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The Three Roles of Business Models for Socio-Technical Transitions
Abstract
This paper explores the role of business models for socio-technical transitions, i.e. large-scale changes in the way societal functions are fulfilled. In a first conceptual attempt it integrates research on business models and research on transitions. Using the multi-level perspective on socio-technical transitions we show that business models can impact transitions in their roles as (1) devices to commercialize technological innovation, (2) a dominant business model logic that is part of the current socio-technical regime and (3) niche innovation competing with this dominant business model logic. Our findings theoretically underpin why non-technological innovation, such as business model innovation, has a higher leverage on achieving radical societal shifts than technological innovation. Exploring the role of business models for transitions is of relevance to researchers and practitioners trying to understand the dynamics behind transitions, such as the ones required for a shift towards more sustainable consumption and production.
Supplementary resource (1)
... Moreover, when users get actively involved in shaping business models, it is likely that they will have a more clear understanding of their own needs and practices [15]. However, only recently scholarly attention has arisen that highlights the role between business models in sustainable transitions [16,17]. Thus far, little attention has been given to the roles business models have in the transition process to increase use of renewable energy technologies in developing countries, knowing that they are likely to suffer from higher levels of economic and political instability [18]. ...
... From a socio-technical perspective, technological innovations themselves play a key role in fulfilling societal needs, but the functioning of a technology in a socio-technical system basically depends on other elements, such as regulations, user practices, or cultural meaning [16]. That is, transition does not only involve changes to the technology itself, but also changes to the environment in which it has a function, and other elements of a socio-technical system, such as user practices and regulations [34]. ...
... Teece [10] defines a business model as the design or architecture of value creation, delivery, and capture mechanisms. In a similar vein, Bidmon and Knab [16] argue that business models address the process by which firms create and capture value. Business models have received various definitions and have been applied from different theoretical perspectives [39]. ...
Although business models presumably have a prominent role in socio-technical change remarkably little research has been conducted in this domain, more particularly in the context of developing economies. In this paper, we tap into this knowledge gap and study business model components and the challenges they face. We argue that the market value of renewable energy technologies will increase when new business models are implemented to overcome financial and institutional challenges. We complement concepts of the business model literature with the insights from the sustainable transitions literature. This paper addresses two research questions: What are the challenges of business and financial models in the transition towards decentralized solar energy driven systems? And what are the promising opportunities for new business models in a developing country context? To answer these research questions, we use a case study research design focusing on niche market development of solar thermal and solar photovoltaic (PV) technology in Lebanon. Data collection involved analysis of relevant text documents and expert interviews with 30 informants across different groups of stakeholders. Data analysis involved qualitative interpretation of collected data against concepts from the business model and Strategic Niche Management literatures. The results show that business model challenges initially were highly dependent on donor aid, which contributed to the launch and network creation of niche markets. Later, a shift to micro-finance and business startup models was observed, which showed promising development. Knowledge transfer and community empowerment were found to play an important role in developing new business models that involve consumers more closely. As this development is expected to take place more often, we expect that new opportunity pathways will develop in developing economies like Lebanon.
... Energy transitions are often referred to as 'socio-technical' transitions, as they require the total rearrangement of a system which involves, technology, policy, markets, infrastructure, culture and consumer behaviour (Geels, 2011). Sociotechnical transition is not limited to technological changes, but it can also involve other elements within a system such as regulations and structural practices (Bidmon and Knab, 2014). ...
... According to Richter (2011), the business model can be understood as a structural framework that defines a firm's organisational and financial foundation. Bidmon & Knab (2014) argue that the business model can play a vital role in the stabilisation of technological innovation. They suggest that the implementation of a business model can create its own intermediary level between niche innovation and a socio-technical regime (Figure 2.3). ...
... Business model innovation can play a crucial role in ensuring the social and environmental sustainability of an industrial system (Bocken et al., 2014). Innovative technologies can act as a driver for business model innovation, but some new business models, such as car-sharing do not necessarily require technological advancement (Bidmon and Knab, 2014). According to Bolton & Hannon (2016), business model innovation can involve the addition of new business activities, connecting activities in novel ways, or changing the way that an activity is carried out. ...
The UK’s energy system is predominantly centralised with a significant reliance on fossil fuels. The trilemma of successfully delivering energy security, equity, and environmental sustainability while dealing with an ageing energy infrastructure demands evolutionary changes within the entire energy system. In recent years the future of the UK’s energy system has attracted growing involvement by local and community-based projects for energy generation, these involvements have begun to play an increasing role in the evolution of the UK’s energy system. However, the development of these projects faces huge financial challenge due to a lack of consistent income stream and a viable business model.
The primary aim of this research is to evaluate ways to accelerate the formation and growth of Community Renewable Energy (CRE) initiatives in the UK by optimising existing community renewable energy model and developing an innovative business model that community-owned solar PV projects can take to progress under the post-subsidy conditions.
This project employed the mixed method approach including primary data collection (survey, semi-structured interviews), and the secondary data collection (desk-based literature review and reviewing Government and official reports) also, it uses the System Advisory Model as a simulation tool and business model Canvas as an analytical framework to address its aim and objectives.
This research has shown that UK’s community-based energy sector has evolved rapidly since 2008 and has seen considerable growth in 2014. The business models used by community energy projects mostly depend on grants and public subsidies. Therefore, these projects have faced substantial financial challenges since January 2016 with the reduction in public subsidies for renewable energy (e.g. Feed-In-Tariff). This study has shown these reductions caused the failure of many community-based renewable energy projects particularly solar PV projects.
This study critically investigated how the new CRE projects can be structured and developed to be financially viable when the FIT scheme is no longer available. Also, it further to explore how the integration of solar PV and electricity storage can be structured to provide demand-side response services as well as, be a feasible and financially viable model for distributed energy system and community-owned solar PV projects in the post-subsidy condition.
The outcome of this research is a developed, validated and robust innovative business model to support the development of community-owned solar projects in the UK. Under the innovative model, these projects become financially viable without the FIT, which the model can be extended to all community-owned solar projects in all localities.
... The authors further demonstrate how a business model perspective can elucidate sources of sociotechnical change that have thus far been missing from sustainability transitions, but also show that new business models cannot act as a base for sociotechnical transformations without major reforms to political, regulatory and market structures. Similarly, Bidmon and Knab (2014) show that how business models can act as a source of change given their role in the commercialisation of new technology. In addition, Bidmon and Knab (2014) also show how business models can act as a source of inertia that was previously overlooked within the MLP. ...
... Similarly, Bidmon and Knab (2014) show that how business models can act as a source of change given their role in the commercialisation of new technology. In addition, Bidmon and Knab (2014) also show how business models can act as a source of inertia that was previously overlooked within the MLP. One further reason to examine the role of firms in sustainable transitions is related to issues of governance. ...
... Since business models extend beyond the boundaries of a single firm, radical BMI can require changes to other firms' business models (Klang and Hacklin, 2013). Hence transformation occurs when business models co-evolve in order to disrupt extant regimes (Bidmon and Knab, 2014). ...
Business model innovation is increasingly seen as a means to promote sustainable forms of production and consumption, having been linked to technological innovations in electric vehicles and the circular economy. Business models are an organisational phenomenon that concern focal firms and their networks. However, there is no theory of the firm in transition theory, such that the role of business model innovation in wider transformative processes is unclear. This paper aims to redress this issue by combining a business model perspective with core concepts and constructs from transition theory. We elucidate sources of change and inertia that issue from new and existing business models, illustrating our arguments by focusing on mobility services, which have the potential to radically transform road transportation via new business models. We derive new lines of inquiry that can be used to examine the dynamics of business model innovation in the context of sustainability transitions.
... In sum, the authors demonstrate how a business model perspective can elucidate sources of sociotechnical change that issue from the micro-perspective that has thus far been missing from sustainability transitions. The second attempt is from a paper authored by Bidmon and Knab (2014). Similar to Bolton and Hannon, the authors show that how business models can act as a source of sociotechnical change given their role in the commercialisation of new technology. ...
