a business model innovation typology

Decision SciencesVolume 46 Number 2April 2015

© 2015 Decision Sciences Institute

A Business Model Innovation Typology∗Yariv Taran† and Harry BoerCenter for Industrial Production, Aalborg University, Fibigerstræde 10, 9220 Aalborg,Denmark, e-mail: [email protected], [email protected]

Peter LindgrenDepartment of Business and Social Sciences, Aarhus University, Birk Centerpark 15, 7400Herning, Denmark, e-mail: [email protected]

ABSTRACT

An effective business model is the core enabler of any company’s performance. Businessmodel innovation is not only becoming more and more important due to increasingand globalizing competition, but also an enormous challenge, both theoretically andpractically. Although many managers are eager to consider more disruptive changesto their business model, they often do not know how to articulate their existing ordesired business model and, even less so, understand the possibilities for innovating it.One of the steps toward developing more theoretical insight and practical guidelinesis the identification of types and the development of a typology of business modelinnovations. Ten retrospective case studies of business model innovations undertakenby two industrial companies provide the empirical basis for this article. We analyzedthe characteristics of these innovations as well as their success rates. The findingssuggest that there are indeed various business model innovation types, each with its owncharacteristics and challenges. [Submitted: March 1, 2013. Revised: January 8, 2014.Accepted: January 16, 2014.]

Subject Areas: Case Studies, Organizational Theory, and Strategic DecisionMaking.

INTRODUCTION

Due to today’s intense competition (e.g., Skarzynski & Gibson, 2008; Tidd &Bessant, 2009; Hult, 2012) in increasingly global markets, companies in all indus-tries worldwide find themselves competing under ever-changing conditions. Thosechanges force companies to rethink their operational business models more fre-quently and fundamentally, as innovation based solely on new products and aimedat local markets is no longer sufficient to sustain competitiveness and survival.Competitors can relatively easily copy products, and local market segments todayare often quickly captured by global rivals located elsewhere.

∗We appreciate the constructive comments from the editor, the associate editor, and two anonymous review-ers, and thank Lee Ann Iovanni for her assistance in developing this article.

†Corresponding author.

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302 A Business Model Innovation Typology

The IBM global chief executive officer (CEO) survey also supports the claimthat business model innovation matters. With approximately 30% of CEOs pursu-ing such initiatives, business model innovation is much higher than expected onindustrial priority lists. Moreover, “[c]ompanies that have grown their operatingmargins faster than their competitors were putting twice as much emphasis onbusiness model innovation as underperformers” (IBM, 2006, p. 12). Four yearslater, IBM (2010, p. 10) reports: “Previously, CEOs recognized the need for busi-ness model innovation, but today they are struggling to find the requisite creativeleadership to produce such innovation.”

The aim of this article is to develop a business model innovation typology.Such a typology can support strategic decision makers in identifying and analyzingvarious options, evaluating their consequences including performance effects, anddetermining the business model innovation(s) most suitable for their company.For researchers, typology development presents an important step in the theory-building process (Christensen, 2006).

INNOVATION AND BUSINESS MODELS

Most companies tend to prefer “more of the same” (mostly product) innova-tions that keep their company fixed on the same line of value propositions, usingthe same, or largely similar, technologies, aimed at the same target customers(e.g., Christensen, 1997). Consequently, and also reflecting phenomena such as(strategic) momentum (Miller & Friesen, 1980, 1982), path dependency (Nelson& Winter, 1982), and prior related knowledge (Cohen & Levinthal, 1990), mostcompanies rarely, if ever, change or even question their business models.

However, few companies have such a secure competitive position basedon, for example, unique assets, intellectual property rights (IPR), brand or anexclusive technology, that they do not need to risk innovating their business modelradically. In most industries, intense global competition (Skarzynski & Gibson,2008; Tidd & Bessant, 2009; Hult, 2012) has reduced not only the life cycles ofproducts/services, but also the life cycles of prevailing business models (e.g., IBM,2006, 2008). This inevitably forces ever more companies to rethink their businessmodel in order to allow them to continue competing in existing, or to enter new,markets successfully (e.g., Chesbrough, 2007; Skarzynski & Gibson, 2008; Tidd &Bessant, 2009). Apple, IBM and Dell, Southwest Airlines and Ryan Air, Google,Microsoft, Amazon, Facebook and Skype, Starbucks, Zara, and Cirque du Soleil arewell-known examples of, what D’Aveni (1994, p. 2) would call, “hypercompetitivefirms,” whose success in the market cannot be explained by the introduction ofnew products or services alone. The key to these companies’ success is businessmodel innovation.

Business Model

The business model literature has grown exponentially since the end of the 1990s.However, before the term business model gained popularity, many models re-lated to the effective functioning and performance of businesses had been pro-posed, especially in organization theory. Miller & Rice (1967, p. 6) conceived an

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organization as a task system defined as a “system of activities [required to completethe process of transforming an intake into an output] plus the human and physicalresources required to perform the activities.” Primary (i.e., operational), mainte-nance (or support), and regulatory (i.e., management) processes are at the core ofthese authors’ organizational model. Other models depict organizations as, for ex-ample, formal and informal flows of authority (hierarchy), work materials (i.e., pro-duction processes), communication/information (e.g., management and control), ordecision-making (Mintzberg, 1979). Porter’s (1985) value chain model consists ofprimary and support activities whose goal it is to create a profit margin by offeringthe customer a level of value that is higher than the cost of the activities. Influencedby the work of authors such as Burns & Stalker (1961), Chandler (1962), Pugh etal. (1963), Woodward (1965), Thompson (1967), Perrow (1967), and Lawrence &Lorsch (1967), researchers realized that there is no best way of organizing; it all de-pends on the fit between the structure and factors such as the environment, strategy,technology, and size of the organization (Mintzberg, 1979). This led to the develop-ment of so-called contingency models of organization (e.g., Kast & Rosenzweig,1973). One such example is the 7S model of McKinsey (Peters & Waterman, 1982),which depicts organizations as systems with seven elements (strategy, structure,systems, shared values, style, staff, and skills) that must be aligned for the orga-nization to perform well. The process-based contingency model of organization(Boer & Krabbendam, 1999) combines these approaches, and essentially holds thatthe effective performance of an organization depends on the consistency amongprocess design choices, organizational arrangements, and contingency factors.

