The business model recent developments and future research pdf

Goergen Chair for financial support of this research. Pearson 21, Barcelona, Spain Email: czott iese. The business model also has been the subject of a growing number of practitioner-oriented studies. While there has been an explosion in the number of articles published, and an abundance of conference sessions and panels on the subject of business models, it appears that researchers and practitioners have yet to develop a common and widely accepted language that would allow researchers who examine the business model construct through different lenses to draw effectively on the work of others.

In this comprehensive review of the academic literature, we have attempted to explore the origin of the business model concept and to examine it through multiple disciplinary and subject-matter lenses. We observe that researchers frequently adopt idiosyncratic definitions that fit the purposes of their studies but that are difficult to reconcile with each other.

As a result, cumu- lative progress is hampered. The main interest areas identified are 1 e-business and the use of information technology in organizations; 2 strategic issues, such as value creation, competitive advantage, and firm performance; and 3 innovation and technology management.

These emerging themes could serve as important catalysts for a more unified study of business models. Our intended contributions in this article are twofold: first, to provide the most compre- hensive and up-to-date literature review on business models, as well as to document carefully the discrepancies and dissonances in that literature, and second, to structure the literature along its main fault lines and begin to bridge the seemingly wide gaps between the various approaches.

This should facilitate future cumulative research on the topic. The review is structured as follows: We begin by briefly reviewing the emergence of the business model concept. Next, we proceed to the Method section, where we discuss the way this review has been carried out.

We then review the business model literature by examining it through multiple lenses. Method To conduct this study, we followed a multistep process. First, we searched for articles pub- lished in leading academic and practitioner-oriented management journals during the period January to December Focusing on articles that contain the term business model in the title or keywords, our initial search revealed 70 articles on business models of which 10 had been published in academic journals and 60 had appeared in CMR, HBR, and MSM.

This database includes more than 1, business journals and represents one of the most complete sources on business studies. We searched the database for academic articles published from January to December containing the term business model in the title, abstract, or keywords.

As a result of this process, we obtained 1, articles, which we added to our initial sample of 70 articles. As 19 of the newly added articles were already present in the initial sample, our overall sample contained 1, articles. An initial cursory analysis of these articles, performed by reading article titles, journal names, abstracts, and introductions, revealed that not all the articles identified by our search would be useful for the purpose of writing this review.

Many of these articles were case studies, summaries of articles published elsewhere, or studies in which the business model is not really the subject of the analysis. To identify relevant articles, we adopted the following three additional criteria for our literature review on business models. First, to be included in our review, an article must deal with the business model concept in a nontrivial and nonmarginal way.

Second, an article also must refer to the business model as a concept related to business firms as opposed to, e.

As a result, we eliminated 1, articles that did not fit these criteria, which left us with a sample of articles. Through reading these articles in depth, we became aware of further works on busi- ness models in particular, books that appeared relevant and that we therefore decided to include in our review.

We also found working papers that our database research had failed to reveal, some of which were subsequently published and are included in the Reference section, which lists their updated publication status. Moreover, our careful reading of these articles also allowed us to exclude studies in which the business model was treated in a rather marginal or trivial way.

Our final sample, therefore, included publications. Moreover, as we highlight below in the Discussion section, our analysis of these publica- tions suggested some common themes, such as 1 the business model as a new unit of analysis, 2 a holistic perspective on how firms do business, 3 an emphasis on activities, and 4 an acknowledgement of the importance of value creation. These themes led us to review adjacent literatures that might be relevant for the study of business models but do not directly refer to the concept—namely, the literatures on new organizational forms, ecosys- tems, activity systems, and value chains and value networks.

Drawing on these literatures could help put future research on business models on a more solid conceptual footing. Given the space and scope considerations for this article, however, we present our brief reviews of these adjacent literatures in an appendix that is available upon request from the authors.

Downloaded from jom. Although business models have been integral to trading and economic behavior since pre-classical times Teece, , the business model concept became prevalent with the advent of the Internet in the mids, and it has been gathering momentum since then.

From that time on, ideas revolving around the concept have resonated with scholars and business practitioners, as documented by the number of publications, including articles, books, and book chapters in the business press and scientific journals. In a frame analysis of the use of the term business model in public talk, Ghaziani and Ventresca searched for the use of the term in general management articles from to Of these, only were published in the period ; the remaining 1, belonged to the period , revealing a dramatic increase in the incidence of the term.

We performed a similar search using the EBSCOhost database, distinguishing between academic and journalistic outlets and extending the analysis to We found that up to December , the term business model had been included in 1, articles in academic journals. Nonacademic articles followed a similar trend. From to December , the term had been mentioned in 8, documents. Figure 1 also indicates that academic research on business models seems to lag behind practice.

Some scholars surmise that the emergence of the business model concept, and the exten- sive use of the concept since the mids, may have been driven by the advent of the Internet e. Business model definitions. Surprisingly, however, the business model is often studied without an explicit definition of the concept. Moreover, existing definitions only partially overlap, giving rise to a multitude of possible interpretations. This lack of definitional clarity represents a potential source of confusion, promoting dispersion rather than convergence of perspectives and obstructing cumulative research progress on business models.