... Since business models extend beyond the boundaries of a single firm, radical business model innovations can require changes to other firms' business models (Klang and Hacklin 2013). Hence from the perspective of the MLP, regime change can only occur when business models co-evolve in order to disrupt the dominant business model logic within an existing regime (Bidmon and Knab 2014). ...
... The core logic of a business model ('how we do business') is one such barrier, in that it structures sense-making activities, influencing the way companies perceive ideas (Doz and Kosonen 2010;Chesbrough 2010) and can thus prevent companies from recognising new business models altogether (Chesbrough and Rosenbloom 2002). Bidmon and Knab (2014) extend this notion using the term 'dominant business model logic', namely "the generic scheme of value creation and capture shared by actors in an industry" (see also Sabatier et al. 2010;Baden-Fuller and Morgan 2010). This distinction highlights the way in which institutionalised business model logics can act as a source of inertia within socio-technical regimes, in that they are aligned to other system elements such as user preferences and regulation. ...
This paper seeks to redress the lack of a micro-level perspective within the field of sustainability transitions by combining a business model perspective with insights from the Multi-Level Perspective and Technological Innovation Systems. We elucidate sources of change and inertia that issue from new and existing business models and illustrate our arguments by focussing on servitised mobility, which has the potential to radically transform road transportation via new business models. In particular, we focus on intermodal mobility, often referred to as 'mobility-as-a-service', as a means to derive a set of propositions that can be used to examine the dynamics of innovation at the micro level of firms and value networks.
... So far, business model research has neglected the developments at the macro-systemic level, while transition research, in turn, has paid little attention to the dynamics at micro-level . Only recently scholars started to refer explicitly to both business model and transition theory; our paper contributes to the literature at this interface between business model (innovation) and sustainability transitions Hannon, 2012;Bidmon & Knab, 2014;Foxon et al., 2015;Huijben et al., 2016;. In contrast to scholars who take a narrow approach assessing business models as market devices for the commercialisation of sustainable technologies in the context of socio-technical transitions (e.g. ...
... In contrast to scholars who take a narrow approach assessing business models as market devices for the commercialisation of sustainable technologies in the context of socio-technical transitions (e.g. Bidmon & Knab, 2014;, our approach is wider, as we examine the role of business models in farreaching sustainability transitions. And, in contrast to , we take a strong sustainability perspective wherein beyond economic, environmental and social value are also considered (e.g. . ...
Cite/Reference as:
Hoveskog, M., and Halila, F. (eds), (2021). Proceedings of the 6th International Conference on New Business Models: New Business Models in a Decade of Action: Sustainable, Evidence-based, Impactful. Halmstad: Halmstad University Press. http://urn.kb.se/resolve?urn=urn:nbn:se:hh:diva-44872
... Viewing rural broadband deployment from this perspective, allows us to study the effects of many, loosely related broadband projects in rural areas. Because a number of studies have shown that the deployment of broadband technologies is well established, this study will view rural broadband as a business model niche rather than a technological niche, as suggested by Bidmon and Knab (2014). ...
... Niche development allows 'hopeful monstrosities' to develop in an environment shielded from competitive pressure. These 'monstrosities' are usually underdeveloped technologies, but may equally be applied to untested business models (Bidmon and Knab, 2014). This line of research argues that if development of such a niche is of public interest, public investment may be justified to stimulate niche formation and growth. ...
... Studies on the organizational level have also looked into the role of TI and BMI in transforming industries, such as newspapers (Holm, Gunzel, & Ulhøi, 2013;Rohrbeck, Günzel, & Uliyanova, 2012) or electric mobility (Abdelkafi, Makhotin, & Posselt, 2013). Thus, the question of how TI and BMI interplay has implications not only for the management of firms but also for the dynamic of industry transformation (Bidmon & Knab, 2014). ...
... For our study, we sought an industry that has undergone multiple phases of discontinuous change and in which companies are expected to be particularly exposed to path dependency (Bidmon & Knab, 2014;Tushman & O'Reilly, 1996). We chose the telecommunication industry because it has been challenged by multiple market and tech-paradoxical. ...
We leverage the business model innovation and ambidexterity literature to investigate a contradictory case, the Swedish-Finnish Telecom operator TeliaSonera. Despite being challenged by three major disruptions, the company not only still exists but also enjoys remarkably good financial performance. Building on extant archival data and interviews, we carefully identify and map 26 organizational responses during 1992–2016. We find that the firm has overcome three critical phases by experimenting and pioneering with portfolios of business models and/or technological innovations. We describe this behaviour as double ambidexterity. We use an in-depth case study to conceptualize double ambidexterity and discuss its impact on the business's survival and enduring success.
... With this work, we seek to address whether BM tensions and innovative BM initiatives are acting as disruptive forces on the barriers of the low carbon transition. We also intend to contribute to an emerging literature linking BM and sociotechnical transitions (Bidmon and Knab, 2014;Huijben and Verbong, 2013;Loorbach and Wijsman, 2013;Tongur and Engwall, 2014). The paper is structured as follows: Section 2 provides the background literature, theoretical framework and relevance, Section 3 presents a characterization of tendencies in the power system transition using the BM and MLP framework, Section 4 provides the illustrative examples to further elaborate on these tendencies, and Section 5 concludes and discusses further research. ...
... Given that low carbon energy solutions are generally provided by private sector companies aiming to derive (and drive) value from the market, BMs are, therefore, an essential analytical component of understanding the low carbon socio-technical transition (Bidmon and Knab, 2014). ...
Decarbonising the electrical power system holds a critical role in climate change mitigation. Recent developments in technology are helping change the current centralized paradigm into one of integrated distributed clean energy resources. In spite of these developments, radical transformation is not occurring at a speed to effectively meet environmental targets, mostly due to the incumbent carbon lock-in trajectory. We argue that business model (BM) innovation dynamics are key drivers in accelerating the low carbon power system transition, often operating irrespective of the underlying technology. We combine BM theory with the multi-level perspective on sociotechnical transitions to present a useful framework to analyze this potential transition. This paper presents the application of this framework characterizing relevant BM dynamics of niche and regime business actors, and supporting these with illustrative examples. Particularly, we find that new actors in the distributed energy business are achieving market scale by offering financially innovative BMs that do not require upfront costs from customers. Higher penetrations of renewable energy sources in liberalized electricity markets are destabilizing the historical BM of large centralized utilities through erosion of wholesale prices. Furthermore, a shift towards distributed and dynamic energy resources further challenges incumbents and might bring opportunities for BMs focused on active customer participation and social value creation. As these tendencies are expected to accelerate, we find analyses of BMs will have important relevance for future power system transition research.
... This new wave of financial support provided opportunities for niche entrepreneurs, who started to develop new business models for PV, resulting in fast growing markets (Dewald & Truffer, 2011;Hinnells & O'Neil, 2012;Huijben & Verbong, 2013). Such business models can be considered as vehicles for bringing new technologies to the market and as a form of niche innovation (Bidmon & Knab, 2014;Björkdahl, 2009;Boons & Lüdeke-Freund, 2013;Chesbrough & Roosenbloom, 2002). Research-wise, a business model represents a separate unit of analysis (McGrath, 2010;Zott, Amit, & Massa, 2011). ...
... In their analysis of six cases of solar PV, offshore wind and CCS, Raven et al. (2015) found the fit strategy was dominant, although there were cases of stretch strategy. Researchers note that business models play an important role in the development of niches (Bidmon & Knab, 2014;Geels, 2011). Niches not only nurture breakthrough technologies like solar PV, but also host a range of novel business models (Huijben & Verbong, 2013;Jolly, Raven, & Romijn, 2012). ...
