review on business models, an academic perspective

8/4/2019 Review on business models, an academic perspective

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The Business Model in Practice and its

Implications for Entrepreneurship ResearchGeorge, G. & Bock A. J.

Entrepreneurship Theory & Practice, January 2011

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Article Review

Ferran Giones

Supervisor: Dr. Francesc Miralles


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Agenda

Introduction

Literature Review Discourse Analysis

The Data

Discussion

Implications for Theory

Directions for Future Research

Conclusions

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Introduction

Question:

What are business models and how do practitioners use them?

Business models definition vary widely

Used as termed of convenience by press and practicecommunity

Business models relevant for entrepreneurship

Need for a convergent construct

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Literature Review

Review process:

Searched EBSCO and ISI Web of Science databases forbusiness model

EBSCO: 929 title hits, 822 from articles published after 2000, 288 inmanagement field.

ISI: 194 citations.

Outcomes:

Discussion on business models emerging from six main themes:

1. Organizational design

2. The resource-base-view (RBV)

3. Narrative and sense-making

4. Nature of innovation

5. Nature of opportunity

6. Transactive structures

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Literature Review

Theme 1: Business model as Organizational Design

Idea: Agent-driven or emergent configuration of firmcharacteristics.

Managers rationally assess existing and potential businessmodels to ensure firm survival.

Business model fit with strategy favors firm performance (Zott &Amit 2008).

But:

Does not explain business model evolution.

Research has not yet converged on the components of the businessmodel.

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Literature Review

Theme 2: Business model and the RBV

Idea: Organizational structure codeterminant and coevolvingwith firms asset stock or core activity set.

Links business models to resource acquisition and allocation.

Business model as the dynamic capability that links firms distinctive

competnencies to organizational aspirations and outcomes.

But:

Easily confused with product-market positioning strategy

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Literature Review

Theme 3: Business Model as Organizational Narrative

Idea: Subjective, descriptive, emergent story or logic of keydrivers of organizational outcomes.

Powerful tool for understanding and interpreting organizationalbehavior.

Generation of narrative sensemaking dynamics driven by thefirms social order, rules, organizational structure

But:

Limited scope of research: story formation and cataloging of

narratives. No process to mediate between narrative models and firm behavior

or outcomes.

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Literature Review

Theme 4: Business Models as Innovation Form

Idea: Processual configuration linked to evolution or applicationof firm technology.

Business model as focusing device between technologydevelopment and economic value creation.

Idea that business models adjust in parallel to firms life-cycleevolution.

But:

Unclear linkages between business model and organizational

structure innovation. What precedes what and how it is influenced.

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Literature Review

Theme 5: Business Models as Opportunity Facilitator

Idea: Enactment and implementation tied to an opportunitylandscape.

Business model as the link between the entrepreneurialappraisal of the opportunity and its exploitation.

If opportunity is uncertain, business model are equated tobusiness idea or firms value creation mechanism.

But:

Need to explain better the mechanisms that connect the underlying

opportunity with the business model.

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Literature Review

Theme 6: Business Models as Transactive Structure

Idea: Configuration of boundary-spanning transactions.

Business model as unifying mechanism describing the content,

structure, and governance of transactions (Amit & Zott 2001).

Firm performance as a function of:

Specific business model characteristics. Fit between business models and strategy.

But:

Lacks theory building and empirical research outside of the e-

business sector.

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Discourse Analysis

Objective is to compare practitioner perspectives and

construct definitions in the literature. Method:

Pilot interviews (12).

Survey administration (182 Indian managers 13 UKmanagers).

Question: What is a business model?

Discourse Analysis (OConnor 1995):

1. Identification of discourse content.

2. Selection of a unit of analysis.

3. Analysis of the text using an a priori set of categories.

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The Data

Emergence of 25 subcategories, covering 80% of (word)

usage across all analyses.

Coding at two levels providing insights on the construct:

Response-level coding

Higher-level perspective business model language of design andvalue.

Word unit-coding

Usage in practice demonstrate importance of resource andtransactive elements at the organizational level.

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Discussion

Absence of support in practitioners language for

narrative perspectives of the business model. Not matching with narrative legitimating efforts.

Discourse analysis supports research streams that link

business models to resources and transactive structures(Amit & Zott 2001).

Business models as Opportunity-Centric Design

Business models are not the activities, but the structure thatbound and connect the firms core activity set in service to aspecific set of goals (Winder & Szulanski 2001), for example toenact a commercial opportunity.

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Discussion

Business Models, Strategy and Entrepreneurship

Strategy is a dynamic set of initiatives, activities and processes

Linked to reflexive change.

Competitor or environment centric.

Business model is a static configuration of organizationalelements and activity characteristics.

They are not a recipe for change.

Opportunity-centric.

Firm viability requires a value structure to replenish or augment

the firms resource base.

Business model as a core building block of the entrepreneurialenactment process.

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Implication for Theory

Framing of the business model: opportunity-centric

Introduction of the idea of dimensional dominance inthe business model definition:

Dominant dimensions obtain more resources or importance within thefirm configuration activities or efforts.

Resources structure dimension

Transactive structure dimension

Value structure dimension

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Resource-Structure Dominance:

Firm evolution as a function of product development technologies

in search of a market

Accommodate change by altering resource allocations, acquiringand deploying novel resources and reassessing busines model

viability.