Table 1 summarizes some of the most prevalent definitions suggested for the business model and shows which articles have adopted these definitions. Our review further revealed that the business model has been employed mainly in trying to address or explain three phenomena: 1 e-business and the use of information technology in organizations; 2 strategic issues, such as value creation, competitive advantage, and firm performance; and 3 innovation and technology management. Although we do not wish to claim mutual exclusivity among these categories, we believe that they allow us to broadly classify the business model literature.

Therefore, we use them as organizing principles for this review. Business Models for e-Business The research stream that, to date, has devoted the greatest attention to business models concerns e-business. And what does the customer value?

What is the underlying economic logic that explains how we can deliver value to customers at an appropriate cost? Morris et al. We exclude those firms that merely make use of websites to display information for products or services. Indeed, these developments have opened new horizons for the design of business models by enabling firms to change fundamentally the way they organize and engage in economic exchanges, both within and across firm and industry boundaries Mendelson, According to Brynjolfsson and Hitt , this includes the ways in which firms interact with suppliers as well as with customers.

The Internet is a principal driver of the surge of interest in business models and the con- sequent emergence of a literature that revolves around the topic e. Shafer et al. Our literature review confirms this trend. In a total of 49 conceptual studies in which the business model is clearly defined, almost one fourth of the studies are related to e-business.

Research on e-business models can be organized around two complementary streams: The first aims to describe generic e-business models and provide typologies; the second focuses on the components of e-business models.

Description of generic e-business models and typologies. Several scholars have attempted to classify e-business models by describing types. Timmers distinguishes among 11 generic e-business models, from e-shops and e-procurement to trust and other third-party services. Tapscott, Lowy, and Ticoll propose a network- and value-centered taxonomy that identifies five types of value networks that they call b-webs business webs , which dif- fer in their degree of economic control and value integration.

Rappa classifies com- panies according to the nature of their value propositions and their modes of generating revenues. Weill and Vitale describe eight so-called atomic business models, each of which describes a different way of conducting business electronically; e-business initiatives can be represented by pure atomic business models or by combining them.

Applegate introduces the following six e-business models: focused distributors, portals, producers, infrastructure distributors, infrastructure portals, and infrastructure producers.

And Dubosson- Torbay et al. What is common to all these approaches is an attempt to describe and organize around typologies and taxonomies the plethora of new perceived busi- ness archetypes enabled mainly by Internet technologies. Components of e-business models. In addition to developing typologies that enlist and describe various generic e-business models, scholars of e-business have also attempted to Downloaded from jom. Table 2 presents a summary of these efforts.

Business model representations. Several authors have attempted to represent business mod- els through a mixture of informal textual, verbal, and ad hoc graphical representations e.

Weill and Vitale introduce a set of simple schematics intended to provide tools for the analysis and design of e-business initiatives. In a related vein, Tapscott et al. The value map depicts all key classes of participants partners, customers, suppliers and value exchanges between them tangible and intangible benefits and knowledge.

Other scholars have provided a business model ontology, which is a conceptualization and formalization of the elements, relationships, vocabulary, and semantics of a business model Osterwalder, and which is structured into several levels of decomposition with increasing depth and complexity.

Gordijn and Akkermans propose a conceptual modeling approach. Their ontology borrows concepts from the busi- ness literature, such as actors, value exchanges, value activities, and value objects, and uses these notions to model networked constellations of enterprises and end-consumers who cre- ate, distribute, and consume things of economic value.

Strategic marketing in e-business. In the domain of e-business, some scholars have focused on the changing nature of customer—firm relationships. A special concern has been the monetization of e-business. In this regard, scholars have also examined the degree of Internet advertising effectiveness.

Clemons provides an overview of business models for monetizing Internet applica- tions. He argues that although the majority of attempts to monetize Internet applications tar- geted at individuals have focused on natural extensions of traditional media or traditional retailing, there are several potential online business models that are not based on advertising and that, given declining advertising effectiveness, might constitute a better choice.

Scholars have also noted the convergence of different media channels onto one digital platform e. McPhillips and Merlo refer to this convergence by introducing the term media busi- ness model. Structural change in the media industry also has been driven by the advent of new communication channels, such as mobile e-services m-services.

Huizingh has studied how to help managers design such e-business models. Who pays what value and when? What are the margins in each market, and what drives them?

What drives value in each source? Scholars focusing on e-business as an area for research on business models have been interested mainly in understanding the gestalt of firms engaging in new Internet-based ways of doing business and the new roles that these firms play in their respective ecosystems. Their mostly descriptive contributions highlight, to varying degrees, the notion of value e. Each of these components may constitute part of a generic business model, and it could be a source of differentiation among business model types.

Thus, in this literature stream, the business model is not a value proposition, a revenue model, or a network of relationships by itself; it is all of these elements together. Accordingly, none of the articles in this literature stream analyzes the relationship between any business model component e. Value creation in networked markets.

The digital economy has provided firms with the potential to experiment with novel forms of value creation mechanisms, which are networked in the sense that value is created in concert by a firm and a plethora of partners, for multiple users. This redefinition of value has attracted the attention of management scholars, who have employed the concept of the business model in their attempts to explain value creation in networked markets e.