This paper explores how the regulatory regime for Solar PV, defined as a combination of niche shielding and mainstream regulations, affects niche business models, using the Dutch and Flemish regulatory regimes as examples. The regulatory regime does not influence all components of the business model: only one or two components are usually affected. The level of niche shielding influences the dominant niche empowerment strategy. We also identified substantial heterogeneity in fit-and-conform and stretch-and-transform empowerment strategies for dealing with the regulatory regime. These strategies are reflected in business models, and differ in terms of temporal focus, motivation and shielding characteristics targeted. Finally, we show that business model innovation, sometimes in combination with technological innovation, can be used for stretching the regulatory regime. Organizational components of the business model are usually redesigned for this purpose.
... They receive a statutory subsidy from the state budget and the remaining funds are obtained independently in cooperation with the socio-economic environment. Unfortunately, budget support very often leads to demotivation of institutes and limits their activity for cooperation with enterprises [94]. The 2014 report of the Supreme Audit Office showed a number of irregularities in the functioning of the audited research institutes among which we should point out the following: ...
Transfer and diffusion of knowledge and technology is a key condition for the development of innovation. In practice, they take place at the interface between science and business, which makes the level of innovation and development of a given economy depend on the effectiveness and efficiency of universities and other scientific units co-creating the national innovation network. With this important circumstance in mind, this article presents an assessment of the operations of selected research institutes in Poland in 2014–2019 in the context of pro-efficiency statutory changes aimed at making the commercialization of research and development results more effective. The multiple case study used in the article includes five units operating in the field of environmental protection (two) and energy (three)—sectors relevant to the transformation of the national energy sector. The research analyzes the sources of funding of the institutes’ operations, their profitability and the financial effectiveness of their scientific and research staff. The results of the research indicate the adaptability of the surveyed institutes to the new rules of financing and the possibility of their wider than previously opening to business relations, as well as at least partial independence from budget financing. This is a valuable observation from the perspective of shaping innovation policy and the principles of operation of the national innovation system in developing economies.
... Another activity aimed at drawing from the varying perspectives available in the network to develop novel business models, particularly relevant during socio-technical transitions of which digitalization has characteristics of (Bidmon & Knab, 2014). These activities can arguably be understood as aiming at capturing either relational rents or supernormal profits based on partner contributions that form the foundation of Dyer and Singh's (1998) relational view, or more specifically, appropriated relational rents as discussed in the extended RBV (Lavie, 2006 (Colombo et al., 2006). ...
Firms are facing an increasingly complex environment and highly complex product and service landscapes that often require multiple organizations to collaborate for innovation and offerings.
Research in this dissertation was based on the expectation that corporate foresight activities will increasingly be embedded in interorganizational settings and a) can draw on such settings for the benefit of themselves and b) may contribute to shared visions, trust building and planning in these network organizations. The goal of this dissertation is to contribute to the corporate foresight research field by investigating capabilities, practices, and challenges particularly in the context of interorganizational settings and networked organizations informed by the theoretical perspectives of the relational view and dynamic capabilities.
The EIT Digital is a central case of this dissertation, supplemented with insights from three additional cases. Research draws on the rich theoretical understanding of the resource-based view, dynamic capabilities, and particularly the relational view to further the discussion in the field of corporate foresight—defined as foresight in organizations in contrast to foresight with a macro-economical perspective—towards a relational understanding. Further, Rohrbeck’s Maturity Model for the Future Orientation of Firms is used as conceptual frame for corporate foresight in interorganizational settings. The analyses—available as four individual publications complemented by on additional chapter—are designed as exploratory case studies based on multiple data sources including an interview series with 49 persons, two surveys (N=54, n=20), three supplementary interviews, access to key documents and presentations, and observation through participation in meetings and activities of the EIT Digital. This research setting allowed contributing to corporate foresight research and practice by 1) integrating relational constructs primarily drawn from the relational view and dynamic capabilities research into the corporate foresight research stream, 2) exploring and understanding capabilities that are required for corporate foresight in interorganizational and networked organizations, 3) discussing and extending the Maturity Model for network organizations, and 4) to support individual organizations to tie their foresight systems effectively to networked foresight systems.
... Richter (2011), refers to the business model as a structural framework that defines a firm's organisational and financial foundation. Bidmon & Knab (2014) argue that the business model can play a significant role in the stabilisation of technological innovation. Osterwalder (2004) describes the business model as the means for an organisation to create and deliver value. ...
The progressive withdrawal of the Feed-in-Tariff provided by the UK government has left community-owned solar photovoltaic projects facing significant financial challenges. They urgently need to develop alternative business models that will enable them to develop new projects and recuperate their costs in this post-subsidy era. One promising possibility is the incorporation of storage technology. However, currently it cannot be denied that the financial viability of this type of model is in question. This paper investigates whether and how integrated solar and battery storage system would be financially viable, using the System Advisor Model as a simulation tool to conduct techno-economic analyses.
This paper proposes an innovative model designated as, the ‘Community-owned Energy Storage’ model. This model proposes that community-owned solar projects should sell their locally generated electricity under a Time of Use Power Purchase Agreement (TOU PPA). Results demonstrated under the developed model of community-owned solar projects can fully restore the economic viability and become financially attractive if they could utilise a combination of TOU PPA and demand-side response (DSR) services. This paper, therefore, recommends that the UK government should promote and facilitate the TOU PPA and encourage suppliers to involve local energy projects within the provision of DSR.
... Schneider and Spieth (2013) defined 'business model innovation' as a fundamental modification in the way firms create and capture value to produce results which exceed those that would be created simply by incremental adjustment to an existing business model. Innovative technologies can act as a driver for business model innovation, but some models, such as car-sharing, do not necessarily require technological innovation (Bidmon and Knab, 2014). Several internal and external barriers obstructing business model innovation have been identified in the literature. ...
The UK's energy system is predominantly centralised with a major reliance on fossil fuels. The trilemma of successfully delivering energy security, equity, and environmental sustainability, whilst dealing with an ageing energy infrastructure, demands change within the entire energy system. In recent years, Community Renewable Energy (CRE) projects have played a significant role in the transition of the UK's energy system, but since 2016government support for them has been less robust. This paper reports a web-based survey and semi-structured interviews of the UK's community energy groups undertaken between August 2016 and March 2017. The results indicate that huge problems have arisen due to the changes in government policy, particularly for solar photovoltaic schemes. The majority of CRE organisations have chosen to focus on managing their existing assets rather than plan further growth. Additionally, this paper highlights the key challenges facing CRE projects that wish to develop innovative business models under the new policy conditions.
... With regard to changing the ways of producing and consuming goods and services that are culturally and economically embedded and institutionalized, Wells argues that only radical and sustainability-driven innovations are capable of challenging the persistent and continuously self-reinforcing status quo (Wells 2008(Wells , 2013a(Wells , 2013bHansen et al., 2009). However, radical sustainability innovations often start in niches and struggle to either create new markets or penetrate existing mass markets-e-mobility is a prime example (Bidmon and Knab, 2014;Hockerts and Wüstenhagen, 2010;Schaltegger and Wagner, 2011;Tukker et al. 2008). Creating business models based on radical, sustainability-driven innovations, that not only bridge the gap between niches and mass markets but also deliver ecological and social benefits in an economically viable way, is the major challenge when developing sustainable business models (Bocken et al., 2014;Lüdeke-Freund, 2013). ...
Supply chains and business models are of general importance for any company. Due to these concepts’ overarching and interlinking nature, they are of particular importance for companies engaging in sustainable entrepreneurship and sustainability management. These companies look over the rim of their organizations’ boundaries—motivating research and practice dealing with sustainable supply chains (SSCs) and sustainable business models (SBMs). SSCs and SBMs come from different origins and use, but are highly interrelated, both in theory and practice, one building in part on the other often without recognition by scholars and practitioners in both fields. Therefore, this chapter compares the main characteristics of SSCs and SBMs as discussed in current academic literature and investigates the conceptual similarities, differences and areas where both can complement each other. Sustainability-oriented extensions of supply chain and business model concepts are meant to bring together multiple stakeholders, their needs and perceptions of value, going beyond suppliers and customers and including local communities (e.g. in the case of social business models) or post-consumer actors (e.g. in the case of closed-loop supply chains). Because of their shared potential to foster multi-stakeholder perspectives on value creation, particular analogies between supply chains and business models can be discerned. A framework is introduced comparing both concepts, highlighting their complementary and distinguishing characteristics. The resulting integrated perspective on value creating activities provides more clarity for those engaging in conceptual and practical SSC and SBM design and management.
