Reconfiguring – realigning structure

In the last stage of the BMI process, the focus should be on organizational transformation, and adjusting internal and external changes continuously. Companies should adjust their resource ba-ses and operating capabilities to external changes. New opportunities might also create a need for business model configurations. Organizational and managerial innovations are the essence of achieving competitiveness and long-term sustained growth. Companies need capabilities to re-configure their assets and organizations when some part of their business model changes. For business model success, organizational renewal capabilities are undervalued compared to certain technologies. (Teece 2007)

The first challenge at this stage is to understand companies’ value creation systems. New business model development requires the organization to rethink their activity systems, because these have

the ability to change the current value chain. Some parts of the value chain might integrate, be eliminated or be renewed. (Mezger 2014, p. 442) Depending on the industry, the innovation pro-cess throughout the entire business ecosystem transforms continuously. Usually, when companies have limited product and service performance, they must be part of an integrated value chain in order to gain a competitive advantage. New market development requires an integrative approach until the product has evolved to a sufficient level. When offerings are more than good enough for customers’ needs, disintegration and modularisation become more relevant. New companies should anticipate how markets are developing and at what part of the value chain they can be successful. (Christensen & Raynor 2003, p. 134–141)

Companies face a high level of uncertainty when they invest time, money and other resources in new business models. It can be a challenging task to decide which capabilities should be internal to the organization and which activities could be external. There is no certainty as to which of these will gain a competitive advantage through the new business model. The selection and sourc-ing process of the business model’s specific core competences and resources is a capability in itself. These make the implementation process of new business models possible. (Mezger 2014, p. 442–444) Sometimes the combinations of intangible and tangible assets create value as cospe-cialized assets. Teece has commented (2007, p. 1338): ‘Co-specospe-cialized assets are a particular class of complementary assets where the value of an asset is a function of its use in conjunction with other particular assets.’ Companies can gain a strategic fit through co-specialized assets by pur-chasing or developing resources which create special value together. These combinations are much harder to copy. Managers must continuously adjust their resources in a dynamic and rapidly changing environment. (Teece 2007, p. 1337–1339)

Partner companies may offer some complementary competences and resources. Thus companies can avoid owning all of these by themselves (Mezger 2014, p. 443). Integration with partners may offer broad network effects and reduce investment risk (Amit & Zott 2001; Chesbrough &

Crowther 2006; Mezger 2014). Collaboration with external partners enables the spreading of in-dividual, organizational or industry-level knowledge. Intangible assets are critical in building new businesses and firms should always emphasize continuous learning. (Teece 2007, p. 1339) If a new business model is viable, it can be implemented through many practices, depending on the firm’s risk-taking capacity, strategy and resources. The implementation stage is usually finan-cially riskier than other stages of the BMI process. Unlike product innovation, a new business model must be implemented in its entirety to see how it operates and which adjustments should be made. Of course, piloting and testing activities may offer similar kinds of results to effect adjustments. The main challenges in this phase are overcoming internal resistance and managing the chosen implementation approach. (Frankenberger et al. 2013)

Start-ups can transform ideas into organizational changes much easier than mature companies (Teece 2018, p. 42). They may not have a similar resource base, but smaller organizations find it easier to respond to a changing environment and quickly adopt this in their organization and busi-ness model. Often incumbent companies need a decentralized organization structure to reconfig-ure their current business model. When a company expands, this helps the company to stay flex-ible and responsive. Some managers can sense opportunities and make decisions by themselves without useless reporting. (Teece 2007, p. 1336–1339) Start-ups are like incumbents’ decentral-ized organizations which have local autonomy and proximity to the newest developments in the markets. They still lack the same kind of asset position, paths available, and managerial and or-ganizational processes, which can constitute the core of a competitive advantage. (Teece 1997, p. 518–521)

The integration stage is more challenging for incumbents trying to change their current business model, but new firms must also take note of different parts of the business model which are nec-essary to retain. With start-ups, the business model usually changes many times in its early years and they must observe the main challenges in these steps. Despite company size, the integration of all pieces of their new business model is one of the main challenges in the BMI process. New models must fit internally, but external fit must also be considered by observing challenges in the ecosystem. The second challenge is the management of partners, which aims at getting everyone involved in the development process. It is impossible to integrate and finally implement new business models if they do not have the support of all relevant stakeholders. (Frankenberger et al.

2013)

Ecosystem-level learning needs clear procedures for knowledge sharing. There should be a bal-ance between sharing and protecting intellectual property with partner companies and other stake-holders. Even new companies need a governance structure to prevent misappropriation in joint development activities. There may also be alignment problems between managers and owners without a clear governance structure, as agency theory indicates. Problems between control and ownership are rare in entrepreneurial companies, but as the business grows, professional manag-ers need more detailed policies to prevent actions for private purposes. Poor incentives do not encourage the behaviour and actions needed for profitable performance. In addition to financial malfeasance, owners should always evaluate managers’ skills to avoid strategic malfeasance. It requires expertise and talent to analyse the sensing, seizing and reconfiguring capabilities of man-agers. Strategic management should guide incentive alignment, which is usually too focused on external appropriation. (Teece 2007, p. 1339–1440) Incentive alignment can be a dynamic capa-bility which directs the organization to better performance and a sustainable competitive ad-vantage. It relates to motivation and behaviour as a human resources aspect, and should take into account organizational alignment in decision-making. (Gottschalg & Zollo 2007, p. 431–433)

Especially in the area of ecosystems, appropriate rules for different partners are necessary, other-wise cocreated value is not shared equally (Straub 2019).

3. INNOVATION AND ECOSYSTEM APPROACH