Going back to the writings of Peter Drucker (Casadesus-Masanell & Ricart,2010), the term business model (and, for that matter, business model thinking)rose to prominence toward the end of the 1990s (Osterwalder, Pigneur, & Tucci,2005), driven by factors such as “the emerging knowledge economy, the growthof the internet and e-commerce, the outsourcing and offshoring of many busi-ness activities, and the restructuring of the financial services industry around theworld” (Teece, 2010, p. 174). Influential publications in the business model lit-erature include Linder & Cantrell (2000), Amit & Zott (2001), Magretta (2002),Osterwalder & Pigneur (2004), Osterwalder et al. (2005), and Chesbrough (2006).One thing all the authors in this field seem to agree on is that a business model isa model of the way a company does business (Taran, 2011). However, while thereis consensus on the essence of “doing business,” namely creating and deliveringvalue so as to generate revenue and achieve a sustainable competitive position,there is less agreement on the “model” part. Morris, Schindehutte, & Allen (2005,p. 727) present “a synopsis of available perspectives regarding model components”in which the number of components (i.e., building blocks) ranges from three toeight. The model described in Osterwalder et al. (2005) includes nine buildingblocks.

Innovation

Although there are many definitions of innovation, they all point toward (doing)something new. Schumpeter (1934, p. 66), possibly the first writer on innovation,mentions “(1) The introduction of a new good . . . (2) The introduction of a new


method of production . . . (3) The opening of a new market . . . (4) The conquestof a new source of supply . . . (5) The carrying out of a new organization . . . .”Most innovation researchers have essentially adopted Schumpeter’s categorization.Recognizing that “pure” innovations are actually very rare, Boer & During (2001,p. 84) define innovation as “the creation of a new product-market-technology-organization-combination.” Tidd & Bessant (2009) discuss product, process, posi-tion, and paradigm innovation. While the first three go back to Schumpeter’s “newgood,” “new method,” and “new market,” one of the forms of paradigm innovation(Francis & Bessant, 2005) is business model innovation.

Business Model Innovation

Change is very common in organizations. In addition to “unprecedented changes. . . [which] . . . include . . . organizational creation, innovation, turnaround,reengineering, cultural transformation, merger [and] divestiture” there is “a widevariety of recurring changes, such as adapting to economic cycles, periodic revi-sions in products and services, and ongoing instances of personnel turnover andexecutive succession” (Garud & Van de Ven, 2002, pp. 222–233). The questionis: when can we call a change in an organization a business model innovation?Unfortunately, this question has rarely been addressed in either business model orinnovation management research.

Teece (2010) observes that the business model concept lacks theoreticalgrounding in economics and business studies, including organizational, strategic,and marketing studies. Innovation research has produced a wealth of theory, espe-cially on radical product and incremental process innovation, but has not addressedbusiness model innovation. In the business model literature, the question on howto achieve business model innovation has been largely neglected, too (e.g., Amit& Zott, 2001; Morris et al., 2005; Lindgren, Taran, & Boer, 2010; Osterwalder &Pigneur, 2010). Yet, many scholarly (e.g., Amit & Zott, 2001; Chesbrough, 2010;Teece, 2010) and practitioner publications (e.g., Magretta, 2002; IBM, 2006) havemade it plausible that business model innovation matters. IBM (2006), for exam-ple, reports that business model innovators enjoyed an operating margin growth inexcess of their competitors of over 5% over five years; product/service/market andprocess innovators achieved growth rates of around 0%.

RESEARCH OBJECTIVE

Business model innovation matters, but the question as to how to achieve it hasbeen largely neglected. This article aims to address this deficit.

The term business model innovation can be interpreted in two importantways: (i) as a process and (ii) as an outcome. This article focuses on the secondinterpretation, considering that process follows intended outcome. That is, thebetter a decision maker is informed about the envisaged outcome of a process, thebetter the decisions s/he can make about the design, organization, and managementof that process. There is no reason to assume that this “law” in, for example,operations management would not hold in innovation management.


According to Christensen’s (2006) three-step procedure for building de-scriptive theory, one of the steps toward developing more theoretical insight isthe development of a typology. As they are also useful in guiding managerialdecision making, various different typologies have been used or developed in deci-sion science research (e.g., Jarvenpaa & Ives, 1993; Hahn, 2003; Abdinour-Helm,Chaparro, & Farmer, 2005; Tangpong, Michalisin, & Melcher, 2008; Paswan,D’Souza, & Zolfhagharian, 2009; Ravichandran & Liu, 2011). The objective ofthis article is to propose a qualitative (Bailey, 1994) business model innovationtypology.

A business model innovation typology reduces the variability and diversityof the real world to a small number of richly defined types (cf. McKelvey, 1982;Jarvenpaa & Ives, 1993; Tangpong et al., 2008; Paswan et al., 2009). Consisting ofa limited number of constructs and relationships between these constructs (Doty &Glick, 1994), a typology can support strategic decision makers in identifying andanalyzing various options, evaluating their consequences including performanceeffects, and determining the business model innovation(s) most suitable for theircompany.

Ten retrospective case studies of business model innovations undertaken bytwo industrial companies provide the empirical basis for this article. We selectedthese companies based on their (relatively) successful yet somewhat differentinnovation experiences.

Despite the observation that organization, strategy, innovation, and businessmodel theory have not dealt with business model innovation, notions from thesetheories are useful in the development of an analytical framework to guide thecase studies. After a presentation of that framework, we describe and account forthe research design. Subsequently, we present, analyze, and discuss the case studyfindings. Next, we present and explain the typology of business model innovationthat emerged from the research. We conclude the article with a summary of itstheoretical contribution and limitations, propositions and suggestions for furtherresearch, and recommendations for decision makers.

ANALYTICAL FRAMEWORK

Similar to Paswan et al. (2009) who developed a service innovation typology, wetake our starting point in the fundamental questions that management needs toanswer when considering innovating their business model. The first question is:“what should we innovate?” The answer to this question is related to innovationcontent, that is, the business model building blocks. The second question is: “howfar do we go?” This question essentially inquires about the innovativeness of thenew business model. The third and fourth questions are “how will the innovationsupport our business strategy?” And, “do we adopt a closed or open approachto the innovation?” These two questions consider the strategic context and theorganizational setting in which the business model innovation takes place. Thefifth question is: “when do we consider the business model innovation a success?”The answer to this question is crucial input to the development of normative theoryand robust recommendations for strategic decision makers.


Innovation Content – What Should We Innovate?

There is consensus in the literature that a business model is a model of the way inwhich a company creates and delivers value so as to generate revenue and achieve asustainable competitive position. The number of components (Morris et al., 2005)or building blocks (e.g., Osterwalder et al., 2005) constituting business modelsranges from three to nine (Morris et al., 2005; Osterwalder et al., 2005). Basedmostly on Hamel (2000), Amit and Zott (2001), Chesbrough (2006), Johnson,Christensen, & Kagermann (2008), and Osterwalder et al. (2005), we distinguishseven building blocks. Table 1 defines these building blocks and gives examplesof incremental and radical building block innovations.

Business Model Innovativeness – How Far Do We Go?

This question inquires about the innovativeness of the business model. In innova-tion theory, three approaches have been proposed to define and measure innovation.