... Schneider and Spieth (2013) defined 'business model innovation' as a fundamental modification in the way firms create and capture value to produce results which exceed those that would be created simply by incremental adjustment to an existing business model. Innovative technologies can act as a driver for business model innovation, but some models, such as car-sharing, do not necessarily require technological innovation (Bidmon and Knab, 2014). Several internal and external barriers obstructing business model innovation have been identified in the literature. ...
In recent years, the future of the UK’s energy system has attracted growing involvement of local and community-based projects for energy generation despite an unfavourable policy landscape. The purpose of this paper is to evaluate the impact of curtailment of renewables support mechanisms in 2015 on the development of UK’s Community Renewable Energy (CRE) sector.
The approach involves analysis of an online survey and semi-structured interviews conducted between August and October 2016 among, community energy groups, community energy representatives and developers to explore their perspectives on future of community energy projects after the major reduction renewable support mechanisms. Furthermore, investigates key success factors, and perceived challenges for further development of these projects.
Research has shown that UK’s community sector has evolved rapidly since 2008 and has seen considerable growth in 2014. The business models used by community energy projects, mostly depend on grants and public subsidies. Therefore, these projects have faced huge financial challenges since January 2015 with the reduction in public subsidies for renewable energy (e.g. FIT). This study has shown these reductions caused failure to many community-based renewable energy projects. This paper critically analyses the potential future development of the community renewable energy sector and furthermore, it focuses on new approaches that community energy groups can implement to maintain and develop further under the new policy regime.
In conclusion, preliminary recommendations are suggested based on alternative business models and discuss alternative policy approaches for the future development of community renewable energy in the UK.
Keywords: Community Renewable Energy; Business model; Feed -in-Tariff (FIT)
... However, such innovations often start in niches and struggle either to create new markets or to penetrate the existing mass markets -take e-mobility as a prime example (cf. Bidmon & Knab 2014;Hockerts & Wüstenhagen 2010;Schaltegger & Wagner 2011;Tukker at al. 2008). Creating business models that not only bridge this gap between niche and mass markets for radical and sustainability-driven innovations and hereby deliver ecological and social benefits, but are also economically viable, is the major challenge for sustainable entrepreneurs dealing with business models and their innovation (cf. ...
Whether and how “sustainable business models” effectively support sustainable development is not just a matter of design, but also of the measurability and manageability of business model effects. While the interrelations between organisations’ sustainability performance and their business models is discussed in an increasing number of academic and practice publications, appropriate management approaches for the deliberate assessment and management of business models and their expected contributions to a sustainable development of the natural environment and human society are currently not available. Therefore, this chapter discusses this research gap and proposes a conceptual framework for sustainability-oriented business model assessments.
... With regard to changing the ways of producing and consuming goods and services that are culturally and economically embedded and institutionalized, Wells argues that only radical and sustainability-driven innovations are capable of challenging the persistent and continuously self-reinforcing status quo (Wells 2008(Wells , 2013a(Wells , 2013bHansen et al., 2009). However, radical sustainability innovations often start in niches and struggle to either create new markets or penetrate existing mass markets-e-mobility is a prime example (Bidmon and Knab, 2014;Hockerts and Wüstenhagen, 2010;Schaltegger and Wagner, 2011;Tukker et al. 2008). Creating business models based on radical, sustainability-driven innovations, that not only bridge the gap between niches and mass markets but also deliver ecological and social benefits in an economically viable way, is the major challenge when developing sustainable business models (Bocken et al., 2014;Lüdeke-Freund, 2013). ...
This paper aims to seek conceptual integration between two major concepts that oftentimes have been treated as separate issues: sustainable supply chains (SSCs) and sustainable business models (SBMs). The purpose is to enhance our understanding of both by identifying shared theoretical and conceptual features. Although both concepts share some common features, they largely remain in their disciplinary “silos”; rare exceptions are a small number of studies that link, for example, sustainable supply chains, Base-of-the-Pyramid settings, and stakeholder theory to sustainable business models. While obvious complementarities between both concepts exist, such as the common objective of corporate sustainability and sustainable value creation, we see an urgent need to compare, distinguish, and (re-)integrate the perspectives of SSCs and SBMs. The paper builds on two major propositions. First, both concepts regularly refer to one another, but mostly on an abstract level only, which leads to a superficial treatment of supply chains in the business model literature, and vice versa. Second, both concepts share the vision of sustainable organisational value creation and thus provide two fundamental levers for entrepreneurs and managers to improve their sustainability performance. The identification of conceptual similarities, dissimilarities, and complementarities might help strengthen the practice of SSC and SBM management. Our overall assumptions are that both streams of research have more in common than the currently separated bodies of literature suggest, and that an integrative view can provide a bridge between the dominant operations management and strategic management perspectives underlying SSCs and SBMs. The proposed integrated perspective is applied to a set of generic closed-loop models to show its value as a new conceptual framework and “language” to address often entangled supply chain and business model issues.
... where innovative business models are framed as niches struggling against incumbent regimes. Rather it supports Bidmon and Knab's contention that innovative business models act as translation devices between niches and regimes (Bidmon and Knab, 2014). Furthermore, our study suggests that both new entrants and incumbent players utilise business models to commercialise niche technologies. ...
This paper examines the role of innovative business models in the transformation of socio-technical systems. Focusing on decentralised energy technologies, we explore business model innovation in the context of a transition towards a more sustainable energy system. We conduct an empirical study of two Energy Services Company (ESCo) models for the deployment of combined heat and power with district heating (CHP/DH) infrastructure in the UK. Based on these case studies we illustrate the different ways in which Local Authorities develop business models to create and capture value from more efficient resource use and to deploy sustainable technologies. Drawing from systems theories in the business model and socio-technical literatures, we analyse the interfaces between business models, energy infrastructure and institutions. We propose that a systems based approach to the analysis of business models as embedded in their socio-technical contexts can offer new insights into the dynamics and governance of sustainability transitions.
... Such a process is systemic in nature and requires a radical shift from the status quo. However, the mainstream system in place has its own logic, forming a barrier to sustainable innovation [4] and [5]. Therefore, a protected space called a niche is needed as a nurturing place, from where new innovations can scale up and alter the mainstream system [4]. ...
How did a country in the middle of Western Europe, starting almost from scratch, reach the European top 3 in terms of solar PV capacity in five years? And what were the costs? We provide a systematic chronological review of the different governmental support instruments that drove the exponential growth of the solar energy market in the Flanders region of Belgium and calculate their relative contributions. The results of the economic calculations show that green electricity certificates had by far the greatest effect on both the rise and stagnation of the market, costing about 1.5 billion euro only for 2006–2013. The long-term societal costs of such growth proved to be even higher (6.7 billion for 2014–2031) and unevenly distributed, with residents paying the highest price via their energy bills. Companies continuously adapted their organizations to enact the available support instruments. Counter-intuitively, the substantial support shifted the attention of companies to the larger systems, even though the incentive for investment in PV was lower than for the smaller systems.
... With regard to changing the ways of producing and consuming goods and services that are culturally and economically embedded and institutionalized, Wells argues that only radical and sustainability-driven innovations are capable of challenging the persistent and continuously self-reinforcing status quo (Wells 2008(Wells , 2013a(Wells , 2013bHansen et al., 2009). However, radical sustainability innovations often start in niches and struggle to either create new markets or penetrate existing mass markets-e-mobility is a prime example (Bidmon and Knab, 2014;Hockerts and Wüstenhagen, 2010;Schaltegger and Wagner, 2011;Tukker et al. 2008). Creating business models based on radical, sustainability-driven innovations, that not only bridge the gap between niches and mass markets but also deliver ecological and social benefits in an economically viable way, is the major challenge when developing sustainable business models (Bocken et al., 2014;Lüdeke-Freund, 2013). ...
