Paper to be presented at the
DRUID Society Conference 2014, CBS, Copenhagen, June 16-18
Paving the way for a new composite indicator on business model innovations
Franz Barjak
University of Applied Sciences and Arts Northwestern Switzerland School of Business
franz.barjak@fhnw.ch Marc Bill
University of Applied Sciences and Arts Northwestern Switzerland School of Business
marc.bill@fhnw.ch Pieter Perrett
University of Applied Sciences and Arts Northwestern Switzerland School of Business
pieter.perrett@fhnw.ch
Abstract
The paper conceptualises business model innovations (BMI) as a fundamental change of the mechanisms and arrangements of how a company creates, delivers and captures value. It translates this definition into a composite innovation indicator that consists of a combination of radical product and radical process innovations, or radical product innovations combined with marketing and organisational innovations. Implementing this definition with empirical data from the Community Innovation Surveys (CIS) in Europe, we find that roughly one out of 20 SMEs has introduced a BMI in the three-year period preceding the surveys. Deepening our understanding of the construct by means of an
exploratory analysis of 60 BMI case studies, we find that revenue model innovations have not been captured sufficiently in the CIS datasets. At the same time, they constitute an essential element and characterize a significant number of BMI cases. We suggest that innovation surveys should introduce questions on revenue model innovations and add a few further changes to better capture business model innovations in the future.
Jelcodes:O32,O31
1 . I n t r od u ct ion
I n t he USA, 40% of t he 27 com panies founded in t he last 25 year s, t hat gr ew t heir w ay int o t he For t une 500 in t he past 10 year s did so t hr ough business m odel innovat ion ( Johnson, Chr ist ensen,
& Kagerm ann, 2008) . David Teece ( 2010) suggest ed t hat t he m ore radical a t echnological innovat ion, t he gr eat er t he need for business m odel innovat ion ( BMI ) in or der t o capt ur e ( par t of) t he value cr eat ed by t he new t echnology. Henry Chesbrough ( 2007, p. 12) seconds: " Today, innovat ion m ust include business m odels, r at her t han j ust t echnology and R&D."
Over all, t her e is a gr ow ing focus on business m odels and business m odel innov at ions ( Zot t , Am it , &
Massa, 2011) . How ever , academ ic r esear ch seem s t o lag behind business pr act ice ( ibid.) . I n t he t r adit ional SME cont ext , Clar ysse ( 2007) put for t h t hat t he im por t ance of business m odel innovat ion has been highly under est im at ed in t he past , concluding t hat policy m aker s can develop m easur es w hich help SMEs t o look cr it ically at t heir on- going business and suppor t act ivit ies t hat aim for incr eased gr ow t h. And, indeed, t he idea has been t ak en up in r esear ch and innovat ion policy cir cles as w ell: t he ERI AB adv isor y boar d of t he Eur opean Com m ission r ecom m ended r ecent ly differ ent m easur es t o incr ease t he upt ake of business m odel innovat ions in Eur ope, for inst ance by r aising t he pr om inence of t he t opic in academ ic educat ion ( Eur opean Resear ch and I nnovat ion Ar ea Boar d ( ERI AB) , 2012) .
How ever , w e cur r ent ly know r at her lit t le on business m odel innovat ions ( BMI ) . A big par t of t he gr ow ing lit erat ur e on BMI is concept ual ( see t he r eview s in Kr cm ar , Fr iesike, Böhm , & Schildhauer , 2012; Morris, Schindehut t e, & Allen, 2005; Ost erw alder, Pigneur, & Tucci, 2005; Shafer, Sm it h, &
Linder , 2005; Zot t , et al., 2011 t o nam e a few ) . Ot her s have developed inst r um ent s for using t he concept in business pr act ice and consult ing ( Maur ya, 2012; Ost er w alder & Pigneur , 2009) . Em pir ical evidence on BMI is lim it ed r esult ing m ainly fr om case st udies and v er y few ad- hoc and m ost ly non- scient ific survey s.1
Case st udies ar e w ell suit ed t o explor e t he const r uct . They can capt ur e a br oad set of influences w it hin t he innovat ing com panies as w ell as in t heir envir onm ent and ar e im por t ant for developing t heor y. Usually t he case st udies on BMI ar e lim it ed t o a sm all num ber of cases – an ex cept ion is Am it & Zot t ( 2001) w ho looked at 59 e- business cases – w hich is suit able for analyzing in dept h aspect s of BMI m anagem ent ( see e.g. Bucher er , Eiser t , & Gassm ann, 2012; Ram on Casadesus- Masanell & Tar zij an, 2012; Chesbr ough & Rosenbloom , 2002; Desyllas & Sako, 2013; Rohr beck, Günzel, & Uliy anova, 2012) . How ever , it is im possible t o gat her fr om t his line of w or k how im por t ant BMI ar e in differ ent econom ies, w het her t her e ar e specific bar r ier s against it in nat ional r esear ch and innovat ion sy st em s, or w hat t he m acr o- econom ic consequences of BMI ar e.
A r ecent Aust r alian st udy collat ed dat a on 64 pension funds and m easur ed t he degr ee of BMI as t he t ot al of up t o seven innovat ions w hich should im pact t he business m odel ( Har t m ann, Or iani, &
Bat em an, 2013) . The analysis found a posit ive im pact of BMI on oper at ional pension fund per for m ance. Dr aw ing on a unique, m anually collect ed dat aset Zot t and Am it ( 2008) find t hat novelt y- cent r ed business m odels – coupled w it h pr oduct m ar ket st r at egies t hat em phasize differ ent iat ion, cost leader ship, or ear ly m ar ket ent r y – can enhance fir m per for m ance. Non- scient ific surv eys im plem ent ed by consult ancies have suggest ed t hat business m odel innovat or s ar e m or e successful t han ot her t ypes of innovat or s, see for inst ance t he BCG innovat ion sur vey ( Lindgardt , Reeves, St alk, & Deim ler, Decem ber, 2009) and t he I BM CEO sur vey ( I BM I nst it ut e for Business Value, 2012) . How ever , at least w it h r egar d t o t he I BM sur vey, t he concept ualisat ion and t he under ly ing sam ple int roduce som e uncer t aint y about t he v alidit y of t his r esult ( see below ) . Met hodologically st r onger innovat ion sur veys, such as t he har m onized Eur opean Com m unit y I nnovat ion Sur vey ( CI S) 2010, t he Japanese Nat ional I nnovat ion Sur vey 2012 or t he US Business
1 For a differ ent appr oach using I PO pr ospect uses and ot her docum ent s for 170 com panies t o ex t r act dat a on business m odels see Zot t and Am it ( 2008) .
R&D and I nnovat ion Sur vey ( BRDI S) 2010 do not know t he concept of BMI . The sam e applies for t he Oslo Manual, t he OECD guidelines for collect ing innovat ion dat a ( OECD, 2005) . I n it s m ost recent t hir d edit ion it defines and describes four t ypes of innovat ion: pr oduct innovat ions, pr ocess innovat ions, m ar ket ing innovat ions and or ganisat ional innovat ions w it h sub- t ypes in each cat egor y.
CI S exper t s have com plained about t he low use and im pact of t he CI S dat aset , t he m ost com pr ehensiv e m ult i- count r y dat a set on cor por at e innovat ion ( Ar undel, 2007; Bloch & Lopez- Bassols, 2009) . The dev elopm ent and analysis of com plex indicat or s can be a r em edy t o t his, r aising t he policy r elevance of CI S sur vey quest ions ( Ar undel, 2007) . A num ber of such indicat or s have been suggest ed t o ident ify differ ent innovat ion m odes or t ypes ( Fr enz & Lam ber t , 2012) , generat ed eit her in a grounded bot t om - up approach by clust ering innovat ion- r elat ed var iables, or in a t op- dow n pr escr ipt ive appr oach by im plem ent ing var iable com binat ions deduced fr om innovat ion t heor y. How ever , t he const r uct of BMI is also om it t ed in t his line of w or k.