The first approach, associated with radicality, defines business model inno-vation as a radical change in the way a company does business (Linder & Cantrell,2000; IBM, 2006, 2008; Chesbrough, 2006). Radicality, a “critical variable in thefield of innovation” (Chandy & Tellis, 2000, p. 6), is usually defined in terms ofthe extent to which an innovation departs from prior products/services, processesor, in the context of this article, business models. Radical innovation involvesthe development or application of something significantly new (McDermott &O’Connor, 2002). Incremental innovations, in contrast, are minor changes suchas extensions (McDermott & O’Connor, 2002) or improvements (e.g., Tidd &Bessant, 2009), which, cumulatively, may have a large impact; singularly they arealmost imperceptible (Siguaw, Simpson, & Enz, 2006).

The second approach defines innovativeness in terms of what might be calledthe reach of the innovation (e.g., Rogers, 1983; Green, Gavin, & Aiman-Smith,1995; Olsen, Walker, & Ruekert, 1995; Garcia & Calantone, 2002). A suitablescale for this approach measures the newness of an innovation in terms of “new towhom,” which could range from new to the company, via new to the market or theindustry, to new to the world (Rogers, 1983).

Related to the notion of architectural innovation (e.g., Henderson & Clark,1990), in this case at the corporate level (e.g., Galunic & Eisenhardt, 2001),the third approach measures innovativeness in terms of complexity. In line withAbell (1980), Magretta (2002), Osterwalder et al. (2005), and Skarzynski &Gibson (2008), any change in any of the building blocks could be consid-ered as a form of business model innovation. A change in one of the build-ing blocks would constitute a simple innovation, while simultaneous changes inall of the building blocks would be the most complex form of business modelinnovation.

If we combine these three approaches, a three-dimensional space emerges(Figure 1), which helps in qualifying the innovativeness of a new business model.Radicality refers to the newness (incremental vs. radical) of each building block(see Table 1 for examples). Reach concerns the question of whether the innovationis new to the company or, at the other end of the scale, the world. Complexity iscounted as the number of building blocks (see Table 1) changed.


Table 1: Definition and examples of incremental and radical innovation of thebusiness model building blocks.

Building Incremental Radicalblock Description Innovation Innovation

What do we provide?

Value proposition A company’s offeringof products andservices.

Offering “more ofthe same.”

Offering somethingdifferent (at leastto the company).

Who do we serve?

Target customers Customer segments acompany aims toserve.

Existing market. New market.

How do we provide it?

Customer relations Actual interactionsestablished withthese customersegments.

Continuousimprovements ofexisting channels.

New relationshipchannels (e.g.,physical/virtual,per-sonal/peers/massawareness).

Value chainarchitecture

Involving both theprimary andsupport activitiesneeded for acompany todevelop, produceand deliver itsofferings (e.g.,Porter, 1985).

Exploitation (e.g.,internal, lean,continuousimprovement).

Exploration (e.g.,open, flexible,diversified).

Core competences Those capabilitiesthat are difficult toimitate bycompetitors, andare critical to acompany forachievingcompetitiveadvantage, e.g.,unique technology,IPR, know-how,culture, marketexclusivity.

Familiarcompetences(e.g.,improvement ofexistingtechnology).

Disruptive new,unfamiliar,competences(e.g., newemergingtechnology).

Continued


Table 1: Continued

Building Incremental Radicalblock Description Innovation Innovation

Partner network Partners who engagein different kinds ofcooperation with acompany, with thegoal of achievingeconomies of scale,reduction of risks(e.g., joint venture)or tapping into newknowledge orresources(Osterwalder &Pigneur, 2010).

Familiar (fixed)network.

New (dynamic)networks (e.g.,alliance,joint-venture).

How do we make money?

Profit formula Including revenuemodel, coststructure, marginmodel, andresource velocity(e.g., Johnsonet al., 2008).

Incremental costcutting in existingprocesses.

New processes togeneraterevenues, ordisruptive costcutting in existingprocesses.

Accordingly, any change can rightfully be called a business model innova-tion, but some changes are more radical and/or complex than others, and some(e.g., radical product innovation, incremental process improvement) are better un-derstood than others (e.g., a holistic, new to the world departure from all businessmodels known so far). Consequently, we sidestep the eternal discussion of whenan innovation is radical or incremental, complex or simple, far-reaching or not,and, instead, portray the space in which any business model innovation can bepositioned in terms of its degree of radicality, reach, and complexity. As will bediscussed below, these three characteristics are not only important to describe butalso to preassess before making important decisions about the organization andmanagement of business model innovation processes.

Strategic Context – How Will the Innovation Support Our BusinessStrategy?

We expect Miles & Snow’s (1978) strategy typology, and especially the relatednotions of proactiveness and reactiveness, to provide a suitable approach to de-scribe (innovation) strategy. Miles & Snow (1978) distinguish four strategic types:the prospector, analyzer, defender, and reactor strategies. Prospector companiesare the most innovative, and emphasize the development of new products, tech-nologies, and markets. They try to be first in the market with new products, andcontinuously experiment with responses to emerging market trends and changes.


Figure 1: A three-dimensional (business model) innovativeness scale.

Reach

Radicality

Company

Market Industry

World

Low

Medium

High

12

3

54

76

Complexity (number of building

blocks changed)

Defender companies primarily stay in their existing domains and stable marketniches, and limit their product development efforts to improving existing products.Analyzers combine the prospectors’ innovativeness with the defenders’ ability toserve existing markets effectively with existing products. These companies pursueefficiency in the stable markets they serve, and try to be adaptive to and prepared forchange in the dynamic markets in which they are also active. However, rather thanbeing first movers (e.g., Lieberman & Montgomery, 1988, 1998), analyzers focuson the quick adoption of new concepts launched by prospector companies. Finally,reactors are companies without a consistent strategy. They perceive changes inthe markets in which they operate, but are not able to respond effectively to thesechanges.

Organizational Setting – Do We Adopt a Closed or Open Approach to theInnovation?

Since Von Hippel’s (1978) seminal work, innovation researchers and practitionershave become actively aware of the possibility and benefits of innovating withexternal partners. This has gradually led to the open innovation concept (e.g.,Chesbrough, 2006). In the business model literature, there is sufficient evidence thatadopting a closed approach or, alternatively, creating an open setting is an important


choice for companies to make. For example, Chesbrough’s (2006) business modelframework is partly based on this dimension.

A company has essentially three options. First, it may support a businessmodel innovation using and staying within its existing organization. Alternatively,it may change its existing organization, start internally and spin off later, or evenestablish a separate business unit specifically for the purpose of the innovation. Innone of these cases are external partners involved. Third, in an open setting, thebusiness model innovation is conducted with one or more external partners, in-volved through an acquisition (possibly followed by a merger), a strategic alliance,or a joint venture (e.g., Chesbrough, 2006). An important notion in this context isthe distinction Boer & During (2001) make between organizational innovation andorganizing for innovation. In business model innovation, these two analyticallydifferent concepts are difficult to distinguish empirically – often “organizing forinnovation” is part of the business model innovation itself. That is, the organiza-tional setting established to develop the business model innovation will also beresponsible for serving an existing or new market with existing, improved, or newproducts and/or services.

