Value Creation Logic Research Articles

Business model innovation for reducing uncertainty in sustainability transitions: A case study of the wood construction industry

Sustainability transitions are a significant challenge that requires established industries to adopt innovative ways of doing business. Research suggests that while this is possible through business model innovation (BMI), risk avoidance by regime actors and high levels of future uncertainty act as barriers to successful transitions. Specifically, we lack knowledge about how established companies innovate their business model (BM) to reduce uncertainty related to sustainability transitions. We explore the case of a large forest‐based manufacturing company in the construction industry, Stora Enso. We find that, by pursuing transformative BMI and combining multiple value creation logics, a company can reduce different types of uncertainty while shaping its business ecosystem towards more sustainable opportunities. We show that the BM can serve as an organizational tool for collectively exploring new knowledge, reducing uncertainty and driving change in a business ecosystem.

Customers, Markets, and Five Archetypical Value Creation Logics: A Review of Demand-Side Research in Strategic Management

Scholars have examined the role of customer preferences, and demand-side characteristics more generally, in varied core strategy areas like market entry and timing, diversification, positioning, resource reallocation, and firm adaptation, among many others. We review this diverse demand-side literature and develop an empirical classification that identifies five archetypical customer value-creation logics seen in the literature to date. To apply each of these logics, a firm must look downstream with the intent of matching, leveraging, adapting, learning, or shaping customer preferences or market characteristics to create value for customers. For each value-creation logic, we detail the logic itself, how the demand side is characterized, how specific strategic decisions allow for value creation following the logic, literature gaps in the logic, and opportunities for future research. Opportunities include extending the work on existing logics, examining the combined effects of multiple logics, identifying understudied demand-side characteristics, and studying strategy applications for which demand-side attributes have received comparatively little attention to date. These include business models, corporate social responsibility (CSR), corporate governance, and demand-side shocks. Finally, we address implications for managerial practice.

Innovation and Practical Exploration of Industrial Economic Models Driven by Emerging Technologies

Abstract Science and technology innovation is the key driving force to support and lead industrial transformation and upgrading. This topic explores the relationship between digital technology application and industrial economic model innovation in the context of emerging technology development. Taking the annual report text of an enterprise as a research sample, the improved LDA theme model is applied to extract the themes of the annual report text and analyze the characteristics and trends of the digital technology application of the sample enterprise. After measuring the degree of digitization of the enterprise, the conceptual model of its relationship with industrial economic model innovation is constructed, relevant hypotheses are put forward, and correlation and regression analyses are applied to validate the role of the application of digital technology in promoting the innovation of the industrial economic model. The use of digital technology in the sample enterprises during the research interval has increased by about 18 times, dominated by the use of artificial intelligence technology. The application of digital technology has a significant positive effect on the industrial economic model’s innovation (p < 0.01), with a regression coefficient value of 0.508. The analysis demonstrates that enterprises can use emerging technologies to connect all links from production to sales, revolutionize the logic of value creation in the existing business model, and promote the innovation of the industrial economic model.

Cultivating a sustainable and circular economy: The role of institutional logics in manufacturing companies

This paper aims to explore the institutional logic of manufacturing companies in the transition to a sustainable and circular economy. The paper follows abductive reasoning and uses a qualitative methodology encompassing primary data collected from 16 interviews with manufacturing companies and supplementary data from web-scan analysis, observation and 15 interviews with public institutions and environmental experts. We identify four specific co-existing logics of the circular economy of manufacturing companies and explain operating conditions of each logic. Compliance and commercial logics reflect instrumental thinking, while value chain and value creation logics are more based on integrative thinking. To illustrate opposites of instrumental thinking and integrative thinking, we propose an analytical framework of circular logics, that consists of three pillars, that is homogeneity vs heterogeneity, techno-centric vs system-centric perspectives, compliance vs ethical responsibility. The originality also relates to the prioritization among different logics.