The pr esent paper aim s t o close t his gap by
linking t he BMI const r uct concept ually and em pir ically t o est ablished innovat ion sur veys and t heir definit ions,
ident ifying gaps in t he sur vey cover age w it h r egar d t o t he BMI const r uct ,
developing suggest ions on how t o close t hese gaps.
The paper goes beyond pr evious w or k in a num ber of r egar ds: it deduces t he t ype of business m odel innovat ions fr om t heor y in a t op- dow n appr oach and connect s t his for t he fir st t im e w it h nat ional innovat ion sur veys. I t r eflect s on t he gaps in t hese sur veys w hich encum ber t he under t aking. I t adds a bot t om - up explor at ion of case st udy dat a, t o shed light on t he lim it at ions of t he t op- dow n appr oach and get a bet t er under st anding of t he sub- t ypes of business m odel innovat or s.
We fir st int roduce our under st anding of business m odels and business m odel innovat ions in t he nex t sect ion. I n sect ion 3 w e im plem ent t his definit ion, dev elop a com posit e indicat or for BMI and m easur e it w it h dat a fr om CI S 2008 and CI S 2010. I n sect ion 4 w e use a dat a set of 60 BMI cases t o explor e fur t her t he lim it at ions of our com posit e indicat or and develop an underst anding of differ ent t ypes of business m odel innovat or s. The last sect ion sum m ar izes and concludes t he paper .
2 . Bu sin e ss m ode ls a n d bu sin e ss m ode l in n ov a t ion
2 .1 Bu sin e ss m ode ls a s a h e u r ist ic t o u n d e r st a n d a n d a n a ly se com pa n ie s
I n science, as Baden- Fuller and Mor gan ( 2010) point out , m odels ar e or ganism s for invest igat ion.
For inst ance, t he labor at or y m ouse is a m odel t hat is r epr esent at ive for it s class of m am m als and exper im ent ing w it h lab- m ice gener at es insight s t hat ar e relevant for m am m als. I n analogy , business m odels can be consider ed as r epr esent at ives of cer t ain genr es of fir m s t hat can be st udied. A num ber of scholar s have suggest ed using t hr ee aspect s of value t o define t he business m odel const r uct and dist inguish differ ent genr es of fir m s:2
“ A business m odel descr ibes t he r at ionale of how an or ganizat ion cr eat es, deliver s, and capt ur es value.” ( Ost er w alder & Pigneur , 2009, p. 14)
2 See in par t icular : Giesen et al. ( 2010) , I BM I nst it ut e for Business Value ( 2012) , Mueller & Voler y ( 2010) , Teece ( 2010) , Yunus et al. ( 2010) or Zot t , Am it , & Massa ( 2011) .
Figur e 1. Concept ualizat ion of business m odels ( Sour ce: Aut hor s)
Value cr eat ion r efer s t o how and for w hom a com pany ( or ot her or ganisat ion) cr eat es value ( Mor r is, Schindehut t e, & Allen, 2005) . Wit hout value and benefit s, user s or cust om er s ar e unlik ely and a com pelling value pr oposit ion is one of t he elem ent s of a good business m odel ( Teece, 2010) . Tak ing Google as a w ell- know n ex am ple, t her e can be m ult iple values t hat accr ue t o differ ent t y pes of cust om er s: for int er net sear cher s t he com pr ehensiv e and sor t ed list of hit s of t he Google sear ch engine is t he m ain v alue; for com panies adv er t ising on Google it is t he possibilit y t o link up wit h pot ent ial client s w hich r ev ealed t heir int er est and pr efer ences by m eans of t heir int er net sear ch.
Br andenbur ger and St uar t ( 1996) define t he value cr eat ed in an or ganisat ion as t he buyer s' w illingness- t o- pay for t he pr oduct s of t his organisat ion m inus t he or ganisat ion's supplier s' oppor t unit y cost s. Hence, an or ganisat ion can cr eat e m or e value by r aising dow nst r eam w illingness- t o- pay or r educing upst r eam oppor t unit y cost s in t he value chain. The t ot al m axim um value t hat is cr eat ed in a value chain depends on t he end consum er s' w illingness- t o- pay.
Business syst em . How ever , it is not enough t o cr eat e value, but t he or ganisat ion needs t o deliv er t his value t o t he cust om er s and t he cost s of doing so need t o be low er t han t he gener at ed r evenues; ot her w ise t he business m odel w ill be unsust ainable. Fr om t his follow s t hat par t of t he business m odel is t he ent ir e business syst em w hich has been defined as " t he 'syst em of w or ks’ ( t he pr oduct ion/ deliver y syst em ) t hat a fir m designs - w it hin and beyond it s boundar ies - t o pr oduce and deliv er it s goods or ser vices t o it s t ar get cust om er s" ( I t am i & Nishino, 2010, p. 364) . The business syst em r eflect s t he business ar chit ect ur e and how t he or ganisat ion int er nally m obilises it s capabilit ies and or ganises it s act ivit ies. I t also includes t he div ision of labour bet w een t he or ganisat ion and it s ext er nal t r ading par t ner s and how t his is cont r olled. Com panies such as Wal- Mar t and Dell have cr eat ed a com pet it iv e advant age by m aking changes t o t heir logist ics w hich saved cost s, pr om ot ed ser v ice qualit y t o cust om er s and incr eased r evenues and pr ofit s.
On t he one hand, t he business syst em funct ions as a lear ning syst em as w ell. Exam ples like Toyot a or Google show t hat doing t he w or k of v alue cr eat ion and int er act ing w it h client s, par t ner s and ot her st akeholder s can result in fur t her or ganisat ional lear ning and innovat ion ( I t am i & Nishino, 2010, p. 366) . I n addit ion, t he business syst em consist s in t he inst allat ion of subsyst em s, pr ocesses and asset s w hich ar e har d t o r eplicat e and ser ve as bar r ier s for com pet it or s t o im it at e t he business m odel ( Teece, 2010) - e. g. t ake t he asset s and com pet encies needed t o br ing a new phar m aceut ical com pound t hr ough clinical t r ials and ev aluat e it s effect iv eness for t r eat ing par t icular diseases. On t he ot her hand, how ever , t he business syst em and t he capit al w hich is
" fr ozen" in it m ay also const it ut e a bar r ier t o changing an exist ing business m odel and m ake it difficult and t im e- consum ing for incum bent fir m s t o r eact t o new ent r ant s w it h m ore effect iv e business m odels.
Value capt ur e. The t hir d cr ucial elem ent of a sust ainable business m odel w as m ent ioned alr eady: it is t he logic of how t o capt ur e value fr om w hat ever gr oup of user s or cust om er s w ho benefit fr om t he value cr eat ed ( Chesbr ough & Rosenbloom , 2002) . The value appr opr iat ion has been depict ed as t he out com e of bar gaining bet w een t he client s, t he fir m and t he fir m 's supplier s ( Br andenbur ger
& St uar t , 1996) . This bar gaining r esult s in a dist r ibut ion of shares of value. How ever , im por t ant is not only w ho appr opr iat es how m uch, but also w hat influences t he bar gaining posit ion and w hat cont r ibut ions j ust ify v alue claim s. Dr aw ing on an analy sis of m ult iple cases, Am it and Zot t ( 2001) see four differ ent gr ounds on w hich e- businesses can claim value: a) t hey incr ease t he efficiency of t r ansact ions; b) t hey bundle goods and gener at e com plem ent ar it ies; c) t hey lock in client s t hr ough
sw it ching cost s or net w or k ext er nalit ies; 4) t r ansact ion cont ent , st r uct ur e and gover nance ar e novel.
Not necessar ily all beneficiaries of an or ganisat ion need t o becom e r evenue sour ces as w ell, as t he exam ple of Google, Skype and ot her so- called " fr eem ium " business m odels show s, w hich offer a pr oduct ( oft en case a ser v ice) and char ge only a select ion of t heir user s. Capt ur ing value w as one of t he challenges of m any dot .com com panies and even lar ge com panies such as Yahoo! had pr oblem s in t he beginning t o conver t value int o pr ofit ( Shafer , Sm it h, & Linder , 2005) . The r evenue m odel m ight not be lim it ed t o econom ic r ev enues only, but include ot her t y pes of r ev enue as w ell, such as social r evenue as in t he case of social businesses ( Yunus, Moingeon, & Lehm ann- Or t ega, 2010) , envir onm ent al or healt h- r elat ed r evenues. This w ider underst anding of revenue and value is par t icularly im por t ant if w e ex t end t he business m odel concept beyond t he pr iv at e for - pr ofit sect or and include social business, NPOs, or t he public sect or .