Success Rate – When Do We Consider the Business Model Innovation aSuccess?

The success of any innovation can be measured in many different ways. Oneapproach, logically following from the definition of “doing business,” holds thatthe success of a business model innovation should be measured in terms of theextent to which the new model enables the company to generate revenue andhelp the company to achieve a sustainable competitive position by creating anddelivering value to its customers.

Analytical Framework

Taken together, these questions imply that we should be interested in data thatdescribe a business model initiative in terms of its content, innovativeness, strategiccontext, organizational setting, and success rate.

Furthermore, fit is likely to play a major role. This notion is central to thestudy of (manufacturing) strategy, organization, and innovation. Skinner (1985), forexample, mentions that manufacturing strategy decisions made must align properlyand be examined in the light of their contribution toward the manufacturing tasks,which ought to be derived from the corporate strategy. Hayes & Wheelwright(1984) propose two similar criteria, namely the degree to which the manufacturingstrategy: (i) displays internal and/or external consistency and (ii) augments theexternal competitiveness of the company, that is, contributes to the competitiveadvantage pursued. Based on an extensive review of organization theory, Mintzberg(1979) hypothesizes that effective organizational structuring requires a consistencyamong the (organizational) design parameters and contingency variables. Boer &During (2001) suggest that the success of an innovation process depends on thefit between: (i) the required characteristics of the people involved in, and theorganization of, the process, which derive from the characteristics of the processand the type of innovation involved, and (ii) the actual characteristics of the people


involved, their perception of the innovation and the innovation process, and theway these perceptions are effectuated in the organization of the process.

We expect that fit between the innovativeness (radicality, reach, complex-ity), strategic context and organizational setting of the business model innovationaffects the success of the innovation positively, and hope to find a number ofideal types, that is, effective (successful) configurations of these constructs, cf.Mintzberg (1979), who hypothesized five structural configurations and Miles andSnow (1978), who posited four strategic types. Although Doty, Glick, & Huber’s(1993) studies support Miles and Snow’s (1978) but not Mintzberg’s (1979) the-ory; the issue is that these and other authors equate ideal types with successfulconfigurations.

RESEARCH DESIGN

Methodology

Consistent with the explorative nature of the study, we conducted case studies.The case study method is “particularly suitable for developing new theory,” inthat it “lends itself to early, exploratory investigations where the variables are stillunknown and the phenomenon is not at all understood” and “allows the questionsof why, what and how to be answered with a relatively full understanding ofthe nature and complexity of the complete phenomenon” (Voss, Tsikriktsis, &Frohlich, 2002, p. 197). We studied multiple cases, as this “can . . . augmentexternal validity, and help guard against observer bias” (Voss et al., 2002, p. 202).Finally, the case studies were retrospective, rather than real-time longitudinal. Thisallowed us to actually assess the success rate of the business model innovations.

Eisenhardt (1989) gives an overview of important steps to be taken in theprocess of building theory from case study research. “Getting started” involvesdefining a research problem and, possibly, constructs. This step was reported in theprevious sections. The next steps, “selecting cases” (i.e., sampling) and “craftinginstruments and protocols” (in particular choice of [multiple] methods) are reportedbelow. The step following “entering the field” and collect data, is “analyzing data.”Following Eisenhardt’s (1989) recommendation, we perform both within-case aswell as cross-case analyses. The final steps are “shaping hypotheses,” “enfoldingliterature,” and “reaching closure.” We infer a business model innovation typologyfrom our findings, which, in a way, is a complex hypothesis on the relationshipsbetween the key constructs embedded in the typology. We then discuss our findingsin view of existing literature, as recommended by Eisenhardt (1989) and reachclosure not so much through theoretical saturation, as this is not possible given thecurrent state of the theory, but rather by inferring propositions from the research,discussing the limitations of the study, and developing suggestions for furtherresearch aimed at enriching and generalizing the typology.

The five research design components identified by Yin (2003) largely overlapwith Eisenhardt’s (1989) steps, with one exception: choice of unit of analysis, inour case a business model innovation with its immediate context. Furthermore, Yin(2003) identifies and discusses four criteria to assess the quality of research designs,namely construct validity, internal validity, external validity, and reliability. Internal


validity is of no concern for exploratory studies (Yin, 2003), while external validity,through analytical replication (Yin, 2003), is difficult to assess at this stage of thetheory development. The procedures we adopted to ensure construct validity andreliability are described in a subsequent subsection.

Sample

Ten retrospective case studies of business model innovations undertaken by twoindustrial companies provide the empirical basis for this article. We selected thesecompanies based on their experience with a range of different business modelinnovations, some of which were more successful than others.

Company Alpha is a large, global company headquartered in NorthwestEurope. The company has 2,100 employees and specializes in developing, manu-facturing, and marketing (mostly) professional audio products, which are sold toconsumers (B2C) and businesses (B2B) in more than 70 countries worldwide. Inresponse to the financial crisis of 2008–2012, the company developed a new five-year strategy, focusing on reestablishing its previous leading position within itscore business areas by developing a more efficient, effective, and global customer-oriented organization.

Company Beta is a large global company, specialized in developing, manu-facturing, and marketing flexible electrical/electronic control and instrumentationsolutions for the power production, marine and offshore industries. The companyhas 300 employees and is also headquartered in Northwest Europe. The companyhas eight subsidiaries and 23 distributors worldwide. The development and man-ufacturing processes take place at the parent company; sales and customization ofthe products are performed by both the parent company and its subsidiaries. Thestrategic objective of the company for the next couple of years is to continue to de-velop and provide technology that helps to improve the environment and supportsglobal green growth.

Data Collection, Validity, and Reliability

To ensure the validity and reliability of the research, multiple qualitative methodswere used. The data collection was done through desk and field research.

The desk research involved collecting background information throughbooks, articles, Web sites, as well as public and internal documents receivedfrom the two companies, such as annual reports, product–market trajectories, fi-nancial reports, internal PowerPoint presentations discussing current status andfuture challenges, and strategic plans.

The field research consisted of face-to-face, mediated, group, and third-partyinterviews, along with e-mail correspondence, company visits, and questionnaires.The interviews were conducted with managers who had actively participated in,or had been in charge of, a new business development initiative (e.g., innovationmanager, technology manager). Consistent with the mostly explorative natureof the research, we used a semistructured questionnaire (see Appendix), whichallowed the individual respondents maximum freedom to explain their views onthe new business model. The questions address each of the constructs in theanalytical framework. In company Alpha, we conducted 28 hours and in company


Beta 18 hours of interviews. All interviews were recorded and most of them weretranscribed. The transcribed interviews were sent to the interviewees for comments,corrections, and final acceptance, which, together with the use of multiple methods,enhanced the validity of the data.

