Linking a Service Innovation-Based Framework to Business Model Design

Abstract

Technological innovations are said to be intricately linked to business models in order to create value for both the end-users and the innovators, as exemplified by Amazon and Google. Yet, specifically how and by what mechanisms or approaches can new technologies be represented and systematically designed as customer-centric business models to create value is still an under-researched area. This paper proposes a new service innovation-based conceptual framework for designing new business models to create and capture the potential value of new technologies. By unpacking the theoretical constructs of various well-known business models from the extant literature and reframing them in the context of the "value co-creation" principle defined by service dominant logic, this paper shows that "service concept design" provides a conceptually sound yet practical method for incorporating the "outside-in" end-user view of a new technology into a new business model design. From this mapping a service innovation-based conceptual framework is proposed as a foundation of a new business model design method. Amazon's famous technology-based retail business model is used to exemplify the practical applicability of the proposed new service innovation-based business model design method prescribed by the framework. In the process, the paper also sheds light on how service innovation may relate to business model innovation - a relationship which, to date, is not well understood.