2 .2 Bu sin e ss m ode l in n ov a t ion
Exper im ent ing w it h t he business m odel is com m on m anagem ent pr act ice. Manager s conduct t hought exper im ent s, sim ulat ions or real exper im ent s in or der t o find out whet her changes t o t he business m odel w ould r aise over all success ( Baden- Fuller & Mor gan, 2010) . Baden- Fuller and St opfor d find t hat " … [ s] t agnat ing or ganizat ions need exper im ent s, and t o lear n fr om t hem , if t hey ar e t o succeed in r ej uvenat ion.” Sosna et al. ( 2010) dem and t hat t he t r ial- and- er r or lear ning appr oach has t o involv e all levels of t he fir m and Ost er w alder et al. ( 2005) ar gue t hat a sy st em at ic appr oach t o under st anding and designing business m odels is conduciv e t o innovat ion.
Follow ing our definit ion of business m odels, w e consider business m odel innovat ions ( BMI ) as changes of all t hr ee com ponent s of business m odels, 1) value cr eat ion, 2) business syst em s, and 3) r evenue gener at ion. This includes innovat ions in t he for m of new ly int r oduced goods or ser vices ( Mit chell & Coles, 2003) or changes t o pr ocesses of pr oducing and deliver ing pr oduct s, but it r equir es also t hat t hese t echnological innov at ions ar e com plem ent ed by " or ganizat ional and business m odel changes as w ell as alt er at ions in t he business net w or k" and how t hese ar e linked ( Rohrbeck, Günzel, & Uliy anova, 2012, pp. 9- 10) . BMI is t hen a com posit e t ype of innovat ion com bining m or e basic t ypes of innovat ion ( Bj örkdahl & Holm én, 2013) . Of not e, it does not cont r adict Am it and Zot t 's ( 2012) suggest ion of t hr ee w ays t hr ough w hich BMI can occur , nam ely by adding novel act ivit ies ( " cont ent " ) , linking act ivit ies in novel ways ( " st r uct ur e" ) or changing one or m or e part ies per for m ing t he act ivit ies ( " gover nance" ) , but it r equir es t hat t hese act ivit ies som ehow connect t o cr eat ing, delivering or appr opr iat ing value.
I n addit ion t o com bining changes in differ ent ar eas of t he business and it s par t ner net w or k, and cr eat ing and appr opr iat ing value in a differ ent w ay, t he lit er at ur e gener ally agr ees on t he fundam ent al char act er of t he changes r esult ing fr om business m odel innovat ions ( Bock, Opsahl, Geor ge, & Gann, 2012; Cavalcant e, Kest ing, & Ulhoi, 2011; Mar kides, 2006; Yunus, et al., 2010) .3 BMI m ight go beyond " only" doing business in a new w ay in t he com pany. I t can acquir e t he char act er of disr upt ive innovat ion at m ar ket level w hich at t r act s new cust om er s or causes cust om er s t o consum e m or e and it enlar ges t he m ar k et .
Exam ples of business m odel innovat ions have been discussed fr equent ly in t he lit er at ur e:
BMI t hat m ainly em ploy a new appr oach t o cr eat ing value t o t he cust om er s ar e, for inst ance, shift s fr om pr oduct s t o ser vices. Chesbr ough ( 2007) point s t o GE Aircr aft , w here t he engines unit swit ched t he v alue proposit ion fr om selling j et engines t o it s client s t o selling flight hour s w it h t he engines r ent ed fr om GE Air cr aft and ser v iced by t he com pany , shift ing t he risk of
3 This is challenged by Bucher er , Eiser t & Gassm ann ( 2012) w ho, how ev er , em ploy a r at her nar r ow definit ion of r adical innovat ions as char act er ised by a " discont inuit y along t he t w o m ost im por t ant dim ensions on a m acr o- lev el per spect iv e" ( ibid., p. 192) w hich ar e indust r y and m ar k et . Using a soft er definit ion and set t ing r adical innov at ions equal t o new t o t he m ark et / indust ry , t he innov at ions w hich t hey descr ibed as incr em ent al w ould also qualify as r adical.
dow nt im e fr om t he air line cust om er t o GE. Sim ilar appr oaches have t aken hold in ot her indust r ies, such as aut om ot ive ( leasing car s inst ead of selling) , office equipm ent or const r uct ion t ools ( r ent ing out equipm ent inst ead of selling) .
An exam ple for a ver y successful business m odel innovat ion t hat applied a differ ent business syst em t han t he one dom inat ing at t hat t im e in t he indust r y is Dell Com put er ’s dir ect - t o- user ( consum er s and businesses) business m odel ( Teece, 2010) . By w or king dir ect ly w it h t he user s and im plem ent ing innovat ions in t he dist r ibut ion syst em Dell could offer per sonal com put er s for significant ly low er pr ices t han it s com pet it or s. Chesbr ough ( 2010) descr ibes an ex am ple fr om t he m usic indust r y, Radiohead's 2007 launch of t he new CD " I n Rainbow s" for 60 days on t he WWW. Sit e visit or s could choose w het her and how m uch t hey w ant ed t o pay for t he dow nload and t he enor m ous publicit y t hat t his sales st r at egy gener at ed cont r ibut ed t o higher sales w hen t he CD w as lat er launched in r egular com m er cial channels.
Good exam ples of innovat ive appr oaches t o gener at ing r evenues and capt ur ing som e of t he value in t he com pany ar e again t he sponsor - based business m odel of Google ( m ain revenue fr om adver t iser s, see Casadesus- Masanell & Zhu, 2013, on t his t ype of business m odels) or
" fr eem ium " business m odel of Skype ( cheap pr em ium ser v ices on t op of a fr ee ser v ice w hich helped t o scale up t he user base in a shor t t im e per iod) . Anot her exam ple is t he " pay as you go" appr oach, used for inst ance by t he aut o insur ance Pr ogr essiv e w it h it s Pay- As- You- Dr ive ( PAYD) offer ( Desyllas & Sako, 2013) . I t r equir ed a fundam ent ally new r evenue m odel, t aking int o account self- select ion effect s of client s for w hich t he new value pr oposit ion w as at t r act ive.
We next t r y t o oper at ionalize t his under st anding of BMI w it h exist ing dat a on innovat ion in fir m s.
3 . M a ppin g bu sin e ss m ode l in n ov a t ion in Eu r ope a n d be y on d by m e a n s of in n ov a t ion su r v e y da t a
Mapping t he BMI const r uct on t he exist ing t ypes of innovat ions as defined by t he OECD and ot her s and im plem ent ed in nat ional innovat ion sur veys has sever al advant ages: 1) I t m akes use of exist ing dat a and cont r ibut es t o r aising t he r elev ance of such dat a by m eans of explor ing new com posit e indicat or s ( Ar undel, 2007; Bloch & Lopez- Bassols, 2009) . 2) The under ly ing dat a r esult fr om m ult i- nat ional concept ual and em pir ical w ork under t he um br ella of t he OECD and ( w it hin Eur ope) Eur ost at . Significant effor t s have gone int o quest ion developm ent and sam pling w it h t he pur pose of r aising t he consist ency and com par abilit y of t he r esult ing dat a acr oss count r ies ( Ar undel, O'Br ien, & Tor ugsa, 2013) . Hence, t he r esult ing dat a set s ar e cer t ainly t he best available dat a set s on innovat ion in fir m s and super ior t o scient ific ad- hoc sur veys or non- scient ific dat a set s assem bled by consult ancies. 3) Gener at ing com par able pr im ar y dat a on BMI for a set of count r ies w ould be a cost ly and t im e- consum ing under t aking w it h quest ionable pr ospect s of success, given t hat t he under lying const r uct s of business m odels and business m odel innovat ions lack a widely accept ed m eaning bot h in science and business ( G. Geor ge & Bock, 2011, 2012) .