Supply chains and business models are of general importance for any company. Due to these concepts’ overarching and interlinking nature, they are of particular importance for companies engaging in sustainable entrepreneurship and sustainability management. These companies look over the rim of their organizations’ boundaries—motivating research and practice dealing with sustainable supply chains (SSCs) and sustainable business models (SBMs). SSCs and SBMs come from different origins and use, but are highly interrelated, both in theory and practice, one building in part on the other often without recognition by scholars and practitioners in both fields. Therefore, this chapter compares the main characteristics of SSCs and SBMs as discussed in current academic literature and investigates the conceptual similarities, differences and areas where both can complement each other. Sustainability-oriented extensions of supply chain and business model concepts are meant to bring together multiple stakeholders, their needs and perceptions of value, going beyond suppliers and customers and including local communities (e.g. in the case of social business models) or post-consumer actors (e.g. in the case of closed-loop supply chains). Because of their shared potential to foster multi-stakeholder perspectives on value creation, particular analogies between supply chains and business models can be discerned. A framework is introduced comparing both concepts, highlighting their complementary and distinguishing characteristics. The resulting integrated perspective on value creating activities provides more clarity for those engaging in conceptual and practical SSC and SBM design and management.
... The analysis of how sustainable entrepreneurs and their business models can trigger market transformation requires further theoretical framing. While the business model literature provides some frameworks and theories of business model innovation (for overviews, see Schneider & Spieth, 2013;Zott et al., 2011), with few exceptions (Bidmon & Knab, 2014;Hannon, 2012;Hannon et al., 2013), no consistent theoretical framework is available that connects business models with the dynamics of markets, industries, or society and that helps understand the dynamic role of business model innovation for sustainability transformations of markets. To address this gap we propose using evolutionary economics. ...
The relevance of business models for corporate performance in general and corporate sustainability in particular has been widely acknowledged in the literature while sustainable entrepreneurship research has started to explore contributions to the sustainability transformation of markets and society. Particularities of the business models of sustainable niche market pioneers have been identified in earlier research, but little is known about the dynamic role of business models for sustainable entrepreneurship processes aiming at upscaling ecologically and socially beneficial niche models or sustainability upgrading of conventional mass market players. Informed by evolutionary economics, we develop a theoretical framework to analyze co-evolutionary business model development for sustainable niche pioneers and conventional mass market players aiming at the sustainability transformation of markets. Core evolutionary processes of business model variation, selection and retention, and evolutionary pathways are identified to support structured analyses of the dynamics between business model innovation and sustainability transformation of markets.
... Wüstenhagen et al. [26] conceptualize social acceptance, identifying three categories of acceptance: socio-political, community and market acceptance. According to Bidmon and Knab [25], energy transitions could be substantially improved by including non-technological innovations, such as new business models. Their conceptual discussion underpins the importance of appropriate business models in order to further develop niches. ...
Even though the potential of sharing data across firms’ boundaries is clear, most industrial data remains siloed. Scholars and industrial leaders propose a decentralized approach, which guarantees data sovereignty and promises to enable industrial firms to collaborate for latent data value, to skim this potential. Such data ecosystems are, however, not yet being adopted on a broad scale. We have investigated the challenges of emerging industrial data ecosystems with the aid of expert interviews. Qualitative analysis has let us identify four challenge dimensions that help explain why productive and scaled data ecosystems cannot be observed in action, yet. We find that next to technology-, people-, and organization-related challenges, a foundational component missing in the ongoing design considerations are well-defined and attractive business models.
This chapter discusses the transition to a low-carbon energy system and how this will involve all of us rather than just the traditional energy “Supply Side.” We will look at this from a Built Environment perspective. In this context, “we” are typically referred to as the “Demand Side.” The future energy system will see us, the occupants of the Built Environment at the heart of the system engaging interactively with both supply and demand.
Because in the United Kingdom we have a relatively old building stock and heavy reliance on natural gas for heating, one of the biggest challenges we face is decarbonizing heat. Action to reduce demand and improve energy efficiency significantly requires making intrusive change in nearly all buildings. Until recently, energy efficiency in the Built Environment has been considered at policy level to be the “low-hanging fruit.” But to pick it is in our view quite another matter and not so easy. We in the United Kingdom face a true infrastructural challenge to transform our buildings to be fit for the 21st Century and the time for implementation of the necessary changes to hit the UK carbon reduction targets is now imminent.
It has been suggested that business model innovation (BMI) is crucial for incumbent firms to drive and master sustainability transitions. Yet there is not much knowledge about how business models (BMs) and sustainability transitions interrelate and how incumbents (can) innovate BMs in a transition context. BM research typically takes a firm-centric perspective, disregards the mutual influence between firms and the socio-economic system they are embedded in, and fails to address the particularities of BMI in a transition context. To address these shortcomings, I embark on this cumulative dissertation by identifying BM research directions which are particularly relevant in a transition context. The five dissertation papers follow these directions, are theoretically informed by transition and strategic cognition theory and empirically situated in the German energy industry. Methodologically, this dissertation includes conceptual papers, action research and longitudinal case studies. Overall, I find that the BM concept is well suited to link firms and the wider system because it is firm-centric yet context-oriented. To drive and master sustainability transitions, incumbents need to emphasize BMI with a focus on inter-organizational collaboration and support cognitive change within and across organizational boundaries. In this dissertation, insights from the transition and BM literatures are conceptually integrated and a method for collaborative BM design is developed, applied and evaluated. Furthermore, BM implementation is portrayed as a recursive process of cognitive change and alignment at and across organizational levels, and ensuing action. This dissertation primarily contributes to BM research; however, individual papers offer secondary contributions to the transition and strategic cognition literatures.
This paper explores how the regulatory regime for Solar PV, defined as a combination of niche shielding and mainstream regulations, affects niche business models, using the Dutch and Flemish regulatory regimes as examples. The regulatory regime does not influence all components of the business model: only one or two components are usually affected. The level of niche shielding influences the dominant niche empowerment strategy. We also identified substantial heterogeneity in fit-and-conform and stretch-and-transform empowerment strategies for dealing with the regulatory regime. These strategies are reflected in business models, and differ in terms of temporal focus, motivation and shielding characteristics targeted. Finally, we show that business model innovation, sometimes in combination with technological innovation, can be used for stretching the regulatory regime. Organizational components of the business model are usually redesigned for this purpose.
Business model innovation is attracting increasing attention in corporate practice and academia. Despite strong interest in the phenomenon, no common understanding of the concept’s meaning has yet been established, hindering dialogue and progress in this research field. This study seeks to build a definition of business model innovation, and to provide a measurement index for the extent of innovativeness of a firm’s changed business model. Based on the business model, business model innovation and product innovation literatures, conceptualise business model innovation as a ‘new-to-the firm’ change that affects at least one out of three business model dimensions: value offering, value creation architecture and revenue model logic. Based on a study among 200 German firms, this study further offers an empirically validated measurement model for business model innovativeness comprising three dimensions and nine indicators. We also emphasise the opportunity-centric potentials of business model innovation as well as the potentials of integrating findings from related research streams into business model innovation research.
The Energy Service Company (ESCo) business model is designed to reward businesses by satisfying consumers' energy needs at less cost and with fewer carbon emissions via energy demand management and/or sustainable supply measures. In contrast, the revenue of the incumbent Energy Utility Company (EUCo) model is coupled with the sale of units of energy, which are predominantly sourced from fossil fuels. The latter is currently dominant in the UK. This paper addresses two questions. First, why has the ESCo model traditionally been confined to niche applications? Second, what role is the ESCo model likely to play in the transition to a low-carbon UK energy system? To answer these, the paper examines the core characteristics of the ESCo model, relative to the EUCo model. The paper then examines how ESCos have co-evolved with the various dimensions of the energy system (i.e. ecosystems, institutions, user practices, technologies and business models) to provide insight into how ESCos might help to shape the future UK energy system. We suggest that institutional and technological changes within the UK energy system could result in a more favourable selection environment for ESCos, consequently enabling the ESCo model to proliferate at the expense of the EUCo model.