Digital transformation or not? Manufacturer's selection strategy under carbon cap-and-trade mechanism

Purpose The digital economy is profoundly transforming the manufacturing industry's fundamental concepts and value creation logic, making digital transformation (DT) strategy a crucial decision for manufacturers. And faced with increasingly severe environmental issues, DT may become an important means to achieve sustainable development. This paper mainly discusses the strategic choice of the manufacturer's DT and analyzes the impact of DT on carbon emissions.Design/methodology/approach Based on the carbon cap-and-trade mechanism, the authors have constructed two decision models to study the DT strategy of the manufacturer, further exploring the impact of the mechanism on the DT strategy and production strategy of the manufacturer. Finally, the authors discussed the effect of manufacturers' DT on their carbon emissions.Findings The authors found that the manufacturer should initiate DT to enhance their competitiveness, regardless of whether they are in a low digital technology scenario or a high digital technology scenario. Notably, DT can enhance the ability of the manufacturer to respond to external emergencies. In a low digital technology market scenario, both carbon emissions per unit of product and carbon price are positively affecting the digitization level of the manufacturer. In a high digital technology market scenario, the manufacturer will initiate a full degree of DT. Moreover, the impact of DT on total carbon emissions varies in markets with different levels of digital technology.Originality/value Innovatively, the authors divided the DT of the manufacturer into market scenarios with low digital technology and high digital technology. Provide the manufacturer with DT decisions according to different scenarios. At the same time, it verifies the uncertainty of DT on carbon emission and enriches the related research.

Strategic orientation for Chinese firms in the digital economy: a business model process formalization perspective

ABSTRACT The widespread use of digital technologies has reshaped the resources and capabilities of firms, and changed the logic of value creation in their business models. Digitalization formed by relying on digital technologies, such as artificial intelligence, big data, and blockchain, has brought new opportunities and challenges to the business models of Chinese manufacturing firms. Based on the two types of strategic orientation (market orientation and entrepreneurial orientation), this paper investigates the relationship between market orientation (MO), entrepreneurial orientation (EO), and firm performance and the mediating effect of business model process formalization (PF). The study constructs the multiple paths of strategic orientation driving firm performance, and conducts an empirical test using a sample of 369 Chinese firms. The findings are as follows. (1) Both MO and EO can effectively improve firm performance, and the interaction term of the two orientations also has a positive effect on firm performance. (2) There are three different mediation paths for strategic orientation to improve firm performance: ‘MO→PF→firm performance’, ‘EO→PF→firm performance’, and ‘the interaction term of the two orientations→PF→firm performance’. (3) Among these three pathways, the indirect effect of ‘MO→PF→firm performance’ is the largest with an indirect effect of 12.29%, which is significantly larger than the effect of the other two pathways. These findings not only enrich the theories related to MO and EO, but also provide various options and management implications for Chinese firms to effectively carry out strategic orientation practices to implement business models in line with the digital economy.

Carbon emission reduction: Understanding the micro‐foundations of dynamic capabilities in companies with a strategic orientation for sustainability performance

AbstractThis article aims to identify the micro‐foundations of dynamic capabilities that underpin a strategic orientation for sustainability performance in order to reduce carbon emissions. These micro‐foundations are examined in relation to two types of strategic orientation for sustainability performance: instrumental and stewardship. A qualitative research design is used to investigate four Dutch stock‐listed companies with either an instrumental or a stewardship strategic orientation. The research shows that certain micro‐foundations of dynamic capabilities achieve carbon emission reductions. Sensing, through measuring carbon emissions, supports a transparent raising of awareness on this issue. Seizing is based on a collaborative and carbon‐driven capturing of value enabled by clear financial incentives linked to reducing carbon emissions. Transforming is supported by an ambidextrous organizational structure and the active diffusion of knowledge concerning carbon emission reduction. Top management can deliver a significant impulse to achieve the desired level of influence related to carbon emission reduction. Our analysis reveals five dimensions (level of influence, level of transparency, level of responsibility, logic of value creation, and logic of embeddedness) that explain the relation between a strategic orientation for sustainability performance and the associated sustainable performance achieved in carbon emission reduction.

The multiplex of value creation and capture logics in the video game industry: An integrative review of 20 years of studies and a future research agenda

With the development of digital devices, information and communication technology, and software, value creation and capture logics have evolved, and new ones have emerged. The video game industry has been a forerunner in this evolution. It has grown from an industry that revolved primarily around entertainment to one that engages game developers, users, spectators, and countless actors, becoming intertwined with many other entertainment and non-entertainment industries, such as education and health management. Although the economic importance of the video game industry has been rapidly increasing over the last two decades or so, research on value creation and capture in the video game industry has remained fragmented and predominantly based on transactional and static views. By addressing theoretical shortcomings and oversights in prior literature, this integrative review of 278 studies makes three key contributions. First, we highlight shortcomings in the current body of knowledge. Second, we craft an integrated framework of value creation and capture logics, which we have conceptualized as the multiplex of value creation logics. Third, we provide future research directions and perspectives on the future evolution of value creation and capture logics, both in and across markets and industry sectors.