I n t his sect ion w e will fir st define and ex plain com posit e indicat or s for m easur ing BMI , descr ibe t he available dat a for m easur ing t he const r uct and show fir st r esult s.
3 .1 M e t h odology
I n or der t o m easur e BMI w e need t o obt ain dat a on innovat ions t hat change t he value pr oposit ion, how t he value is cr eat ed and deliv er ed t o user s and client s, and how som e of t his value leads t o r evenues w hich ar e capt ur ed by t he fir m . Nat ional innovat ion sur veys do not use t he value concept , but t hey dist inguish up t o four ot her t y pes of innovat ions as suggest ed by t he OECD ( 2005) :
“ 156. A pr oduct innovat ion is t he int r oduct ion of a good or ser vice t hat is new or significant ly im pr oved w it h r espect t o it s charact er ist ics or int ended uses. This includes significant im pr ovem ent s in t echnical specificat ions, com ponent s and m at er ials, incor por at ed soft w ar e, user fr iendliness or ot her funct ional char act er ist ics.” ( p. 48)
“ 163. A pr ocess innovat ion is t he im plem ent at ion of a new or significant ly im pr oved pr oduct ion or deliver y m et hod. This includes significant changes in t echniques, equipm ent and/ or soft w ar e.” ( p. 49)
“ 169. A m ar ket ing innovat ion is t he im plem ent at ion of a new m ar ket ing m et hod involving significant changes in pr oduct design or packaging, pr oduct placem ent , pr oduct pr om ot ion or pr icing.” ( p. 49)
“ 177. An or ganisat ional innovat ion is t he im plem ent at ion of a new or ganisat ional m et hod in t he fir m ’s business pr act ices, w or kplace or ganisat ion or ext er nal r elat ions.”
( p. 51)
I n or der t o r elat e innovat ions in t he ar eas of value cr eat ion, value deliver y and value capt ur e t o t hese t ypes of innovat ions, w e developed t hr ee pr oposit ions ( see Table 1) . They m ap t he t hr ee com ponent s of our business m odel definit ion on t he four innovat ion t ypes dist inguished by t he OECD.
Table 1. Mapping of t he business m odel const r uct on innovat ion t ypes Business m odel
com ponent
I nnovat ion t ypes Pr oposit ion
Value creat ion Pr oduct innovat ion 1. New value pr oposit ions w ill in m any, if not in m ost cases, coincide w it h pr oduct innovat ions.
Business syst em
Pr ocess innovat ion, or ganisat ional innov at ion
2. Changes of business syst em s can be in t he for m of changes in t he pr oduct ion pr ocesses as w ell as int er nal and ex t er nal organisat ion and div ision of labour along t he value chain.
Value capt ur e Pr ocess innovat ion, m arket ing innovat ion
3. A new appr oach for capt ur ing value w ill coincide w it h a pr ocess and/ or m arket ing innovat ion.
This r esult s in a delim it at ion of business m odel innov at ions as a com posit e t y pe of innov at ion at t he int er sect ion of t he four t ypes of innovat ion defined by t he OECD as show n in t he figur e below ( gr ey ar ea cover ed by segm ent s I - V) .
Figur e 2. Business m odel innovat ion as a com posit e t y pe of innovat ion ( Sour ce: Aut hor s)
This oper at ionalizat ion encount er s t w o challenges:
A BMI r equir es in our under st anding t hat t he differ ent t ypes of innovat ions are not im plem ent ed independent ly of each ot her , for inst ance in differ ent business unit s, but t hey need t o be connect ed t o j ust ify a classificat ion as BMI . The OECD Oslo Manual ( 2005) suggest ed asking for com binat ions of innovat ions which, how ever , has not yet been picked up by innovat ion sur veys. I n or der t o r educe t he r isk of including com panies w it h disconnect ed innov at ions w e lim it t he analy sis t o SMEs ( firm s w it h < 250 em ployees) . This low ers t he num ber of false posit ives t hat is com panies w hich int r oduced differ ent innovat ion t ypes in differ ent business unit s or ar eas, because SMEs usually do not have m any or ganisat ional
subunit s and t hey lack t he r esour ces t o engage in m any unr elat ed innovat ion pr oj ect s sim ult aneously. This also r educes t he influence of fir m - size differ ences on count r y- level indicat or s, as it has been found t hat fir m size can have an influence on how t he innovat ion quest ions in CI S ar e int er pr et ed by r espondent s ( Ar undel, O'Br ien, & Tor ugsa, 2013) .
As w e have ar gued abov e, business m odel innovat ions should be per ceived as fundam ent ally novel and r adical changes of how innovat ing com panies do business ( and not j ust as an incr em ent al adj ust m ent ) . The OECD ( 2005) suggest s t hr ee differ ent degr ees of novelt y: new t o t he fir m , new t o t he m ark et , and new t o t he w orld. New t o t he fir m r eflect s t he low est degr ee of novelt y and new t o t he w or ld t he highest . The harm onised CI S, how ever , uses t he full r ange of novelt y m easur es only for pr oduct innovat ions; for pr ocess innovat ions CI S only asks for new t o t he fir m and new t o t he m ar ket . For or ganisat ional and m ar ket ing innovat ions it is lim it ed t o new t o t he fir m ( Eur ost at , 2010) . The char act er ist ic " new t o t he m ar ket " t r ies t o assess w het her t he innovat ion has been int r oduced by ot her com pet ing fir m s befor e, and w het her t he r esponding fir m is an innovat ion leader or an innovat ion adopt er . How ever , for non- pr oduct innovat ions, including pr ocesses, t he m ar ket is not an adequat e point of r efer ence; " new t o t he indust r y" could be m or e appr opr iat e for such innovat ions. How ever , in par t icular sm all com panies in indust r ies wit h m any play er s m ight not know w het her t heir com pet it or s alr eady use or ganisat ional m et hods, m ar ket ing appr oaches, or business pr ocesses w hich t hey int r oduced only r ecent ly . The v alidit y of t he r esponses t o such a quest ion could be dubious. The CI S quest ionnair e under lying t he dat a used for t his paper did not include quest ions on t he novelt y of or ganisat ional and m ar k et ing innovat ions. Relying on t he ex ist ing m easur es, w e r est r ict t he under st anding of r adical innovat ions t o pr oduct s and pr ocesses int r oduced as m ar ket fir st s.
The OECD Oslo Manual r ecom m endat ions on m easur ing differ ent t ypes of innovat ions, t heir degr ee of novelt y and connect ions bet w een t hem have not been im plem ent ed one t o one in all nat ional innovat ion sur veys. Only t he Eur opean Com m unit y I nnovat ion Sur vey ( CI S) included quest ions on r adical pr oduct , r adical pr ocess, or ganisat ional and m ar ket ing innovat ions in har m onised quest ionnair es for 2008 and 2010 ( Eur ost at , 2010) . Neit her t he Swiss ETH- KOF innovat ion sur vey, nor t he US Business R&D and I nnovat ion Sur vey ( BRDI S) , nor t he Japanese Nat ional I nnovat ion Sur vey included sufficient quest ions on non- t echnological innovat ion and t he novelt y of innovat ions up t o 2010/ 2011.
This ar t icle uses only CI S 2008 and 2010 m icr o- dat a for t he available Eur opean count r ies. For CI S 2008 t hese ar e 11 count r ies w hich w er e m ade av ailable by Eur ost at on CD- ROM. The CI S 2010 dat aset cover ed 16 count r ies for w hich dat a could be accessed in t he Eur ost at Safe Cent r e in Luxem bour g.
3 .2 Re su lt s of t h e m a ppin g
Over all 6.3% of t he sm all and m edium sized ent er pr ises fr om 11 count r ies and differ ent sect or s w er e classified as business m odel innovat or s accor ding t o CI S 2008 ( see Figur e 3, see also Table 7–Table 11 in t he annex for m or e det ailed count r y and indust r y lev el dat a) . For a slight ly differ ent select ion of 16 count r ies t he shar e of business m odel innovat or s w ent dow n t o 5.5% in CI S 2010.
