Building a new business model

Company needs resources to successfully apply a new business model. DaSilva and Trkman (2014) supported by Teece (2018) argue that company’s dynamic capabilities are in the key role, when designing a new business model. Tallman et al. (2018) note that business model innovation can also be a result of competitors entering the market with differing business models. Chesbrough and Rosenbloom (2002) call for more information on what results in adaptation on existing business model, but also suggest that business model innovation process itself is more easily adapted by independent ventures than by established firms. Teece (2010) argues that constant search for improvements in the existing business model is needed by the firm itself compared to the threat of having to change the model due to external factors. If a firm wants to create new kind of value to its customers, it should concentrate on business model innovation, either changing the existing one or creating a new one (Massa et al. 2017).

Fast-paced technological innovations, changing competitive environment and varying customer needs are forcing even the most traditional industries to look around for new opportunities and advancements in their operations. Technological advancements (Teece 2010; Teece 2018;

Massa et al. 2017) and open global trade (Teece 2010) results in more choices for customers and enhanced transparent in product offerings, which requires companies to put emphasize on their customer-centric actions, how they can create and capture value. These matters call for deeper analysis on how the business model can better serve the changing business environment and customer needs.

Deep understanding of customer needs and knowledge of existing business models are usually the starting points of business model innovation. While it is not impossible to create a new business model in economies which are both competitive and developed, it often requires advancement in technologies. Internet of things might create new possibilities for business models as the data produced by them can guide in decision-making. From a different perspective, organizational resources including dynamic capabilities play a key role in business model innovation and a company might need a specific unit for the new business model. (Teece 2018.) Finding competitor’s pain points can exceed the business model innovation. Teece (2010) describes Dell being a forerunner in business model innovation challenging the traditional value chain thinking and selling personal computers through distributors. It managed to create competitive advantage by starting to sell the devices straight to customers, which was not possible to its competitors due to conflicts with existing distributors. (Teece 2010.)

Business model without implementation is just another concept, that was never utilized.

Osterwalder et al. (2005) state that implementation is neglected in applying business models.

Whether a business model is successful or not is debatable and there is no research to support it. With poor implementation and management, a good business model may fail. On the other hand, with good implementation and great management even a bad business model may succeed. (Osterwalder et al. 2005.) In order for business model to be useful, the concept needs to be transformed into concrete structures, processes and systems (Osterwalder et al. 2005).

Implementation of a business model, aligned with business model innovation, requires strong dynamic capabilities (Teece 2018). As strong is a very subjective term, Teece (2018) describes that strong equals to stronger as competitors.

Implementing business model requires trials and errors. If a company is introducing a new product or service to a market based on initial customer wishes, it is wise to test the commercialization with smaller group of customers. Teece (2018) suggests that companies identify specific customer segments to test the new business model and prove its viability before introducing the new solutions to larger markets. By doing this, companies can make adjustments and minimize the effect of confusion within its customers. In case of a new platform business model, it is important to get the complementing parties on board from the early beginning (Teece 2018).

A company does not necessarily need to apply only one business model. Geissdoerfer et al.

(2018) propose that business model innovation has four sub-modes of which two apply to having more than one business models. Business model diversification applies when a company creates an additional business model and business model acquisition applies when a company first identifies an additional business model and later acquires and integrates it (Geissdoerfer et al. 2018). If an established company is trying to pursue another business model, especially when it is radically different from the existing one in terms of technology or customers, the chances for success are higher when the company has adequate financial resources and determined commitment (Teece 2018).

From the building and implementation perspective, current literature does not provide a holistic picture, which connects the everything from start to the end. It is acknowledged that there are factors in external environment, which will have an influence on changing a business model (Teece 2010; Massa et al. 2017; Teece 2018). Also, suggestions are made that dynamic capabilities deriving from internal environment have a key role (Teece 2018). Nevertheless, these statements fail to acknowledge how these factors influence the integration process of a digital platform. Yet again, the previous studies concentrate more on business models in general whereas this study’s focus is on digital platform business model from traditional company’s perspective. Teece (2018) has made a claim that established companies pursuing another business model advanced by technology or customers have higher changes for success when the financial resources are sufficient and there is commitment. This view is yet narrow in explaining how a traditional company is able to integrate a digital platform business model and thus, needs closer empirical investigation.