Finally, we designed a formal case study protocol (Yin, 2003) to enhancethe reliability of the research. Following Eisenhardt’s (1989) assertion that it islegitimate to change and add data collection methods (including adding questionsto an interview protocol), we did not regard this as a static document. Overlapof data analysis with data collection generated new insights and ideas, and led toextensions of the analytical framework and the questionnaire.

Data Analysis

Hand-coding the data was the main step in the within-case analysis, and helpedus to describe the 10 business model innovations in terms of the five analyticalconstructs. The initial coding was conducted by the lead author and checked laterby one of the other authors. In the cross-case analysis, we tried to find patterns in therelationships among the content, innovativeness, strategic context, organizationalsetting, and success rate of the 10 cases. Content was categorized according to theseven business model building blocks (Table 1). Innovations in each of these blockswere described using “free text.” Following Figure 1, the following terminologyand scales for innovativeness were adopted:

� Radicality: ranging from low (i.e., incrementally new) to high (i.e., radicallynew).

� Reach: ranging from low (new to the company or marketplace), to high (new tothe industry or to the world).

� Complexity: ranging from low (any change in 1–4 building blocks), to high (anychange in 5–7 building blocks; see Table 1).

Strategic context was described in terms of Miles & Snow’s (1978) typology(prospector-analyzer-defender-reactor), and measured in terms of proactiveness(proactive vs. reactive), a key dimension underlying that typology. Organizationalsetting was measured in terms of openness (open vs. closed), and described usingterms such as internal/external, spin-off, acquisition, outsourcing, licensing, andjoint venture. Finally, in order to measure the success of the new business modelsas objectively as possible, we inquired about their profitability and rated highlyprofitable cases as successful, cases with small profit margins as partly successful,and cases that failed to produce any profits as failures.

ANALYSIS

We will first present the results of the within-case analyses and describe each ofthe 10 business model innovations in terms of the five constructs, that is, theircontent, innovativeness, strategic context, organizational setting, and success rate.In addition, we found risk to play a role in all cases, which we had not foreseen.Subsequently, we will focus on the cross-case analysis, identify patterns in ourfindings, and infer ideal, effective types of business model innovation.


Within-Case AnalysisInnovation content

Throughout the years, company Alpha engaged in the seven business model in-novations shown in Table 2. Case A involved the development of a new businessunit offering products based on existing and new technology to a market new forcompany Alpha. Case B also involved the establishment of a new business unitoffering products to a market new for the company, but in this case the productswere entirely based on existing technology. Case C had the same characteristicsas case B, but in addition, marketing and sales were outsourced to a partner. CasesD, E, and F concerned the establishment of a joint venture. In cases D and E,the joint ventures served one market; in case F it served multiple markets, all ofwhich were new to company Alpha. In case E, the products were based on existingtechnology; in cases D and F, they were based on new technology. Case G involvedthe outsourcing of the manufacturing of one product to a supplier.

Company Beta engaged in three business model innovations. Case 1 was abusiness process re-engineering project combined with and supporting the penetra-tion of a new market for company Beta, with products that were based on existingas well as new technological competences. In case 2, company Beta acquired an-other company operating in a market new for the company. Case 3 concerned thedevelopment and launch of a new product, based on new technology and targetedat existing markets as well as markets new to the company.

In terms of the building blocks illustrated in Table 1, the more complexbusiness model innovations (cases A, B, C, G, 1, 2, and 3) involved changesin the companies’ value proposition, target customers, value chain, and profitformula, combined with changes in customer relations (all cases except G), corecompetences (cases G, 1, 2, and 3) and/or the partner network (all cases except2). “Simpler” business innovations (cases D, E, and F) combined changes inthe company’s target customers, core competences, partner network, and profitformula.

Thus, all the innovations included changes in target customers (market in-novation) and profit formula, that is, the company’s economic model, which isconcerned with its logic of profit generation and, thus, business model innovationat its “most rudimentary level” (Morris et al., 2005, p. 726). However, and in linewith our definition, business model innovation does not always require changesin all the building blocks. Cases D, E, F, and G did not change the company’scustomer relations; cases D, E, and F kept the value chain intact; cases A, B,and C were based on the company’s existing core competences; and in case 2 thecompany used its existing partner network.

Innovativeness

As discussed previously, the innovativeness of a new business model can be estab-lished looking at its radicality, reach, and complexity.

We rate cases A, D, F, 1, and 2 as radical innovations. Cases B, C, E, G, and 3were much more incremental. Two examples serve to explain these interpretations.Case 1 involved a very successful attempt to penetrate the marine industry basedpartly on existing, partly on new technological competences, requiring internal


Table 2: Summary of the case study data.

Content – Radicality,Organizational Context Reach, and

Case – Success Rate Complexity – Risk

Company Alpha – Analyzer Strategy

Case A New business unit offering existingand new technology-basedproducts to a new market(automotive) – very successful

High radicality, high reach (new tothe industry), high complexity(VP; TC; VC; PN; CR; PF). Highrisk of failure.

Case B New business unit offering existingtechnology-based products to anew market (mobile phones) –partly successful

Low radicality, low reach (new to thecompany), high complexity (VP;TC; VC; PN; CR; PF). Low tomedium risk of failure.

Case C New business unit offering existingtechnology-based products to anew market (studios), plusoutsourcing of marketing and salesto a partner – failure

Low radicality, low reach (new to thecompany), high complexity (VP;TC; VC; PN; CR; PF). Low tomedium risk of failure.

Case D Joint venture, a newtechnology-based product that canbe used in many industries – verysuccessful

High radicality, high reach (new tothe world), low complexity (TC;CC; PN; PF). Medium risk offailure.

Case E Joint venture with a venture fund. Thecore business is IP and R&D ofproducts based on (mostly) existingtechnologies for the biomedicalindustry – very successful

Low radicality, high reach (new to theindustry), low complexity (TC;CC; PN; PF). Low risk of failure.

Case F Joint venture offering newtechnology-based products to anew market (telephoneinfrastructure), planned to be sold(divested) to a European company– very successful

High radicality, high reach (new tothe industry), low complexity (TC;CC; PN; PF). Medium risk offailure.

Case G Outsourcing the manufacturing ofone of the products – failure

Low radicality, low reach (new to thecompany), high complexity (VP;TC; VC; CC; PN; PF). Low tomedium risk of failure.

Company Beta – Analyzer Strategy

Case 1 Penetration of the marine industrybased on existing and newtechnological competences.Required internal re-engineering toensure higher-quality control andwork efficiency (e.g., lean, newbusiness intelligence department) –very successful

High radicality, high reach (new tothe industry), high complexity(VP; TC; VC; CC; CR; PN; PF).High risk of failure.