Acr oss count r ies w e find Por t ugal having t he highest shar e of business m odel innovat or s w it h appr oxim at ely 10% of all SMEs and it is not able t hat Por t ugal has high shar es for all indust r ies ( see annex t ables) . Taking CI S 2010 Cypr us, I t aly and Luxem bour g have r at her lar ge shar es of BMI as w ell. I n Rom ania, Hungar y , Lat v ia and Bulgaria t he shar e of business m odel innov at or s is low est w it h less t han 2% of all SMEs. Wher eas in m ost count r ies for w hich dat a in bot h dat a set s is available t he shar e of BMI has gone dow n, it r ose in Lat via. Drast ic changes, like t he drop in t he BMI r at e in t he Czech Republic fr om 8.3% ( t he second highest ) in 2008 t o 3.0% in 2010 requir e fur t her analyses.
Ar undel ( 2007) explains t he im plausibly high innovat ion indicat or s of som e count r ies, like Por t ugal and Spain, w it h t he m ar ket s w hich t hey t ake as r efer ence point s: fir m s ser ving less developed dom est ic m ar ket s w ill m or e oft en st at e t hat t hey int r oduced new pr oduct s t han fir m s ser ving m or e
sophist icat ed int er nat ional m ark et s. Ar undel suggest s including only fir m s w hich ar e act iv e on com par able m ar ket s, e.g. int er nat ional m ar ket s. I m plem ent ing t his w it h CI S 2008 and calculat ing t he indicat or for expor t ing fir m s only, w e get an over all r at io of business m odel innovat ors of 9.1%
of all export ing SMEs, or + 2.8 percent age point s com par ed t o all SMEs ( see Table 8 in t he annex) . Though Por t ugal st ill has t he highest r at io of BMI ( 12.1% ) , ot her count r ies in t he sam ple ar e closer by, in par t icular t he Czech Republic ( 11.8% ) , Nor w ay ( 11% ) , and I t aly ( 11.1% ) .
The shar e of BMI var ies bet w een NACE divisions from 1.7% in energy t o 12.2% in publishing, t elecom m unicat ions, com put er pr ogr am m ing & consult ancy and infor m at ion ser vices. This indust r y is also t he only one in t he dat aset show ing a r ise of t he shar e of BMI bet w een 2008 and 2010 ( up fr om 10.4% in CI S 2008) .
Figur e 3. Per cent age of com panies w it h less t han 250 em ployees and a business m odel innovat ion by count r y in CI S 2010 and 2008 ( Sour ce: Aut hor s)
1.4%
8.3%
5.7%
1.3%
7.9%
3.9%
6.0%
10.2%
0.0%
6.5%
2.9%
6.3%
1.2%
8.5%
3.0%
2.6%
5.9%
0.2%
1.1%
7.6%
4.6%
7.9%
1.2%
4.6%
9.8%
2.1%
5.5%
2.7%
5.5%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%
BG CY CZ DE EE FR HR HU IT LT LU LV NO PT RO SI SK Total
CIS 2008 CIS 2010
Figur e 4. Per cent age of com panies w it h less t han 250 em ployees and a business m odel innovat ion by NACE division in CI S 2010 and 2008 ( Sour ce: Aut hor s)
We lack good sour ces for com par ing t his dat a in or der t o evaluat e it s r eliabilit y. One possible sour ce is t he above m ent ioned I BM sur vey w hich for differ ent r easons should be used w it h car e:
The sur vey concept ualised BMI as a separ at e t ype of innovat ion, w hich m ight have pr oduced inconsist ent quest ionnair e r esponses, as t he concept of business m odels st ill lacks a shar ed m eaning in t he business w or ld ( G. Geor ge & Bock, 2011, 2012) . The sam pling fram e and st r at egy of t he sur vey have not been published and it is unclear , w hat business populat ion is r epr esent ed by t he dat a. The sam ple of t he 2006 sur v ey seem s t o have consist ed of 70% ser vice fir m s fr om 3 sect or s ( Com m unicat ions, Dist r ibut ion, Financial ser vices) and 30% indust r ial fir m s, but it is not published w hat " indust r ial" cover s ( Bock, Opsahl, Geor ge, & Gann, 2012) . Last but not least , t he cit ed publicat ions of sur vey r esult s fail t o st at e t he reference period, i.e. w hen innov at ions w er e int r oduced.
Bock et al. ( 2011, p. 286) had access t o t he 2006 I BM sur vey and based on t heir dat a w e get a shar e of business m odel innovat or s of 19.2% ( = 107/ 556) acr oss all sur vey r espondent s ( see Table 5 in t he annex) . The shar e var ies bet w een 16.5% and 25% accor ding t o fir m size classes and indust r ies w it hout any consist ent pat t er n. I t is highest in Japan w it h 30% , follow ed by 22. 6% in t he Am er icas. I n Eur ope and China t he shar e is low est , w it h less t han 15% of all sur veyed com panies having been ident ified as business m odel innovat ors. How ever , w e do not k now w het her t he I BM dat a set is r eliable and w het her t he show n m agnit ude of BMI am ong lar ge fir m s is plausible.
I n or der t o gener at e a bet t er basis for com par ison, w e also m easur ed t he shar e of business m odel innovat or s accor ding t o our oper at ionalizat ion am ong all CI S 2010 r espondent s w it h at least 250 em ployees. The r esult s ar e show n in Table 10 and Table 11 in t he annex. The BMI shar e am ong lar ge innovat ive com panies in Eur ope is 178.7% and 3.4 t im es higher t han am ong SMEs ( w it hout k now ing w het her t he innov at ions w er e r eally int r oduced in connect ion t o each ot her ) ; it is 3.8 per cent age point s higher t han in t he I BM sur veys ( Europe: 14.9% , see Table 5 in t he annex) ; in bot h sur veys finance com panies ar e m ost oft en business m odel innovat or s. The pat t er ns point int o t he r ight dir ect ion and r aise our t r ust in t he CI S r esult s, t hough w e ar e scept ical w it h r egar d t o a r eliable m easur e of BMI in lar ge fir m s.
2.7%
7.5%
3.3%
5.3%
4.4%
2.8%
10.4%
6.2%
6.5%
6.3%
2.4%
6.4%
1.7%
5.2%
3.6%
2.2%
12.2%
5.4%
6.2%
5.5%
0.0% 5.0% 10.0% 15.0%
B: Mining C: Manufacturing D: Energy E: Water & waste 46: Wholesale trade H: Transportation, storage 58, 61 63: Publishing, telecommunications, computer…
K: Finance & insurance 71: Architectural and engineering activities, technical testing and…
Total
CIS 2008 CIS 2010
4 . Re v ie w in g ca se s of b u sin e ss m ode l in n ov a t ion
4 .1 M e t h odology
Our second appr oach w as t o fur t her explor e t he char act er ist ics of business m odel innovat ions by m eans of a m ult iple- case com par ison. Met hodologically case st udies ar e suit able for t he analy sis of social phenom ena w it h m any and diver se cont ex t ual influences, dealing w it h different form s of em pir ical m at er ial at t he sam e t im e ( Geor ge & Bennet t , 2004; Yin, 2003) . One of t he m ain goals of case st udies is t her efor e t he elabor at ion of t he condit ions under w hich a pr oposit ion or t heor y is valid or not ( Miles & Huberm an, 1994) . This can be done w it h a single case, w hile fur t her cases m ay r aise t he qualit y of t he gener alizat ion by ident ifying fur t her condit ions and specifying t he t heor y.
Due t o t im e and r esour ce r est r ict ions it w as not possible t o develop or iginal cases for t he cont r act w it hin w hich t he r esear ch w as done. Using select ed sear ch t er m s ( see Table 2) w e ident ified m or e t han 400 " candidat e" cases t hat w er e likely t o deal w it h BMI in t he t eaching case r eposit or y " The Case Cent r e" ( for m er ly ECCH, ht t p: / / w w w .t hecasecent r e.or g/ educat or s/) . Of not e, t he sear ch t er m s w er e not lim it ed t o BMI in t he pr iv at e sect or only , as t he cont r act also r equest ed t he inclusion of public sect or cases and a specific analy sis of t he r ole of BMI in com m ercializing academ ic r esear ch r esult s.
