A Conceptual Framework for Business Model Innovation:The Case of Electric Vehicles in China

Abstract

Climate change, deterioration of air quality and security of energy supply have necessitated the rethinking on traditional individual mobility based on internal combustion engines (ICEs). Electric vehicles (EVs) hold the potential to solve these challenges, but wider diffusion is frustrated by many obstacles. Business model (BM) innovation can connect technical potential with the realization of economic value, unlocks the dominant logic of ICEs, which is necessary for EVs development. In practice, the BM innovation for EVs firstly involves questions such as who will enter the value network of the new BM for EVs. Which incumbent actor will exist? So taking one individual firm as basic analysis unit is not appropriate. This paper constructs a ¡°3-7¡± system to define the BM for EVs, and then proposes a two-phase conceptual framework. This framework highlights the dynamics of BM innovation and argues innovation should be conducted on industry-level in the first phase and value network is the foundation. Then BM innovation enters the second phase at which innovation is conducted on firm-level just like the early literature highlights. The case of Shenzhen, China is studied. From the case, we can see the BM innovation in Shenzhen is still in the first phase and the government plays a critical role in the establishment of new value network. Based on the case study, this paper concludes two new barriers that are not highlighted by the early literature and developed a number of recommendations to help address the issues found in BM innovation.