Continued


Table 2: Continued

Content – Radicality,Organizational Context Reach, and

Case – Success Rate Complexity – Risk

Company Beta – Analyzer Strategy

Case 2 Acquisition of a small companyoperating in a different industry(wind power). That companycurrently continues to develop thebusiness internally. Soon to be spunoff again as a new independentcompany – very successful

High radicality, low reach (new to themarket), high complexity (VP; TC;VC; CC; CR; PF). Medium risk offailure.

Case 3 New technology-based product,aimed at serving existing andpotential new customer segments –failure: after one year of heavyinvestment in the product, theproject was terminated due toincongruity with customerdemands (product shape and size;price – too expensive)

Low radicality, low reach (new to thecompany), high complexity (VP;TC; VC; CC; PN; CR; PF). Highrisk of failure.

VP = value proposition; TC = target customers; VC = value chain; CC = core competences;CR = customer relations; PN = partner network; PF = profit formula.

re-engineering to ensure higher quality, leaner and more efficient processes aswell as the establishment of a new business intelligence department. Case C,in contrast, concerned the establishment of a new business unit, entirely basedon well-established organizational or managerial principles, offering incrementalimprovements to existing products, combined with outsourcing of marketing andsales to a partner company.

Reach concerns the “new to whom” question. As Table 2 shows, someinnovations were new to the company only (cases B, C, G, and 3). Others werenew to the market (case 2), new to the industry (cases A, E, F, and 1), or even theworld (case D).

Finally, the variety of types combined (Boer & During, 2001) or the numberof building blocks changed (Table 1) indicate the complexity of a business modelinnovation. As can be inferred from the previous subsection, cases 1 and 3 werethe most complex innovations included in our sample, closely followed by casesA, B, C, G, and 2. Cases D, E, and F were the simplest ones.

We found five of the eight possible combinations of high-low radicality,reach, and complexity in our case studies – see subsequent subsections for furtherdiscussion of their role in the business model innovation typology proposed.

Strategic context

Both company Alpha and Beta are analyzers. According to Miles & Snow (1978),companies pursuing an analyzer strategy aim for efficiency in the stable mar-kets they serve (defender behavior), and try to be adaptive to and prepared


for change in the dynamic markets in which they are also active (prospectorbehavior).

For part of their business, both companies proactively “pushed” innovationsinto their industry (cases A, F, 1, and 3) or even the world (case D). The other busi-ness model innovations were rather reactive, triggered by (predominantly market)“pull” (cases B, C, E, G, and 2) and handled mostly internally, by incrementallychanging the existing core business, which is typical for defenders.

Pursuing an analyzer strategy is consistent with the way both companies de-scribe their business strategy. Company Alpha’s goal was to reestablish its previousleading position within its core business areas by developing a more efficient, ef-fective, and global customer-oriented organization. Pursuing efficiency is defenderbehavior; customer orientation an important aspect of prospector behavior (Miles& Snow, 1978). The strategic objective of company Beta was to continue to developand provide technology that helps to improve the environment and supports globalgreen growth. This looks like a prospector strategy. However, company documentsshow that all KPIs were expressed in financial terms, which is more reflective ofthe defender side of analyzers.

Organizational setting

Some of the innovations presented above were internally generated new businessmodels developed either in addition to or to replace the existing model, whileothers involved the acquisition of, outsourcing to, or a joint venture with, anothercompany.

Case 1 was a closed business model innovation aimed at penetrating a newindustry, which required a radical re-engineering of company Beta’s “as is” orga-nization. Alternatively, yet equally closed, a company may keep its core businessfully operational (“as is” followed by continuous improvements) and develop anadditional business model aimed at serving a new market and/or operating inan industry new to the company. Company Alpha was particularly successful inlaunching such business model innovations (cases A, B, and C). Case 2, an acqui-sition that gave company Beta access to a new market, was a more open form ofinnovation. Cases D, E, and F were the most open forms – in all these cases, a jointventure was established to conduct the innovation process.

Success rate

Company Alpha’s experiences with business model innovation are mixed. CasesA, D, E, and F were very successful, case B a partial success, while cases C andG were failures. The experiences of company Beta are mixed, too. Cases 1 and 2were very successful; case 3 was terminated and should therefore be regarded as afailure.

Risk

Perhaps not surprising, but unforeseen in our analytical framework, we foundthat risk played a role in all business model innovations. However, rather thandescribing this factor in detail here, we prefer addressing it in the cross-caseanalysis.


Cross-Case Analysis – Toward a Business Model Innovation Typology

Table 3 combines the characteristics identified and discussed above and suggestsfour types of business model innovation, three of which are successful and canbe regarded as ideal. For reasons of convenience, we labeled the four types usingthe descriptors of strategic context (i.e., proactive vs. reactive) and organizationalsetting (i.e., open vs. closed). We identified examples of each of the four types.We will first present these types, and then discuss the effects of fit between theinnovativeness, strategic context, and organizational setting of a business modelinnovation on the success of the innovation.

Four main types of business model innovations

Open/proactive: Cases D and F were highly successful open/proactive businessmodel innovations. This type has many potential advantages but also disadvan-tages, particularly the risks involved (e.g., Lieberman & Montgomery, 1988, 1998)in aiming for a radically new to the industry (case F) or even the world (case D)innovation. Company Alpha reduced those risks by limiting the complexity of theinnovations to four building blocks (target customers, core competences, partnernetwork, and profit formula). Rather than developing entirely new core compe-tences, the company acquired and enhanced existing competences. Furthermore,company Alpha conducted and deployed these innovations through a joint venture,which allowed it to share the risks involved, while keeping its existing businessand the necessary competences intact.

Closed/proactive: Cases A, 1, and, depending on perspective (see below),also case 3 were closed/proactive business model innovations. Case A was aimedat developing an entirely new business in addition to company Alpha’s existingactivities. Case 1 involved a major overhaul of company Beta’s existing business.Both innovations involved a significant departure from the companies’ currentactivities (high radicality), offering new-to-the-industry products (high reach),requiring changes in all (case 1), or most (all except new competence developmentor acquisition, case A) building blocks (high complexity). The risks involved in thistype of innovation are high, in particular if it is aimed at replacing the company’sentire business model, as in case 1. Obviously, developing an additional businessas in case A is also risky, but in that case the company still has its existingbusiness to fall back to. Cases A and 1 were highly successful and worth the risksinvolved.