Table 2: Over view of cases st udy sear ch t er m s
Se a r ch t e r m N o of ‘h it s’
Business m odel innovat ion 113
Business logic 15
Business m odel change 13
Business t ransfor m at ion 8
Disrupt ive t echnologies 110
Public sect or AND innovat ion 38
Public procurem ent 2
Value creat ion AND public sect or 3
St art - up AND business m odel 143
Tot a l 4 4 5
Fr om t he gr oss sam ple w e select ed 60 BMI case st udies aft er furt her , m or e det ailed inspect ion and filt er ing based on our BMI definit ion ( see Table 12 in t he annex) . Fift y of t he sixt y cases w er e fr om for - pr ofit ent er pr ises ( of w hich 25% in m anufact ur ing and 75% in ser vice com panies) , 4 cases w er e fr om NPOs and 6 cases fr om public sect or organisat ions. Geogr aphically, 65% of t he cases ar e Eur opean, 18% US Am er ican, 10% Asian and 4 cases fr om ot her count r ies w or ldw ide.
The 60 cases w er e t hen coded w it h t he At las.t i soft w ar e for t ext analysis using a hier ar chical code syst em w it h five t op- level cat egor ies: st akeholder s, funct ions, dr iver s & bar r ier s, cont ext , innovat ions and values. All cases w er e pr e- coded by r esear ch assist ant s and t hen subj ect ed t o code r evisions by t he t hr ee senior r esear cher s. Sever al cases w er e coded by t w o coder s in par allel and t he r esult ing differences w er e r esolv ed aft er ext ensive case discussions. The analysis pr esent ed her only uses 14 codes w hich r elat e t o innovat ions.
I n or der t o get a bet t er over view of t he com binat ions of differ ent t ypes of innovat ions, w e r an clust er analyses of t he 60 cases using 14 differ ent var iables on innovat ions ( all coded 0/ 1, see Figur e 5 on t he var iables) . The clust er s w er e obt ained by a com binat ion of clust er ing m et hods: fir st , w e r an a t w o- st ep clust er analysis and t w o hier ar chical clust er analyses w it h differ ent associat ion algor it hm s ( War d and av er age linkage bet w een gr oups) . Second, w e ident ified t he " cor e" cases w hich w er e j oined consist ent ly in t he t hr ee out put s and calculat ed t he clust er cent r e v alues of t he 14 var iables for t he r esult ing four clust er s of cor e cases. The cases for w hich clust er m em ber ship var ied by clust er algor it hm w er e t hen added using t he K- m eans clust er ing rout ine. Clust er cent r es
w er e r ecalculat ed aft er all cases w er e added t o one of t he clust ers. I n a final st ep, clust ers 1 ( 5 cases) and 4 ( 8 cases) w er e m er ged, as t hey ver y closely r elat ed for all variables except for t w o or ganisat ional innovat ions, int r oduct ion of new business pr act ices and new for m s of w or k or ganisat ion.
4 .2 Re su lt s of t h e m u lt iple ca se com pa r ison
We st ar t ed t he case com par ison by assessing t he pr esence of t he four innovat ion t ypes, pr oduct innovat ions, pr ocess innovat ions, or ganisat ional innovat ions and m ar ket ing innovat ions, in t he cases. I n 6 out of t he 60 cases no new pr oduct s w er e int r oduced. These ar e usually cases w it h over all few refer ences t o innovat ion and if so, pr edom inant ly in t he ar ea of pr ocess innovat ions. I n anot her 10 cases w e did not find any pr ocess innovat ions, or a com binat ion of or ganisat ional and m ar ket ing innovat ions. Taking our concept ualisat ion of BMI , t hese 16 cases ( 27% ) w ould be false BMI posit ives in t he sam ple.
I n anot her 16 out of 60 cases all t ypes of innovat ion w er e im plem ent ed ( sect or I I I in Figur e 2 above) . These cases ar e fr om a var iet y of indust ries and as frequent am ong Eur opean cases as am ong non- Eur opean cases. I n 9 cases ( 15% ) w e r ecor ded no pr ocess innovat ion, but pr oduct , or ganisat ional and m ar ket ing innovat ions ( sect or I V in Figur e 2) . Eight of t he nine cases or iginat ed in Eur ope and one in Africa. Ninet een cases out of t he 60 ( 32% ) cover ed pr oduct and pr ocess innovat ions and event ually – but not alw ays – also m ar ket ing and or ganisat ional innovat ions ( sect or s I , I I , and V in Figur e 2) . These cases do not show any par t icular feat ur es w it h r egar d t o locat ion or public/ pr iv at e or igin.
This fir st over view w it h t he t op- lev el t ypes t echnological and non- t echnological innovat ions cur r ent ly ident ified and m easur ed in innovat ion sur veys r aised som e doubt s about our t op- dow n delim it at ion of BMI . We follow ed up on t his and ext ended t he analy sis in t hree w ay s:
Fir st , w e look ed for indicat or s for r adical innovat ion, e.g. allusions t o fundam ent al changes, pr act ices deviant t o w hat is usually done in t he indust r y, pr oduct s t hat w er e new t o t he nat ional m arket s, global pioneers, et c. I n 35 out of t he 60 cases ( 58% ) such r efer ences w er e m ade. They r elat ed t o all four t y pes of innov at ions. Accor ding t o our definit ion, a com binat ion of incr em ent al innovat ions ( as in 25 of our 60 cases) w ould not classify as a BMI . How ever , it should be not ed t hat t he case st udy aut hor s m ight not have been able t o observe t he degree of nov elt y consist ent ly , in par t icular if t hey lack ed cont ex t ual knowledge of indust r y pr act ices and m ar ket s. So, t he chosen m et hod pr obably r at her under est im at es t he r at io of cases w it h radical innovat ions and w e t her efor e do not exclude any cases fr om t he r em aining analysis even t hough t hey m ight not point t o fundam ent al innovat ions.
Second, w e r ecoded all cases w it h r egar d t o t he innovat ion t ype and w ent one level " deeper " : I n line w it h t he Oslo Manual ( 1995) w e dist inguished t he subcat egor ies of pr oduct , pr ocess, m ar ket ing and or ganisat ional innovat ions ( as show n in Table 3) . For inst ance, w e dist inguished bet w een t he int r oduct ion of new goods and new ser vices gener at ing a m or e pr ecise under st anding of t he im plem ent ed pr oduct innovat ions.
Thir d, w e look ed for r efer ences t o changes of how t he focal act or s ( com panies, NPOs, public ent it ies) capt ur e value, i.e. change t he r evenue m odel. We pr oposed above t hat new r evenue m odels should be visible in changes of pr ocesses and m ar ket ing m et hods as w ell ( see Table 1) . How ever , only 12 of t he 60 cases ( 20% ) point t o pr ocess and m ar ket ing innovat ions in connect ion wit h new r evenue m odels, w her eas anot her 14 cases ( 23% ) do not cont ain t his com binat ion, t hough t hey descr ibe changes of t he r evenue m odels. Hence, t he addit ional cat egor y of r evenue m odel innovat ions w as int r oduced. A corr esponding code w as added and all cases w er e r ecoded.
The r esult is show n in Figur e 5 ( see also annex Table 6) . I n 77% of t he 60 cases w e encount er ed ser vice innovat ions. New goods ar e consider ably less fr equent in only about a quar t er of all cases.
Fair ly com m on w as also t he int r oduct ion of new logist ics, new pr om ot ion act ivit ies, and new r ev enue m odels w hich appear ed in m or e t han 40% of all cases.
