Five dimensions of business model innovation: A multi-case exploration of industrial incumbent firm’s business model transformations

Abstract

Studies focus on the process of business model innovation as performed by start-up firms, while incumbent industrial firms’ attempts to innovate their business models often fail, being hindered by path-dependency. There is a lack of understanding of what in a business model of such firms is modified to produce an innovation that gives rise to value creation. Based on explorations of twenty-two incumbent industrial firms, five dimensions of a business model are identified that, when modified, may result in business model innovation by incumbents. These dimensions are exchangeable, activity, actor, transaction mechanism, and governance setup. The results show how business model innovation can be systemically characterized in terms of several dimensions that must be modified in concert to produce an innovative business model. The results also show that such business model innovations require novel uses of digital technologies that enable new activities to be incorporated into existing business models.