There is an emerging consensus that business models are systemic and transcend firm boundaries. Yet, existing research on Business Model Innovation (BMI) challenges focus almost exclusively on intra-firm factors such as capabilities, cognition and leadership. We explore challenges related to BMI by instead drawing on an open systems perspective on organisations. In particular, we argue that the systemic and boundary-spanning nature of business models imply that firms are forced to act under conditions of interdependence and restricted freedom, since they do not have executive control over their surrounding network. Consequently, we propose that suitable managerial solutions include the development of shared knowledge, appropriability regimes based on trust, network stability and the alignment of heterogeneous interests.
Business model innovation is receiving increased attention in corporate practice and research alike. We propose in this article a role-based approach to categorize the literature and argue that the respective roles of explaining the business, running the business, and developing the business can serve as three interrelated perspectives to present an overview of the current business model innovation field and to accommodate the selected contributions of this special issue. We refer to contributions from entrepreneurship, innovation and technology management, and corporate strategy to explicate the three elaborated perspectives and to summarize the main contents of the special issue articles. We conclude by reflecting on main theoretical challenges for studies on business model innovation which stem from the uncertain boundaries of the phenomenon, and we propose some theoretical stances and analytic levels to develop future avenues for research.
This article introduces a research framework for systematically assessing and comparing the ways social entrepreneurs generate social change. Based on a review of the academic debate, we discuss the requirements for such a framework. We then develop a conceptual framework that focuses on the entrepreneur-environment interaction in two dimensions. The first dimension suggests we think of social space in terms of ideas, structures, and practices. The second dimension captures the dynamic nature of social change. It looks at the interdependencies between entrepreneurs and their environment as they play out at the levels of ideas, structures, and practices over time. We apply this framework to a real-life case and discuss how it may guide case study research.
Firms increasingly rely on business model innovation as a means to face challenges of a world in transition. We identify the conscious integration of products and services, i.e., product service systems, as a valuable strategy to radically innovate product-focused business models. Applying an exploratory multiple case study approach, we uncover five distinct kinds of services that specifically help firms to innovate their business model. These are (1) business consulting, (2) comprehensive services, (3) educational services, (4) financing services, and (5) information management services. The influence of these services on three components of business model innovation (value propositions, value chain architectures, and revenue streams) is discussed. In total, our study emphasizes that integrating specific services with products is an important driver for business model innovations.
A business model describes the design of the value creation and capture mechanisms needed to yield profit. We contend that for a business model to be viable in turbulent and hypercompetitive environments, its dynamics are important and must leverage, out of all key business model modules proposed in different studies, on a combined value and network perspective. These different elements present, however, distinctive challenges for small innovative companies and larger firms. Moreover, the business model of small firms is sited in the business models of their partners, big companies in particular. The purpose of this article is to highlight the importance of a dynamic network perspective and to understand how the networked business models in action of large firms may affect small innovative companies. We examine here the networked business models of big pharmaceutical companies and venture capital firms which interact in open innovation with small biotech companies.
Motivated by the high ubiquity of the term "business models" and its increasing proliferation in terms of the transition from a measure to commercialise innovations to the subject of innovations, this paper provides a systematic review of extant academic literature on business model innovation. The particular characteristics of business model innovation are discussed and three distinct research streams addressing prerequisites, process and elements, and effects of business model innovation are identified. A tentative theoretical framework emphasising the need to distinguish between developing and innovating business models as well as to apply an entrepreneurial perspective for further research on business model innovation is proposed. An integrated research agenda emphasising the need to further enhance our understanding of the process and elements of business model innovation as well as its enablers and effects in anticipation and response to increasing environmental volatility is suggested.
Business models are fundamentally linked with technological innovation, yet the business model construct is essentially separable from technology. We define the business model as a system that solves the problem of identifying who is (or are) the customer(s), engaging with their needs, delivering satisfaction, and monetizing the value. The framework depicts the business model system as a model containing cause and effect relationships, and it provides a basis for classification. We formulate the business model relationship with technology in a two-way manner. First, business models mediate the link between technology and firm performance. Secondly, developing the right technology is a matter of a business model decision regarding openness and user engagement. We suggest research questions both for technology management and innovation, as well as strategy.
Sustainable technologies challenge prevailing business practices, especially in industries that depend heavily on the use of fossil fuels. Firms are therefore in need of business models that transform the specific characteristics of sustainable technologies into new ways to create economic value and overcome the barriers that stand in the way of their market penetration. A key issue is the respective impact of incumbent and entrepreneurial firms’ path-dependent behaviour on the development of such new business models. Embedded in the literature on business models, this paper explores how incumbent and entrepreneurial firms’ path dependencies have affected the evolution of business models for electric vehicles. Based on a qualitative analysis of electric vehicle projects of key industry players over a five-year period (2006-2010), the paper identifies four business model archetypes and traces their evolution over time. Findings suggest that incumbent and entrepreneurial firms approach business model innovation in distinctive ways. Business model evolution shows a series of incremental changes that introduce service-based components, which were initially developed by entrepreneurial firms, to the product. Over time there seems to be some convergence in the business models of incumbents and entrepreneurs in the direction of delivering economy multi-purpose vehicles.
Technological change is a central feature of modern societies and a powerful source for social change. There is an urgent task to direct these new technologies towards sustainability, but society lacks perspectives, instruments and policies to accomplish this. There is no blueprint for a sustainable future, and it is necessary to experiment with alternative paths that seem promising. Various new transport technologies promise to bring sustainability benefits. But as this book shows, important lessons are often overlooked because the experiments are not designed to challenge the basic assumptions about established patterns of transport choices. Learning how to organise the process of innovation implementation is essential if the maximum impact is to be achieved - it is here that strategic niche management offers new perspectives. The book uses a series of eight recent experiments with electric vehicles, carsharing schemes, bicycle pools and fleet management to illustrate the means by which technological change must be closely linked to social change if successful implementation is to take place. The basic divide between proponents of technological fixes and those in favour of behavioural change needs to be bridged, perhaps indicating a third way. © 2002 Remco Hoogma, René Kemp, Johan Schot and Bernhard Truffer.
The current literature on business models lies mainly in the literature on strategy and competitive advantage and focuses on their role as descriptors of actual phenomenon, often by reference to taxonomic categories. In this essay we explore how business models can be seen as a set of cognitive configurations that can be manipulable in the minds of managers (and academics). By proposing a typology of business models, that emphasises the connecting of traditional value chain descriptors with how customers are identified and satisfied, and how the firm monetizes its value, we explore how business model configurations can extend current work on cognitive categorization and open up new possibilities for organisation research.
This paper explores the co-evolution between societal sustainability transitions and fundamental shifts within individuals businesses. We argue that there is an emergent trend of businesses and industries that move beyond optimizing the organization's individual performance by mitigating negative environmental and social impacts, to fundamentally restructuring and rethinking existing businesses in light of broader societal changes. Arguably, the frontrunner businesses that orient themselves towards sustainable market transitions develop a competitive advantage by co-creating these sustainable markets and on the short term develop renewed ambition and enthusiasm. By means of the transition framework, we argue that the fundamental societal changes emerging lead to a new phase in corporate responsibility, implying fundamental transitions within businesses. Based on this perspective and the transition management approach we explore how businesses might proactively engage with sustainability transitions in their direct context and link these to internal business transitions. We illustrate this framework of business transition management in a number of interlinked activities based on an experimental participatory case study of the transition in the Dutch roof sector.
The aim of this paper is to advance research on sustainable innovation by adopting a business model perspective. Through a confrontation of the literature on both topics we find that research on sustainable innovation has tended to neglect the way in which firms need to combine a value proposition, the organization of the upstream and downstream value chain, and a financial model, in order to bring sustainability innovations to the market. Therefore, we review the current literature on business models in the contexts of technological, organizational, and social sustainability innovations. As the current literature does not offer a general conceptual definition of sustainable business models, we propose examples of normative 'boundary conditions' that business models should meet in order to support sustainable innovations. Finally, we sketch the outline of a research agenda by formulating a number of guiding questions.