Figur e 5: I nnovat ions occur r ing in BMI cases by t ype ( see also Table 6 in t he annex)
The next analyt ical st ep consist ed in a clust er ing of t he 60 cases for t he 14 var iables on innovat ion out put s as descr ibed abov e. The final solut ion consist s of t hr ee clust er s ( see Table 3 on t he fr equencies of t he clust er var iables per clust er and Table 4 on sam ple cases) :
All- r ound goods innovat or s. This is t he sm allest clust er w it h only 13 cases, but over all t he highest innovat ion act ivit y . Differ ent t o t he ot her t w o clust er s, in t his clust er innov at ions hav e a st r ong focus on int r oducing new goods and less on ser vices. The opt im izat ion of pr oduct ion m et hods is also m or e com m on, as w ell as t he opt im izat ion of int er nal or ganizat ional rout ines and supply ar r angem ent s. Raising t he m ar ket success of t he pr oduct s ( by m eans of new designs, new placem ent channels and pr oduct pr om ot ion innovat ions) also play im por t ant r oles.
I n vir t ually all cases t her e w as a r efer ence t o r adical changes. How ever , t he r evenue m odels r em ained unchanged. The clust er ed com panies have a clear focus on consum er goods, such as elect r ic vehicles and m ot or cycles ( Think, Har ley, Ducat i) , hom e appliances ( Realfleet Am adana, Haier ) , or food ( Bel, Ready Seafood) .
Am ong t he r evenue m odel innovat or s t he sit uat ion is differ ent . They r epr esent appr oxim at ely 30% of all cases. We find e- com m er ce and m obile com m er ce offer s ( Alibaba, Klar na, paybox.net , ZOPA) , com panies offer ing new ser vices in developing m ar ket s ( MPedigr ee, Eight 19) and a r ange of new ser vices in differ ent indust r ies such as new spaper ( Maghound, Met r o/ Que) , aut om obiles/ m obilit y ( CarMax, Bet t er Place) , t elecom m unicat ion ( Nokia, T- Mobile Aust r ia/ t ele.ring) , fashion ( Moda Oper andi) , healt h ( Laast ar i) , or insur ance ( PAYD) . The st r ong focus on ser vice innovat ions and r evenue m odel changes – and product pricing – is not able, as is t he absence of goods and innovat ions of t he or ganisat ion of w or k. We also found fr equent r efer ence t o r adical changes.
Sm all scale business m odel innovat or s. This is t he lar gest clust er consist ing of near ly one half of t he sam ple. I n t he cases of t his clust er w e find all t ypes of innovat ions less oft en t han in t he full sam ple, ex cept for pr ocess innovat ions ( only suppor t act ivit ies) , new placem ent channels t o m ar ket pr oduct s, or ganisat ional innovat ions ( but only innovat ions in t he or ganisat ion of w or k) .
I nnovat ions ar e less oft en descr ibed as r adical. The cases in t his clust er appear as m ainly or ient ed t o int r oducing new ser v ices and t he cor ollary act ivit ies t o do t his successfully .4
Table 3. I nnov at ions by t ypes and clust er s All- r ou n d goods in n ov a t or s
Re v e n u e m ode l
in n ov a t or s Sm a ll sca le BM I Tot a l
N I n % N I n % N I n % N I n %
Pr oduct innovat ions 13 100% 19 100% 21 75% 54 90%
New goods 12 92% 2 11% 0 0% 14 23%
New serv ices 7 54% 18 95% 21 75% 46 77%
Pr ocess innovat ions 8 62% 12 63% 19 68% 39 65%
Logist ics 7 54% 8 42% 12 43% 27 45%
Pr oduct ion m et hods 7 54% 4 21% 1 4% 12 20%
Support act iv it ies 2 15% 7 37% 8 29% 17 28%
Mar ket ing innov at ions 11 85% 19 100% 14 50% 44 73%
Designs 7 54% 2 11% 1 4% 10 17%
Placem ent channels 8 62% 4 21% 11 39% 23 38%
Pr icing 3 23% 11 58% 1 4% 15 25%
Pr om ot ion 10 77% 15 79% 4 14% 29 48%
Organisat ional innovat ions 9 69% 8 42% 15 54% 32 53%
Business pr act ices 5 38% 2 11% 5 18% 12 20%
Or ganisat ion of ext er nal cont act s 7 54% 7 37% 8 29% 22 37%
Wor k or ganizat ion 4 31% 0 0% 8 29% 12 20%
Revenue m odel innovat ions 1 8% 15 79% 10 36% 26 43%
Radical innovat ions 12 92% 15 79% 8 29% 35 58%
Tot a l 1 3 1 0 0 % 1 9 1 0 0 % 2 8 1 0 0 % 6 0 1 0 0 %
Table 4. Exam ples illust r at ing t he t hr ee BMI clust er s
Clu st e r Ex a m ple Sou r ce
1 " All- round goods innovat or s"
Realfleet Am adana, Japan
The founder s set up REALFLEET as a business sim ilar t o a specialt y st or e ret ailer of pr ivat e label appar el ( SPA) . I n t he SPA m odel, t he dev eloper of t he br and w ould cont r ol t he ent ir e business pr ocess fr om m anufact ur ing t o r et ail. This new business m odel should r aise consum er - or ient at ion in hom e appliance pr oduct ion. While lim it ing t he sales volum e for each m odel, REALFLEET decided t o out sour ce m anufact ur ing t o ot her com panies r at her t han t ry ing t o build a pr oduct ion facilit y in- house. Likew ise, r ecognizing t hat feat ur es and funct ions of hom e appliances available in t he cur r ent m ar ket far exceeded w hat cust om er s r eally needed, t he com pany pur sued sim ple pr oduct designs and dr opped m any unnecessar y funct ions. I n addit ion, t he com pany focused on using r eadily available m at ur ing t echnologies in w ell- est ablished pr oduct cat egor ies ( e.g., coffee m aker s, t elephones, calculat ors) rat her t han at t em pt ing t o develop cut t ing- edge t echnologies on it s ow n. While pur suing a focused and sim plified appr oach in product ion and t echnology developm ent , REALFLEET set pr em ium pr ices for it s Am adana product line t o convey t he ext r a value cr eat ed by t he br and and also t o secur e enough pr ofit s t o cont inuously invest in design dev elopm ent . Am adana pr oduct s w er e display ed and sold in ov er 300 non- t r adit ional r et ail out let s such as int er ior st or es and fashion appar el shops inst ead of t he t ypical hom e appliance w holesaler s and dist r ibut or s.
Yang ( 2008)
2 " Rev enue Model I nnovat or s"
Laast ar i: a r et ail healt h clinic chain, Finland
Laast ar i, t he fir st r et ail healt h clinic chain in Eur ope, offer s fast and low - cost t r eat m ent for com m on illnesses in convenient locat ions ( shopping cent r es, gr ocer y st or es, phar m acies) . To ensur e qualit y and st andar dize car e pr act ices acr oss all locat ions, cust om ized decision- suppor t soft w ar e w as dev eloped. I t included com pr ehensiv e
st andar d- of- car e pr ot ocols for each condit ion in t he ser v ice offer . The car e pr ot ocols w er e built int o t he sy st em as a check list based on nat ional clinical qualit y guidelines of Finland, allow ing for det ailed case docum ent at ion of all pat ient v isit s. Since all t he infor m at ion w as capt ur ed v ia a w eb- based applicat ion on an iPad, nur ses had t o adher e t o t he t r iaging pr ot ocol and t he qualit y- cont r ol fram ew or k w hen r egist er ing and t r eat ing pat ient s.
Laast ar i used bot h, t r adit ional as w ell as social m edia channels for m ar ket ing. The
Aggar w al ( 2013)
4 We see in t his clust er also lim it at ions of our m et hodology: even t hough som e cases in t his clust er appear as not so innovat ive in our analy sis, t hey ar e pr obably st r ong cases for BMI , such as Skype or Xer ox. How ever , t he case descr ipt ions do not alw ay s br ing t his fully t o light , in par t icular if t hey w er e w r it t en w it h a differ ent per spect ive and did not focus on business m odel innovat ion.
Clu st e r Ex a m ple Sou r ce com pany invest ed in local radio, new spapers, search engine opt im izat ion ( t hrough Google
keyw or d search) , and a pr esence on Facebook and Tw it t er. Revenue in t he init ial st ages or iginat ed fr om dir ect cash pay m ent s by pat ient s. There w as significant uncer t aint y, how ever , about int egrat ing pr iv at e and public payers int o t he business, as t his w as t he fir st r et ail clinic chain launched in a pr edom inant ly single payer syst em .