However, in explaining value creation, the concept of the business model has been used not only in the context of the digital economy. Seelos and Mair, for example, have studied value creation mechanisms in the context of deep poverty. Similarly, Thompson and MacMillan propose a framework for develop- ing new business models that can lead to societal wealth improvements e. Thus, value creation can refer to different forms of value such as social or economic. The authors conclude that prior frameworks used in isolation cannot suf- ficiently address questions about total value creation.

Based on a sample of firms, they propose four potential sources of value creation through business models: 1 novelty, 2 lock-in, 3 complementarities, and 4 efficiency. These value drivers can be mutually reinforcing; that is, the presence of each value driver can enhance the effectiveness of any other value driver. Value can also be created through revolutionary business models. Business model and firm performance. The novelty presented by new, effective models can result in superior value creation Morris et al.

Business models can play a central role in explaining firm performance. While the work of Afuah and Afuah and Tucci is conceptual, some authors have conducted empirical analyses. Zott and Amit have analyzed the performance implications of business model design in entrepreneurial firms. They identify two design themes around which the business model can be orchestrated: efficiency and novelty. In their empirical work, Zott and Amit see the business model as the independent variable, and they link it to firm performance, moderated by the environment.

In another empirical study on firm performance, Patzelt, Knyphausen-Aufseb, and Nikol introduce the business model as a variable moderating the effect of top management team composition and organizational performance. They analyze a set of biotechnology ventures in the German industry and focus on two types of business models that biotechnol- ogy firms might adopt: platform and therapeutics. Similarly, Zott and Amit acknowledge the possible contingent effect of the business model in medi- ating between product market strategy and firm performance.

Other studies on the performance implications of business model design come from busi- ness practitioners and consultants e. Consultants at IBM, interviewing corporate and public-sector leaders worldwide, found that firms that were financial outperformers put twice as much emphasis on business model innovation as did underperformers IBM Global Business Services, Giesen, Berman, Bell, and Blitz , examined the relationship between business model innovation and firm performance.

They identify three types of business model innovation, namely, industry models innova- tions in industry supply chain , revenue models innovations in how companies generate value , and enterprise models innovations in the role the structure of an enterprise plays in new or existing value chains. They report two key findings: 1 each type of business model innovation can generate success, and 2 innovation in enterprise models that focuses on Downloaded from jom.

Strategy and the business model. The business model extends central ideas in business strategy and its associated theoretical traditions.

Two main differentiating factors seem to have captured the attention of scholars. The second factor of interest to management scholars is the focus of the business model concept on the value proposition and a generalized emphasis on the role of the cus- tomer, which appears to be less pronounced elsewhere in the strategy literature.

According to Richardson , the business model explains how the activities of the firm work together to execute its strategy, thus bridging strategy formulation and implementation. In a similar vein, both Shafer et al. Summary of literature on business models in the strategy field. In the strategy literature, research on business models has revolved mainly around three aspects: 1 the networked nature of value creation, 2 the relationship between business models and firm performance, and 3 the distinction between the business model and other strategy concepts.

First, the business model does not involve a linear mechanism for value creation from suppliers to the firm to its customers. Value creation through business models involves a more complex, interconnected set of Downloaded from jom. Second, the business model is not the same as product market strategy i. Third, the business model cannot be reduced to issues that concern the internal organization of firms e.

However, the business model can be a source of competitive advantage. Business Models, Innovation, and Technology Management The business model concept also has been addressed in the domains of innovation and technology management.

Two complementary ideas seem to characterize the research. The first is that companies commercialize innovative ideas and technologies through their busi- ness models. The second is that the business model represents a new subject of innovation, which complements the traditional subjects of process, product, and organizational innova- tion and involves new forms of cooperation and collaboration.

One important role of the business model could consist of unlocking the value potential embedded in new technologies and converting it into market outcomes. Chesbrough and Rosenbloom detail an extensive case study in which they show how the Xerox Corporation grew in part by employing an effective business model to commercialize a tech- nology rejected by other leading companies. The study also compares successful and unsuc- cessful technology spin-offs with comparable market potential and finds that in successful ventures the search and learning for an effective business model was significantly higher than in failed ventures.

His central argument is that the integration of new technologies into the technology base of a product i. Business models not only can entail consequences for technological innovations but also can be shaped by them.

Although these studies have examined the role of business models in commercializing technologies at the level of the individual firm, more recently Johnson and Suskewicz have pointed to the importance of the business model for entire industries. They argue that in large infrastructural change such as the transition from a fossil fuel economy to a clean- tech economy the key is to shift the focus from developing individual technologies to creat- ing whole new systems. The business model is introduced as part of a comprehensive framework for thinking about systemic change.

In summary, studies on business models, innovation, and technology management have asserted that technological innovation is important for firms, but it might not suffice to guarantee Downloaded from jom. This is because technology per se has no inherent value Chesbrough, a, b. Besides embedding technology in attrac- tive products and services, a firm needs to design a unique business model to fully realize its commercial potential.

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