Business Model Innovation in Established Firms: Conceptual Challenges and How to Manage Them

Abstract

Technology leaps and demands for environmental sustainability are putting increasing pressure on managers to change not just their way of doing business but also their thinking. As cognitive constructs, business models are at the core of these challenges. But successfully innovating business models is not easy. New models are not conceived fully formed, but emerge from a lengthy process of developing components in a structurally meaningful way. In this paper, we recognize these components as concepts and investigated their role empirically in interviews with managers engaged in business model innovation at five established firms. Our findings suggest that the conceptual challenges that managers face are not primarily individual, but manifest critically on a collective level, implying difficulties in ‘hand-over’ of new business models between those actively engaged in their formulation and others who are nevertheless key to their implementation. In this light, we have reviewed what tools are available to managers, and conclude that the business model literature should focus more on a category of procedural tools we label ‘model-based facilitation’; a category of tools that have been developed in parallel in strategic management and system dynamics, but as we discuss, needs adaptation to appropriately fit the business model context.