3 " Sm all Scale BMI "
12Snap: Fr om B2C Mobile Ret ailing t o B2B Mobile Mar ket ing
12Snap st ar t ed off as a m obile auct ions prov ider in Ger m any in 1999/ 2000, em ploy ing
" guer r illa" m ar k et ing act iv it ies, at foot ball gam es and involv ing Ger m an " celebr it ies" . I n a pr ocess of differ ent innovat ive st eps, t he com pany developed an ent ir ely differ ent value pr oposit ion, business syst em and m ar ket ing appr oach. I n or der t o r educe cost s, t he com pany shift ed from t he “ high- t ouch” business m odel, w her e all operat ions w er e handled int ernally , t o a “ low - t ouch” m odel in w hich 12Snap sim ply ent ered t he product s int o t he dat abase w hile an ex t er nal logist ics pr ovider handled t he act ual fulfillm ent . Next , it scaled dow n t he shopping com ponent by lim it ing t he pr oduct choice and added ent er t ainm ent and m obile m ar k et ing offer s inst ead. This new appr oach w as r efer r ed t o as t he “ Media Model” , t he pow er of w hich t o at t ract and m aint ain act ive cust om ers had been dem onst r at ed by NTT DoCoMo in Japan. 12Snap’s shift t ow ards m obile m ark et ing again led t o int ernal r est ruct ur ing, out sourcing and st aff lay- offs. Addit ionally , t he 12Snap subsidiar ies in t he UK and I t aly built up sm all local t echnology t eam s w ho w or ked direct ly w it h local salespeople. Market ing also changed and t he above m ent ioned prom ot ion act iv it ies becam e obsolet e.
Ender s ( 2002)
5 . Con clu sion s
Fir st , t he paper deduced fr om t he lit er at ur e on business m odels and business m odel innovat ions ( BMI ) a com posit e indicat or t o ident ify business m odel innov at or s and m easur e BMI acr oss count r ies. The com posit e indicat or uses t he definit ions and dat a on innovat ions r esult ing fr om t he w or k of OECD and Eur ost at w or king gr oups. I t oper at ionalizes BMI as a com binat ion of new t o t he m ar ket pr oduct innovat ions and new t o t he m ar ket pr ocess innovat ions, or new t o t he m ar ket pr oduct innovat ions, or ganisat ional innovat ions, and m ar ket ing innovat ions.
We find t hat t w o pr oblem s in t he innovat ion surv ey quest ionnair es and dat aset s com plicat e t his exer cise:
1) I nnovat ion dat aset s do not include w het her differ ent t ypes of innovat ions w er e im plem ent ed independent ly of each ot her or in connect ion. We r esolv ed t his by lim it ing t he analysis t o SMEs w it h few er t han 250 em ployees assum ing t hat t hey do not have t he r esour ces t o im plem ent differ ent innovat ions independent ly of each ot her .
2) The degr ee of novelt y of an innovat ion is cur r ent ly only assessed for pr oduct innovat ions and t o som e ext ent for pr ocess innovat ions. The novelt y of non- t echnological innovat ions is not cover ed and w e ar e not aw ar e of any pr evious at t em pt s t o m easur e t his. We r esolv ed t his in t his paper by lim it ing t he r equir em ent of a fundam ent al change t o pr oduct s and pr ocesses.
The im plem ent at ion of t he indicat or w it h dat a fr om t he Com m unit y I nnovat ion Sur veys CI S 2008 and 2010 show s t hat appr oxim at ely one out of 20 SMEs has int r oduced a business m odel innovat ion w it hin t he pr evious t hr ee year s befor e t he sur vey. The r at es var y consider ably acr oss count r ies, fr om 0.2% in Cr oat ia t o 9.8% in Por t ugal in 2010. The differ ences ar e not easy t o explain, e.g. answ er ing w hy t he BMI shar e in Por t ugal is m ore t han double t he shar e in Nor w ay r equir es fur t her analyses. One possible explanat ion ar e differ ing degr ees of expor t er s and sophist icat ion on int er nat ional ver sus dom est ic m ar ket s ( Ar undel, 2007) . Taking t his int o account , t he shar e of BMI am ong expor t ing com panies increased t o 9% in t he under lying dat aset . At indust r y level, w e see decr eases of BMI in SMEs bet w een 2008 and 2010 in m ost indust ries, except for publishing, t elecom m unicat ions, com put er pr ogr am m ing & consult ancy and infor m at ion ser vices. The m ost conser vat ive sect or is t he ener gy sect or , w her e t he r at e of BMI even w ent dow n fr om 3.3% in 2008 t o 1.7% in 2010.
Second, t he paper engaged in a m ult iple case com parison of 60 t eaching cases of BMI t aken fr om a t eaching case r eposit or y. We found anot her w eakness of t he suggest ed com posit e indicat or on BMI and t he under lying innovat ion surv eys: I n m or e t han one quar t er of t he included cases t he chosen specificat ion of BMI w as not found. This m ight hav e been due t o er r or s in t he sam pling – inclusion
of BMI false posit ives – or t o an incom plet e concept ualisat ion of BMI . Bot h r easons apply t o som e ext ent . The sam pling w as challenging, as t he necessar y pr e- scr eening of t he cases – t o ident ify w hat innovat ion t ypes ar e pr esent – t ook consider able t im e and alm ost r equired t o pr eviously r ead in- dept h and code t he cases. The coding r esult s show ed t hat in par t icular innovat ions of t he r evenue m odels w er e difficult t o ident ify w it h t he available innovat ion t ypes. A new t ype of r evenue m odel innovat ions w as consequent ly int r oduced w hich applied t o m or e t han 40% of t he cases and, in par t icular , ser ved t o ident ify anot her 8 cases ( 13% out of 60) as business m odel innovat or s.
Clust er analyses of t he innovat ion var iables t o dist inguish t ypes of business m odel innovat or s gener at ed t hr ee clust er s w hich can be dist inguished fr om each ot her :
All- r ound goods innov at or s pr edom inant ly int roduced new goods and new pr om ot ion schem es for t heir pr oduct s.
Revenue m odel innovat or s, on t he ot her hand, pr edom inant ly int r oduced a new ser vice t o w hich a change of t he r evenue m odel w as connect ed. They also focused on new pr om ot ion schem es as w ell as pr icing st r at egies.
Sm all scale BMI int r oduced new ser v ices as w ell. They did not change pr oduct ion m et hods, designs, or t heir pr icing. They lagged behind w it h r egar d t o m ost ot her innovat ions as w ell, and r evenue m odel innovat ions ar e less com m on. Their m ain achievem ent is t he int r oduct ion of a new ser vice accom panied by som e pr ocess and or ganisat ional changes.
The analysis suggest s t hat r evenue m odel innovat ions ar e an im por t ant aspect of BMI t hat is cur r ent ly difficult t o cover in dat aset s r esult ing fr om nat ional innovat ion sur veys. Designing and t est ing quest ions on r evenue m odel innovat ions w ould be a fir st st ep t o change t his.
The analysis show s t hat business m odel innovat or s ar e only a sm all fr act ion of com panies in m ost count r ies and indust r ies. I f policy m aker s w ant t o im pr ov e t he condit ions for BMI and low er t he bar r ier s against it , t hey ar e w ell advised t o fir st im pr ove t he infor m at ion basis by pr oviding t he r esour ces for a bet t er m easur em ent and quant ificat ion of business m odel innovat or s in bot h SMEs and lar ge com panies.
Ack n ow le dge m e n t
This w or k w as suppor t ed by t he Eur opean Com m ission, Dir ect or at e Gener al for Resear ch &
I nnovat ion, under cont r act SC- RTD/ C2/ 2013/ SI 2. 655784. We gr at efully acknow ledge t his funding as w ell as t he over all cont r act coor dinat ion by em pir ica Ges. für Kom m unikat ions- und Technologiefor schung m bH, Bonn/ Ger m any. Neit her sponsor nor coor dinat or has influenced t he st udy design, t he collect ion, analysis or int er pr et at ion of dat a, t he w r it ing or t he decision of publishing t his ar t icle in an academ ic j our nal in any regar d.
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