Open/reactive: Cases E and 2 were open/reactive business model innovations,but had radically opposite characteristics in terms of their innovativeness. Aimedat offering new-to-the-industry products (high reach), case E marked a next stepin company Alpha’s strategy in that it involved an improvement (low radicality) ofrelatively few of the building blocks (low complexity) of the company’s alreadyhighly unique business model. Due to these characteristics, this was a relativelylow-risk innovation, whose (financial) risks were further reduced through the es-tablishment of a joint venture with a venture fund. Case 2 was an acquisition, whichdid not change the industry, let alone the world (low reach), but gave company Betaaccess to a very different industry (high radicality). After a major redesign (high


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complexity), the acquired company was expected to continue as an independentbusiness. Cases E and 2 were very successful.

(Partly) closed/reactive: This last group is problematic. Case B is aclosed/reactive innovation. Cases C and G are partly closed/reactive innovations.Both cases involved an attempt to outsource some of company Alpha’s activitiesto a partner, marketing and sales (case C) and manufacturing (case G), respec-tively. Through case 3, company Beta attempted to push a radically new productinto the marketplace. Although it had all the innovativeness characteristics of aclosed/reactive business model innovation (low radicality, low reach, high com-plexity), content-wise case 3 involved a closed/proactive innovation. Innovationsin this group are largely governed and handled internally, although there may besome partner interaction (e.g., the outsourcing attempts in cases C and G). The out-come of this type of innovation is a range of incremental (low radicality) changesin all or most of the company’s business model building blocks (high complexity),which are, however, at best new to the company. In effect, the risks involved werelow and the consequences of failure limited.

The effect of fit on success

Except for open/reactive innovations, there appears to be fit between the inno-vativeness, strategic context, and organizational setting of the business modelinnovation.

Open/proactive business model innovations are associated with high levels ofradicality and reach, and a low level of complexity (cases D, F). Closed/proactiveinnovations score high on all three innovativeness characteristics (cases A, 1, and,depending on perspective, 3). Business model innovations taking place in a (partly)closed/reactive context are low in radicality and reach, but high in complexity (casesB, C, G, and, again, depending on perspective, 3).

As to the open/reactive innovations, the picture is less straightforward: casesE and 2 have radically opposite characteristics – low-high-low and high-low-high,respectively. Through case E, company Alpha tried to use its existing competencesto go beyond its current market and reach out to the rest of the industry, witha partner, in the form of a joint venture. Case 2 involved the acquisition of anexisting company, which left company Beta’s internal organization largely intact,but enabled it to access new markets with new products. The implication of thisfinding is that we should distinguish between two open/reactive subtypes (seeTable 3).

Three of the ten business model innovation attempts failed (shown in brack-ets in Table 3); one was a partial success. All these cases fall into the (partly)closed/reactive group.

IDEAL TYPES: IDENTIFICATION AND TENTATIVEEXPLANATION

Ideal Types

The differences between the success and (partial) failure cases suggest that fitamong innovativeness, strategic context, and organizational setting affects the


likelihood of success. The finding that fit plays an important role is concurrentwith various bodies of theory, including manufacturing strategy (e.g., Hayes &Wheelwright, 1984; Skinner, 1985), organization theory (e.g., Mintzberg, 1979),and innovation theory (e.g., Boer & During, 2001).

On the aggregate innovativeness scale combining radicality, reach, and com-plexity, all successful cases, A, D, E, F, 1, and 2, were more innovative than thepartially successful case B and the failures C, G, and 3. All successful cases werehigh in reach, except case 2, and highly radical, except case E. In contrast, casesB, C, G, and 3 were low in radicality, low in reach, and high in complexity.

A deeper look into the failure cases suggests a pattern. First, complexityhardly seems to explain the difference between success and failure, but radicalityand reach do. Case C involved the establishment of a new business unit offeringincremental improvements to existing products, combined with outsourcing ofmarketing and sales to a partner. Case G concerned outsourcing of manufacturingto a partner, which, however, failed to result in a competitive product. CompanyAlpha is, indeed, a highly competent design company, accustomed to pushingnew products into the marketplace and with a successful history of technologydevelopment collaborations. However, the company may have underestimatedthe complexities involved in establishing a successful operational collaborationthrough outsourcing. Case 3 failed because company Beta tried to push a newproduct into the market – they improved (low radicality) many of the buildingblocks (high complexity) to develop a new product for (mostly) existing marketsegments (low reach), without, however, having any idea of how customers wouldrespond. In other words, the innovativeness characteristics are associated with a(partly) closed/reactive innovation, rather than the closed/proactive innovation itactually is.

Accepting the organization theory notion (e.g., Doty et al., 1993) that ef-fective configuration implies ideal type, the open/proactive configuration, the twoforms of closed/proactive configuration, and the open/reactive configurations rep-resent ideal types. The closed/reactive configuration may also be an ideal type, butwe do not have sufficient evidence for that, as the three failures are examples ofbusiness model innovations that fall between the (other) ideal types; they are eithernot entirely closed, or represent some mix of proactive and reactive behavior.

Tentative Explanation and Propositions

Risk appetite (e.g., HM Treasury, 2006; KPMG, 2008) and mitigation, that is,dealing with the potential effects of failure, seem to explain most of the associa-tions between the innovativeness, proactiveness, and openness of business modelinnovations.

Successful high radicality, high reach, and low complexity business modelinnovations are associated with an open, proactive approach. High radicality andreach are clearly associated with proactiveness. Companies mitigate the risk in-volved by keeping the innovation outside their existing core business. They reducethe risk and effects of failure further by focusing on a limited number of buildingblocks. Based on this, we propose:


Proposition 1: Companies pursuing a proactive, that is, high radicality and highreach, business model innovation, best adopt an open approach aimed at establish-ing a new business outside their existing core business or some form of externalcollaboration, with a limited number of new building blocks.

A proactive company pursuing a highly complex business model innovationtakes serious risks and the consequences of failure may be disastrous, especially ifit adopts a closed approach. The company should be prepared to take and activelymanage the risks involved in innovating its entire core business. We propose:

Proposition 2: Successful companies pursuing a proactive, that is, high radicalityand high reach, as well as high complexity business model innovation, and adoptinga closed approach, take and actively manage the risks involved in innovating theirentire core business.

A company pursuing an open, reactive business model innovation is cautious.In variant A (Table 3), the company reaches out to the world but stays close tohome at the same time, by only pursuing incremental innovation of a limitednumber of building blocks. Alternatively, in variant B (Table 3), the company may,for example, acquire an existing company in a different industry, which providesit with several radically different buildings blocks that the company may furtherdevelop based on its own experiences. The result, however, is a mostly “newto the company” business model. The risk level is low (variant A) to medium(variant B) and the effects of failure are limited as the company’s existing businessis not affected.

Proposition 3: Companies pursuing an open, reactive business model innovationare cautious, keep the risk involved relatively low, and go for low radicality, highreach, and low complexity or, alternatively, high radicality, low reach, and highcomplexity, which, in both cases leads to limited effects, should the innovationfail.

Closed, reactive business model innovations are associated with low radical-ity, low reach, and high complexity, low to medium risk and limited failure effects.As our research did not provide evidence of successful cases of this type, furtherresearch is needed to investigate if closed, reactive business model innovations canbe successful.