Transformational Entrepreneurship and Digital Platforms: A Combination of ISM-MICMAC and Unsupervised Machine Learning Algorithms

For many years, entrepreneurs were considered the change agents of their societies. They use their initiative and innovative minds to solve problems and create value. In the aftermath of the digital transformation era, a new group of entrepreneurs have emerged who are called transformational entrepreneurs. They use various digital platforms to create value. Surprisingly, despite their importance, they have not been sufficiently investigated. Therefore, this research scrutinizes the elements affecting transformational entrepreneurship in digital platforms. To do so, the authors have considered a two-phase method. First, interpretive structural modeling (ISM) and Matrices d’Impacts Croises Multiplication Appliqué a Un Classement (MICMAC) are used to suggest a model. ISM is a qualitative method to reach a visualized hierarchical structure. Then, four unsupervised machine learning algorithms are used to ensure the accuracy of the proposed model. The findings reveal that transformational leadership could mediate the relationship between the entrepreneurial mindset and thinking and digital transformation, interdisciplinary approaches, value creation logic, and technology diffusion. The GMM in the full type, however, has the best accuracy among the various covariance types, with an accuracy of 0.895. From the practical point of view, this paper provides important insights for practitioners, entrepreneurs, and public actors to help them develop transformational entrepreneurship skills. The results could also serve as a guideline for companies regarding how to manage the consequences of a crisis such as a pandemic. The findings also provide significant insight for higher education policymakers.

Shifting focus of value creation through industrial digital twins—From internal application to ecosystem-level utilization

Industrial organizations are increasingly using digital twins as the solutions offered by digital twin service providers are rapidly expanding. This study aims to investigate how the value creation mechanism changes when transitioning from an organizational digital twin to an ecosystem-level digital twin that functions as a two-sided or multi-sided platform. The study results are based on the multiple longitudinal case studies conducted in Finland, where data were gathered using various methods and replications across the cases were conducted to investigate the same phenomenon. The study makes the following main contributions: (1) although the focus of value creation through digital twins at the level of machines/production lines highlights a technological approach, value creation is increasingly complemented with a human approach when digital twins are used as factory-level internal platforms. (2) Owing to the well-recognized value creation logic in internal use, industrial organizations are inclined to expand their value creation beyond organizational boundaries and establish two-sided and multi-sided platforms around their digital twins. (3) Forerunner organizations are also looking for opportunities to establish multi-sided platforms around their digital twins even though they are not yet ready to shift their value creation logic from internal to ecosystem-level utilization.

Contrasting value creation strategies of industrial-IoT-platforms – a multiple case study

Previous platform research has drawn attention primarily to digital consumer platforms, ignoring the specificities of industrial settings. Hence, existing research findings fall short regarding Industrial Internet-of-Things Platforms (IIoTP), which leads to an incomplete understanding of digital platforms. Particularly, IIoTPs from Internet technology firms (Hyperscalers) and incumbent industrial firms (Integrated IIoTPs) deserve special interest due to their coopetitive relationships. Addressing this research need, the study applies explorative multiple case study research to five of these IIoTPs, by analyzing 22 interviews, to describe this phenomenon in-depth in its contextual conditions. As a result, the authors empirically derive, based on existing frameworks and classifications, (1) which strategic measures are needed for a successful evolvement, and (2) which dynamic strategic trajectories occur. We report several findings. First, this study contributes to the literature by showing that existing theories of digital platforms are fertile ground for further and more nuanced empirical research. Second, through the linkage of five strategic measures to the dominant value creation logics, the authors provide important contextualization on different vertical platform layers. Third, the study offers IIoTP managers insights by identifying dynamic strategic trajectories that reveal Hyperscalers are in the best position to profit from innovation, thereby reversing the common notion that downstream positioning is a prerequisite for success.