The term “business model” has been misinterpreted and misused over the years, resulting in it being inadequately understood and applied by both practitioners and scholars. It is frequently confused with other popular terms in the management literature such as strategy, business concept, revenue model, economic model or even business process modeling. Our findings suggest that while business model describes what an organization currently is, it needs to be complemented with a strategy and capabilities in order to face upcoming changes. Besides clarifying the meaning and use of the business model terminology, we theorize about its roots through a combination of the resource-based view and transaction cost economics. Finally, we identify new avenues for further research such as the investigation of path dependency in a business model and the meaning of business model innovation. “The definition of a business model is murky at best. Most often, it seems to refer to a loose conception of how a company does business and generates revenue... The business model approach to management becomes an invitation for faulty thinking and self-delusion” (Porter, 2001, p. 73).“While the term ‘business model’ has gained widespread use in the practice community, the academic literature on this topic is fragmented and confounded by inconsistent definitions and construct boundaries” (George & Bock, 2011, p. 83).
Purpose
The purpose of this paper is to introduce this special issue, conceptualized and realized by a group of scholars engaged in the Global Organizational Learning and Development Network (GOLDEN) for Sustainability programme. It aims to adopt the overarching research question of the GOLDEN research programme “How do firms learn to integrate and manage sustainability in their business models, including their organizational purpose, strategy, processes, systems and culture?” as the guiding principle for case selection.
Design/methodology/approach
The paper first presents the key ideas underpinning the previous research question and illustrates the research approach and agenda of GOLDEN for Sustainability. Second, it introduces the eight case studies presented in this special issue.
Findings
The cases offer good illustrations of the ongoing transition by both medium‐sized and multinational corporations dealing with learning and change challenges posed by the identification and management of sustainability issues. The selected cases represent firms operating in diverse contexts and industries, and are developed by scholars specializing in various fields connected to corporate responsibility and sustainability.
Originality/value
The paper presents cases of organizations that have made sense of the sustainability challenge and also the different approaches taken to tackle the challenge, and the results stemming from their efforts..
Decarbonising the electrical power system holds a critical role in climate change mitigation. Recent developments in technology are helping change the current centralized paradigm into one of integrated distributed clean energy resources. In spite of these developments, radical transformation is not occurring at a speed to effectively meet environmental targets, mostly due to the incumbent carbon lock-in trajectory. We argue that business model (BM) innovation dynamics are key drivers in accelerating the low carbon power system transition, often operating irrespective of the underlying technology. We combine BM theory with the multi-level perspective on sociotechnical transitions to present a useful framework to analyze this potential transition. This paper presents the application of this framework characterizing relevant BM dynamics of niche and regime business actors, and supporting these with illustrative examples. Particularly, we find that new actors in the distributed energy business are achieving market scale by offering financially innovative BMs that do not require upfront costs from customers. Higher penetrations of renewable energy sources in liberalized electricity markets are destabilizing the historical BM of large centralized utilities through erosion of wholesale prices. Furthermore, a shift towards distributed and dynamic energy resources further challenges incumbents and might bring opportunities for BMs focused on active customer participation and social value creation. As these tendencies are expected to accelerate, we find analyses of BMs will have important relevance for future power system transition research.
The relevance of business models for corporate performance in general and corporate sustainability in particular has been widely acknowledged in the literature while sustainable entrepreneurship research has started to explore contributions to the sustainability transformation of markets and society. Particularities of the business models of sustainable niche market pioneers have been identified in earlier research, but little is known about the dynamic role of business models for sustainable entrepreneurship processes aiming at upscaling ecologically and socially beneficial niche models or sustainability upgrading of conventional mass market players. Informed by evolutionary economics, we develop a theoretical framework to analyze co-evolutionary business model development for sustainable niche pioneers and conventional mass market players aiming at the sustainability transformation of markets. Core evolutionary processes of business model variation, selection and retention, and evolutionary pathways are identified to support structured analyses of the dynamics between business model innovation and sustainability transformation of markets.
This paper aims to make two contributions to the sustainability transitions literature, in particular the Geels and Schot (2007. Res. Policy 36(3), 399) transition pathways typology. First, it reformulates and differentiates the typology through the lens of endogenous enactment, identifying the main patterns for actors, formal institutions, and technologies. Second, it suggests that transitions may shift between pathways, depending on struggles over technology deployment and institutions. Both contributions are demonstrated with a comparative analysis of unfolding low-carbon electricity transitions in Germany and the UK between 1990–2014. The analysis shows that Germany is on a substitution pathway, enacted by new entrants deploying small-scale renewable electricity technologies (RETs), while the UK is on a transformation pathway, enacted by incumbent actors deploying large-scale RETs. Further analysis shows that the German transition has recently shifted from a ‘stretch-and-transform’ substitution pathway to a ‘fit-and-conform’ pathway, because of a fightback from utilities and altered institutions. It also shows that the UK transition moved from moderate to substantial incumbent reorientation, as government policies became stronger. Recent policy changes, however, substantially downscaled UK renewables support, which is likely to shift the transition back to weaker reorientation.
While a consensus appears to have evolved among many sustainability researchers and practitioners that sustainable development at the societal level is not very likely without the sustainable development of organizations, the business model as a key initiating component of corporate sustainability has only recently moved into the focus of sustainability management research. Apparently, the usual approaches to sustainable development of philanthropy, corporate social responsibility, and technological process and product innovation are insufficient to create the necessary radical transformation of organizations, industries, and societies toward genuine, substantive sustainable development. More in-depth research is needed on whether both modified and completely new business models can help develop integrative and competitive solutions by either radically reducing negative and/or creating positive external effects for the natural environment and society.
The concept of business models has reached global impact, both for company's competitive success and in management science. Its application by authors from diverse areas has led to a previously very heterogeneous comprehension of the concept. Yet, by means of investigating its origin and theoretical development, we state a recently converging business model view. Further, based on analyzing business model definitions, perspectives and components in the literature, we newly define the concept and portray its essential components in an integrated framework. Finally, the compilation of the current state of business model research yields the article's main findings. In this regard, via database search we quantitatively identify 681 peer-reviewed articles. Further, we qualitatively analyze them according to individual research areas that we adopt from an appropriate heuristic frame of reference. In this way, we identify four essential research foci: innovation, change & evolution, performance & controlling and design. In triangulation with assessing future research perspectives through a survey of twenty-one international experts, they also consider the areas of innovation, change & evolution, and design to be significant for the future development of the business model research field.
This paper examines the actions and strategies of Germany's leading energy companies—E.ON, RWE, EnBW and Vattenfall—in response to the liberalization of the German electricity market and measures to promote renewable energies, market developments as well as exogenous shocks such as the Fukushima nuclear disaster and the economic crisis. The study offers a comparative analysis of these companies from 1998 to 2013, outlining their development from thriving growth at the start of liberalization up to the current state of crisis. It identifies three strategic phases which the incumbents went through nearly synchronously and show how differences between their activities can be attributed to their respective power plant complex, regional positioning and shareholder structure. With a focus on the context of the Energiewende—Germany's commitment to shift toward sustainable energy production—this article contributes to the current debate on the sustainable transformation of the energy supply system. The theory of strategic action fields by Fligstein and McAdam serves as a theoretical framework.
We advance a theory of how business models can be innovated proactively in the absence of exogenous changes, through processes of generative cognition. We contribute to the cognitive perspective in strategy by analyzing business models as schemas that organize managerial understandings about the design of firms' value-creating activities and exchanges and by theorizing how they can be innovated through processes for proactive schema change. Drawing on cognitive psychology research on two major cognitive processes through which individuals change their schema to cope with novelty, analogical reasoning and conceptual combination, we theorize firm-level strategic processes for designing innovative business models. Copyright © 2015 Strategic Management Society.