CONTRIBUTION AND FURTHER RESEARCH

Theoretical Contribution

Business model innovation matters, but business model innovation theory is scarceand lacks an intellectual home (Teece, 2010). We used notions from innovation,organization, strategy, and business model theory to inform a multiple case studyaimed at developing a typology of business model innovations, a first yet necessarystep in the building of theory, and a powerful tool for strategic decision makers.This article contributes to innovation theory, which has largely neglected the phe-nomenon of business model innovation, and to the business model community,which has put little effort into theory development.


The study suggests that the success of the innovation depends on, amongothers, the company’s appreciation of the new business model’s innovativeness andthe extent to which the company achieves fit between the innovativeness (radicality,reach, complexity), strategic context (proactiveness), and organizational setting(openness) of the innovation.

These factors define four types of business model innovation. The casestudies showed that three of these types present ideal types, that is, effective formsof business model innovation, but did not provide enough evidence to conclude thesame about a fourth type. The four types are essentially different in the way theywere triggered (strategic context), the locus of the process (organization setting),the innovativeness of the business models pursued and the risk involved, as well asthe consequences of failure. A company’s risk appetite and mitigation seem to bemajor factors explaining the existence of the four types. The association between fitamong the innovativeness, strategic context, and organization setting of a businessmodel innovation on the one hand, and success, on the other, together with ourarguments for the central role of risk (appetite and mitigation), led us to developthree propositions for further research.

Limitations and Further Research

Given the highly explorative nature of this study, as well as its small sample, thetypology, its explanation and the propositions should be considered as tentativetheory. Several approaches are possible to extend and test the typology proposed,including more case studies to shed additional qualitative light on the findingspresented here. Two issues deserve specific attention.

First, both companies are analyzers, large (in EU terms), active in the elec-tronics industry, and located in Northwest Europe. Further, preferably survey-based, research is needed to test whether the typology and the propositions holdbeyond these limitations.

Important inputs to the development of that survey are related to the secondlimitation. It is not unlikely that we overlooked important descriptors of each ofthe four types. For example, we identified the role of risk and the potential effectsof failure, but there may well be other aspects in which business model innovationsdiffer. Research into technological, product and, to some extent, organizational andadministrative innovation has identified a range of issues including, but not limitedto, success factors (Project SAPPHO – Rothwell and his colleagues, starting withRothwell et al. (1974) and Rothwell, 1977; Project NewProd – Cooper and hiscolleagues (e.g., Cooper, 1980; Cooper & Kleinschmidt, 1995), the roles of keyindividuals in innovation processes (e.g., Schon, 1963; Frohman, 1978; Maidique,1980; Roberts & Fusfeld, 1981; Boer & During, 2001) and also insight into theorganizational context (Burns & Stalker, 1961; Hage & Aiken, 1970; Zaltman,Duncan, & Holbek, 1973; Pierce & Delbecq, 1977; Daft, 1978) and, more recently,the process of innovation (Cooper, 1983; Van de Ven & Poole, 1990; Roussel, Saad,& Erickson, 1991; Van de Ven, 1992; Boer & During, 2001).

With reference to Cooper and Kleinschmidt (1995), whose five categories ofsuccess factors encompasses all of these issues, we have limited insight into theinfluence of process (except for the impact of market understanding or, rather, lack


thereof) and lack data about culture and (senior management and organizational)commitment. Furthermore, our insight into the role of strategy and organizationis limited to two aspects, proactiveness and openness, respectively. For example,we lack data on the role of key individuals. There is a wealth of theory on (mostlyproduct) innovation, organization, and strategy, in addition to the authors referredto above, which may help in developing propositions on the influence of each ofthese five categories on the success of business model innovation, which can beoperationalized and tested through the survey suggested above.

(Potential) Managerial Contribution

Should it appear that further research enriches, but does not essentially alter, thebusiness model innovation typology and, particularly, the influence of consistencyon success, the typology presents a powerful decision-making tool. First, it helpsmanagers to identify, estimate, and seek consistency between the key drivers ofbusiness model innovation success, including innovativeness, strategic context,and organizational setting, and possibly also the factors categorized by Cooperand Kleinschmidt (1995). Second, the typology as is includes key pointers to beconsidered, particularly the importance of risk appetite and mitigation. Hopefully,further research as indicated above will produce more pointers.

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APPENDIX: INTERVIEW GUIDE

Only the questions relevant to this article are listed here. Company information(e.g., location, size, structure, products, and markets) were inferred from companydocuments and checked with the interviewees).

Innovation Content

(1) How many business model innovations did the company experiment withover the past couple of years?

(2) From a business model perspective, what did these innovations involve,that is, which building blocks were changed?

Business Model Innovativeness

(3) Please map each of the business model innovation initiatives accordingto the three-dimensional innovativeness space (Figure 1 in the article).


Strategic Context

(4) Why did you choose to engage in each of these business model innova-tions? Was it a response to some kind of threat (reactive) or did you takean advantage from an emerging opportunity (proactive)? Which of theinnovations would you rate as “idea push,” which as “market pull”?

Organizational Setting

(5) Which of the business model innovations were mostly conducted inter-nally, which involved with external partners? How? Why?

Innovation Success

(6) In terms of profitability, which of the business model innovations do youconsider to be successful, partly successful, or a failure?

Dr. Yariv Taran is an assistant professor in innovation and organization at theCenter for Industrial Production at Aalborg University. He received a BSc in man-agement and sociology at the Open University of Israel, and an MSc in economicsand business administration at Aalborg University, from where he also received hisPhD in business model innovation. His research focuses on business model inno-vation. Other areas of research interests include intellectual capital management,knowledge management, entrepreneurship, and regional systems of innovation.

Dr. Harry Boer is professor of strategy and organization at the Center for Indus-trial Production at Aalborg University. He holds a BSc in applied mathematics andan MSc and PhD both in management engineering. He has (co)authored numerousarticles and several books on subjects such as organization theory, flexible automa-tion, manufacturing strategy, and continuous improvement. His current researchinterest concerns the organizational aspects of continuous innovation – studied asthe effective integration of day-to-day operations, incremental improvement, andradical innovation.

Dr. Peter Lindgren is professor of multi business model innovation and technol-ogy at Aarhus University. He holds a PhD in network-based high-speed innovationfrom Aalborg University. He has (co)authored articles and books on (multi)businessmodel innovation and technology. He was a visiting researcher at Politechnico diMilano and Stanford University. He founded the International Center for Inno-vation and the research group Multi Business Model Innovation and Technology(MBIT) at Aalborg University. Currently, he is a thematic leader at The Center forTeleInFrastruktur (CTIF) at Aarhus University and editor of the Journal of MultiBusiness Model Innovation and Technology.

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