice. Organization Science, 1 (3): 267-291.

Richardson, J. (2008). The business model: an integrative framework for strategy execution. Strategic Change, 17: 133–144.

Sabatier, V., Mangematin, V., Rousselle, T. (2010). From recipe to dinner: Business model portfolios in the European
Biopharmaceutical industry. Long Range Planning, 43 (3/4): 431-447.

Saunders, PM. (1997). Experiential learning, cases, and simulations in business communication. Business Communication
Quarterly, 60:1, 97-114.

Schinehutte, M., Morris, MH. (2009). Advancing strategic entrepreneurship research: the role of complexity science in
shifting the paradigm. Entrepreneurship Theory and Practice, 33 (1), 241-276.

Shafer, SM., Smith, HJ., Linder, JC. (2005). The power of business models. Business Horizons, 48 (3): 199-205.

Shane, S., Venkataraman, S. (2000). The promise of entrepreneurship as a field of research. Academy of Management
Review, 25 (1), 217-226.

Smith, WK., Binns, A., Tushman, ML. (2010). Complex business models: Managing strategic paradoxes simultaneously.
Long Range Planning, 43 (2-3): 448–461.

Sole, D. and Edmondson, A. (2002) Situated Knowledge and Learning in Dispersed Teams. British Journal of Management
13 (S2): 17-34.

Sosna, M., Trevinyo-Rodríguez, RN., Velamuri, SR. (2010). Business model innovation through trial-and-error learning: The
Naturhouse Case. Long Range Planning, 43 (2-3): 383-407.

Swan, J., Bresnen, M., Newell, S. and Robertson, M. (2007) The Object of Knowledge: The Role of Objects in Biomedical
Innovation. Human Relations 60(12): 1809-1837.

Teece, D. (2010). Business models, business strategy and innovation. Long Range Planning, 43 (2-3): 172 – 194.

Tikkanen, H., Lamberg, J-A., Parvinen, P., Kallunki, J-P. (2005). Managerial cognition, action and the business model of the
firm. Management Decision, 43 (6): 789-809.

Timmers, P. (1998). Business models for electronic markets. Electronic Markets, 8 (2): 3-8.

Torbert, B. (2004). Action inquiry: the secret of timely and transforming leadership. Berret Koehler: San Fransisco, CA.

Torbert, WR. (1991). The power of balance. SAGE: Newbury Park, CA.

Torbert, WR., Taylor, S. (2008). Action inquiry: interweaving multiple qualities of attention for timely action. In: Reason,
P. and Bradbury, H. The SAGE handbook of action research. Participative inquiry and practice. SAGE: Thousand Oaks, CA

Wirtz, B., Schilke, O. Ullrich, S. (2010). Strategic development of business models. Implications of the Web 2.0 for creating
value on the internet. Long Range Planning, 43 (2-3): 272 -290.

Zott, C., Amit, R. (2010). Business model design: An activity system perspective. Long Range Planning, 43 (2-3): 216-226.

Zott, C., Amit, R., Massa, L. (2011). The business model: Recent developments and future research. Journal of Management,
37 (4): 1019-1042.

Journal of Business Models (2014), Vol. 2, No. 1 pp. 6-18

About the authors

Petri Ahokangas received his M.Sc. (1992)
and D.Sc. (1998) degrees from the University
Vaasa, Finland. He is a senior research fel-
low and adjunct professor at the University
of Oulu Business School, Department of Man-
agement and International Business, Finland.
Prior to his university career he worked in the
telecoms/software industry. His research in-
terests lie in how innovation and technologi-
cal change affect international business crea-
tion, transformation, and strategies in highly
technology- and software-intensive business
domains.

Jenni Myllykoski received her M.Sc. (2007)
from Oulu Business School. She is currently
a doctoral student at the University of Oulu
Business School. Prior to her university career,
she worked in the telecoms/software indus-
try. Her research interests are in the field of
company transformation, managerial sense
making, and internationalization.

br
_GoBack