Takin' Care of Business Models: The Impact of Business Model Evaluation on Front‐End Success

Abstract

In recent years, the discussion about business models has garnered increasing attention in practice and research. It is argued that thinking about business model alternatives supports managers, entrepreneurs, or R&D groups in, for instance, developing technological ideas into successful new businesses. Due to a business model's holistic perspective on ideas, it aims to understand not only what kind of value can be created for customers with a certain project but also how this value can be captured and what the corresponding value architecture looks like. Although existing research argues that technological development and business model development should go hand in hand, a quantitative examination of the actual benefits of business model evaluation in the technology‐driven front end of innovation has yet to be performed. This study relates business model evaluation to dimensions of front‐end success and examines environmental turbulence as a moderating variable. Hypotheses are tested by applying structural equation modeling on a set of 151 R&D groups. Results indicate that the extent of business model evaluation in R&D groups' early innovation phases positively relates to front‐end effectiveness and efficiency. Further findings reveal that environmental turbulence increases the strength of these relationships, indicating the stronger relevance of business model evaluation in more turbulent environments.