Example: Consulting model where a team of consultants executeprojects and bring in improvements required/designed by thecustomer.

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Transactive-Structure Dominance

Focus on structure systems that determine and execute boundary-spanning and intrafirm transactions.

Resilent when scale economics in transactions show learning and tacitknowledge effects, only impacted by radical changes in the nature ofboundary-spanning transactions.

Example: Catering to a niche market, we sell our products directly tocustomers through interior decorators and fashion houses

Value-Structure Dominance Take value structure for granted focuses on the mechanisms to

generate profits and reinvest.

Example: Create high value product and service relevant to customerperception with changing difficult times and enhance all stakeholdervalues continuously.

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Directions for future research

Discourse analysis of Entrepreneurial Activity.

Identify broad patterns in entrepreneurial psychology anddecision-making processes, and isolate particular characteristicsand actions unique to entrepreneurial circumstances.

Interactions of Business Model Dimensions.

Business model change to describe dimensional dynamics

interactions with underlying changes in the opportunitylandscape.

Business Models in Opportunity Creation.

Business model characteristics and the opportunity landscape,comparing characteristics across organizations.

Business Models and Entrepreneurial Outcomes.

Study the impact of business model structure on organizationalgrowth.

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Conclusions

Fragmentation of definition has precluded integrativeresearch on business models

Reconceptualization of the construct through andinductive study:

Opportunity-centric perspective based on resource, transactiveand value structure underlying dimensions.

Insight:

Same opportunity may look different through a specificdominance lens.

Opportunity to unlock entrepreneurial processes, evaluate firmconfiguration effects, explain and predict entrepreneurialoutcomes.

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Annex

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Annex

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The Business Model: Theoretical roots, recent

developments, and future researchZott, C., Amit, R., Massa, L.

IESE Working Paper, WP-862, June 2010

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Paper Review

Ferran Giones

Supervisor: Dr. Francesc Miralles


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Review Key Points

Business model definitional lack of consistency andclarity.

Identification of most prevalent definitions employed toexplain three main phenomena:

E-business and the use of IT in organizations.

Strategic issues: value creation, competitive advantage and

firm performance.

Innovation and Technology management.

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Review Key Points

E-business and the use of IT in organizations:

Description of generic e-business models and typologies:

Direct to customer, Intermediary(Weill & Vitale 2001)

Agora, aggregation, Distributive Network (Tapscott et al. 2000)

Components of e-business models

Value stream, revenue stream, logistical stream (Mahadevan 2000)

System of linkages between components, customer value, revenuesources (Afuah & Tucci 2001).

Business model representation

Business model ontology (Osterwalder 2004)

Strategic marketing in e-business

Monetization of e-business: fee and free business models (Pauwels&Weiss 2008)

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Review Key Points

Business Models and Strategy Value creation in networked markets

Four potential sources of value creation in e-business (Amit & Zott2001)

Novelty, Lock-in, Complementarities, and Efficiency (NICE)

Business model and firm performance

Firms compete with business models (Casadesus-Masanell & Ricart

2009). Novelty models can result in superior performance (Morris et al.2005, Zott & Amit 2008).

Strategy and the business model

Strategy emphasis is on competition and value capture, businessmodel focuses on value creation.

Business model has more focus on the value proposition and on thecustomer role.

Business model as a reflection of firms realized strategy(Casadesus-Masanell & Ricart 2009)

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Review Key Points

Business Models, Innovation and Technology Management.

Companies commercialize ideas and technologies through their

business models

Business models following a discovery-driven process (McGrath 2009)

Theory of business model innovation in incumbent firms, focusing onrelational dynamics on the informal organization (Santos et al. 2009).

Linked to strategic flexibility (Bock et al. 2011) through different levers

(Giesen et al. 2007): Industry model innovation (in value chain)

Revenue model innovation (in revenue generation, pricing models)

Enterprise model innovation (changing role in value chain, reconfigurations).

Business models represents a new dimension of innovation

Involves new forms of cooperation and collaboration.

Business model innovation through collaborative entrpreneurship

Idea of Open Business Models (Chesbrough 2007).

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Discussion & Conclusion

Business model is a new unit of analysis Bridges the firm and the network

Business model researchers adopt a holistic and systemperspective Looking at the content and the process.

Organizational activities (processes, functionalities ortransactions) are dominant elements of business modeldefinition.

Business model literature has shifted emphasis from valuecapture to value creation Centrality of the concept of value in the business model literature.

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Annex

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Annex

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Ideas for discussion on Business Models

Do business models need to be sensitive to competitiveenvironment? If so, what is strategy and what are business models? Academics VS Practitioners??

Business Model as resources, transactions & value creation Or Business Models as simplified entrepreneurs business plans.

Business Model fit in entrepreneurship? Needed to give shape to your incipient idea?

Build your Business Model Canvas (Alex Osterwalder)

Part of the idea validation and exploitation process? Use it to pivot (experiment) around your initial hypotheses (Eric Ries & Steve

Blank) and learn from it.

In Entrepreneurship research:

Are we ready to build research around Business Models? BM designs as explanatory variables for entrepreneurship performance? BM definition as an under researched process, influence of entrepreneurs

cognitive elements, past experiences/knowledge

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review on business models, an academic perspective

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