Billions of dollars worldwide are pumped into the search for clean technology and renewable energy. So far, however, most investment has been in companies that are using conventional business models to fit new technologies into existing systems. A far better approach, say Johnson and Suskewicz, is to create whole new systems. The authors propose a framework for thinking about clean tech that consists of four interdependent components: an enabling technology, an innovative business model, a careful market-adoption strategy, and a favorable government policy. Two recent experiments show how this framework can be applied: Better Place, founded by the software executive Shai Agassi, has a network of battery-recharging and -switching stations to support its electric cars and a business model based on selling electricity (miles) rather than vehicles. It has a foothold market in Israel, where gas-powered cars are taxed far higher than electric ones. Masdar City, now under construction in Abu Dhabi, will be a carbon-neutral incubator of clean technologies, supported by the investment, manufacturing, strategy, and academic units of a government initiative. The city is itself a foothold market and will benefit from government subsidies, "free zone" status, and favorable regulations. Both enterprises provide hope for supplanting the oil-based economy. Reprint R0911D
Changing environments challenge incumbent firms to retain the fit between their product market strategy and their business model as specific instances of a firm's strategy and structure. Yet, as the business model depicts the pattern of a firm's boundary-spanning transactions with customers, vendors and partners, a change in a focal firm's business model necessitates managing its relationship to these three external parties accordingly. A multiple-case study of 16 firms in the Information and Communication Technology (ICT) sector serves to explore how incumbent firms can enable and support the business model changes that complement the changes in a firm's product market strategy during technological convergence. The results show that three behavioural patterns - infringing, orchestrating and riding - enable and support the changes in an incumbent firm's business model that complement those changes in a firm's product market strategy. These patterns are discussed from the perspective of inter-organisational power and dependency.
This research aims to identify the institutional strategies of incumbent firms with regard to sustainable energy innovations that threaten their interests. This exploratory study contributes to the multi-level perspective by providing new insights into niche–regime interaction. The focus on actor behavior in transitions is informed by literature from institutional theory and strategic management. Based on semi-structured interviews with actors and on documents related to LED lighting and biofuels in the Netherlands, this study identified a preliminary set of empirical strategies: providing information and arguments to policy makers and the general public, as well as strategically setting technical standards. Incumbents are in a position to significantly influence the innovation's development by employing these strategies; thus temporarily keeping sustainable innovation on a leash. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment
This paper provides the first formal model of business model innovation. Our analysis focuses on sponsor-based business model innovations where a firm monetizes its product through sponsors rather than setting prices to its customer base. We analyze strategic interactions between an innovative entrant and an incumbent where the incumbent may imitate the entrant's business model innovation once it is revealed. The results suggest that an entrant needs to strategically choose whether to reveal its innovation by competing through the new business model, or conceal it by adopting a traditional business model. We also show that the value of business model innovation may be so substantial that an incumbent may prefer to compete in a duopoly rather than to remain a monopolist.
This paper examines how a firm can manage the decision-making and cannibalization processes when a new and an existing business model need to be run in parallel. We present an in-depth longitudinal case study of a major bank in the US corporate bond trading market that launched a disruptive business model and ran it alongside its existing well-established and successful business model. The study shows how the firm conducting a staged decision making process that balanced procedural rationality and political expediency facilitates and helped resolve the paradoxes involved in running conflicting business models. We contribute to the decision making literature by showing how the mechanisms for balancing procedural rationality and politics facilitated the management of the decision-making and cannibalization processes and so enable existing and disruptive business models to run in parallel.
This book considers two main questions: how do system innovations or transitions come about and how can they be influenced by different actors, in particular by governments. The authors identify the theories which can be used to conceptualise the dynamics of system innovations and discuss the weaknesses in these theories. They also look at the lessons which can be learned from historical examples of transitions, and highlight the instruments and policy tools which can be used to stimulate future system innovations towards sustainability. The expert contributors address these questions using insights from a variety of different disciplines including innovation studies, evolutionary economics, the sociology of technology, environmental analysis and governance studies. The book concludes with an extensive summary of the results and practical suggestions for future research.
Eco-efficient Product-Service System (PSS) innovations represent a promising approach to sustainability. However the adoption of such business strategies is still very limited because it often involves significant corporate, cultural and regulatory barriers. An important challenge is not only to conceive eco-efficient PSS concepts, but also to understand the contextual conditions that facilitate their societal embedding, and which strategies and development pathways are the most appropriate.The combination of theoretical insights from innovation studies (in particular Strategic Niche Management and Transition Management) and a case studies research (exploring the innovation journeys made by six companies in introducing their eco-efficient PSS innovations in the market) is used to investigate the factors that influence the implementation and diffusion of this kind of innovations. The article provides a structured overview of these factors, grouping them in four clusters: implementation of socio-technical experiments; establishment of a broad network of actors; building up of a shared project vision; creation of room for broad and reflexive learning processes.Based on these results it is argued that a broader and more strategic system approach should be adopted by companies. Companies should focus not only on the PSS solution and its value chain, but also on the contextual conditions that may favour or hinder the societal embedding of the PSS itself. The article concludes by outlining a key area for future research.
Strategic discontinuities and disruptions usually call for changes in business models. But, over time, efficient firms naturally evolve business models of increasing stability - and therefore rigidity. Resolving this contradiction can be made easier by developing three core meta-capabilities to make an organization more agile: strategic sensitivity, leadership unity and resource fluidity. This article reviews the underlying determinants of these capabilities, based on detailed research undertaken in a dozen companies who were re-conceiving their business models - among others, Nokia, easyGroup, HP, SAP and Kone are used as examples. We propose a repertoire of concrete leadership actions enabling the meta-capabilities needed to accelerate the renewal and transformation of business models. To organize our argument we borrow the three main dimensions of the strategic agility framework presented in our earlier work, and develop corresponding vectors of leadership actions, each of which can enhance a firm's ability to renew its business models.
An industry's dominant logic is the general scheme of value creation and capture shared by its actors. In high technology fields, technological discontinuities are not enough to disrupt an industry's dominant logic. Identifying the factors that might trigger change in that logic can help companies develop strategies to enable them to capture greater value from their innovations by disrupting that logic. Based on analyzing the changes that biotechnologies and bioinformatics have brought to the drug industry, we identify and characterize three triggers of change that can create disruptive business models. We suggest that, in mature industries experiencing strong discontinuities and high technological uncertainty, entrants' business models initially tend to fit into the industry's established dominant logic and its value chains remain unchanged. But as new technologies evolve and uncertainty decreases, disruptive business models emerge, challenging dominant industry logics and reshaping established value chains.
The transformation of today's electric power sector to a more sustainable energy production based on renewable energies will change the structure of the industry. Consequently, utilities as the major stakeholders in this transformation will face new challenges in their way of doing business. They will have to adapt their business models to remain competitive in the new energy landscape. The present review of business model literature shows that two basic choices exist: utility-side business models and customer-side business models. The two approaches follow a very different logic of value creation. While the former is based on a small number of large projects, the latter is based on a large number of small projects. The article reveals that blueprints for utility-side business models are available, whereas customer-side business models are in an early stage of development. Applying the business model framework as an analytical tool, it is found that existing utility-side business models comprise a series of advantages for utilities in terms of revenue potential and risk avoidance. This study provides new insights about why utilities will favor utility-side business models over customer-side business models and why they also should engage in customer-side business models in their quest for more sustainable future business models.
Using the business model concept as a theoretical framework, this paper examines the relative disruptiveness potential between technology‐driven and market‐driven innovations. The study analyses retrospectively four case studies comprising two technologically sophisticated IT innovations and two technologically less sophisticated market‐driven innovations starting from their inception to the point of disruption over a period of 5–15 years. It finds that, while the disruption process of technology‐driven innovation conforms to the patterns predicted by disruptive innovation theory, the disruption process of market‐driven disruptive business model innovation depicts a bottleneck shape, where the positive effects of initial strategic choice, model specialization and investments on disruptiveness potential reach the maximum level and start to stagnate due to the same initial strategic choice and cost factors. Implications for researchers and practitioners are discussed.