Digital Factory Transformation from a Servitization Perspective: Fields of Action for Developing Internal Smart Services

In recent years, a complex set of dynamic developments driven by both the economy and the emergence of digital technologies has put pressure on manufacturing companies to adapt. The concept of servitization, i.e., the shift from a product-centric to a service-centric value creation logic, can help manufacturing companies stabilize their business in such volatile times. Existing academic literature investigates the potential and challenges of servitization and the associated development of data-based services, so-called smart services, with a view to external market performance. However, with the increasing use of digital technologies in manufacturing and the development of internal smart services based on them, we argue that the existing insights on external servitization are also of interest for internal transformation. In this paper, we identify key findings from service literature, apply them to digital factory transformation, and structure them into six fields of action along the dimensions of people, technology, and organization. As a result, recommendations for designing digital factory transformation in manufacturing companies are derived from the perspective of servitization and developing internal smart services.

Open strategy and dynamic capabilities: A framework for circular economy business models research

AbstractThe circular economy has attracted the interest of business leaders, policy makers and academics alike for its potential to contribute to a more resilient, prosperous and resource‐efficient economy. The transition towards a circular economy requires new business models that challenge the linear logic of value creation that is still endemic across most industries. In turn, the transition from linear to circular business models involves the rethinking of strategic decision‐making processes and the development of new organisational capabilities. This paper addresses these important strategic implications of the emergence and implementation of circular business models. Coupling business models with open strategy and dynamic capabilities, we develop a “three‐pronged” strategy framework that advances the emerging field of circular business model research. Our contribution is crystallised into a series of propositions and future research questions for scholars working at the intersection of the circular economy and the strategy literature.

Investigating Relationship Between Digital Technology Application, Slack, and Enterprise Innovation Based on Mediating Effect Model

With the rapid penetration of emerging digital technologies such as big data, artificial intelligence, cloud computing and mobile Internet at all levels of the economy and society, human society is accelerating into the era of digital economy. The deep integration of digital technologies with the real economy and the resulting reconfiguration of value creation logic have provided new momentum for high-quality economic and social development. Under the new wave of industrial technology revolution, more and more enterprises are making digital transformation a core strategy for establishing a new competitive advantage and achieving sustainable organisational growth. The application of digital technology has led to a profound change in the way social resources are allocated. The application of digital technology has triggered profound changes in the way society allocates resources and has further influenced all aspects of innovation activities. So, based on the data of A-share manufacturing enterprises listed in China from 2016 to 2020, we constructed a mediating effect model to empirically test the digital technology application on enterprise innovation and the intermediary effect through the slack. The results show that the application of digital technology has a significant facilitating effect on innovation. Secondly, slack has a significant mediating effect on the relationship between digital technology applications and enterprise innovation. Thirdly, the mediating effect of the application of digital technology on enterprise innovation through slack is significantly lower than the direct effect.

Implications of the sustainability transition on the industry value creation logic – case of Finnish pulp and paper industry

Global economic, social and environmental change drivers have tremendous effects on the dynamic and nested business environment calling for a sustainability transition to a circular bioeconomy. The transition will pressurise established industries to alter their value creation logic to consider sustainability holistically. The study follows a case study research strategy and investigates how an established Finnish pulp and paper industry reconfigures its communicated value creation logic. The findings of a qualitative document analysis suggest that the pulp and paper industry has started to explore new sustainable path-breaking innovations and create a common development agenda, which has resulted in incremental adaptations in the value creation logic. However, the industry’s narrative of already being sustainable has hampered the reconfiguration and stabilisation of the adapted value creation logic. From a theoretical perspective, adopting an interdisciplinary and systemic perspective is necessary to understand the changing business environment. From a managerial perspective, cross-sectoral collaboration and including perspectives of different actors can help in creating a holistically sustainable value creation logic.

On the reconfiguring value creation logic and networks of the forest sector in a changing business environment

Numerous phenomena, such as sustainability challenges and the increasing importance of knowledge and digitalisation, have tremendous impacts on the global socio-economic system. These phenomena affect the dynamic and complex business environment where different actors from various sectors interact with each other. Responding to the phenomena and changes in the business environment calls for a systemic change in the ways that value-creating activities are performed. One suggested systemic change is a transition to a sustainable circular bioeconomy. Changes in the business environment pressure established business sectors, such as the forest sector, to reconfigure their networks and value creation logic, i.e., the ways in which actors co-create value. In this dissertation I investigated how the value creation logic of the forest sector changes when entering the sustainable circular forest-based bioeconomy. The research design followed a qualitative theory-guided interdisciplinary case study strategy. I analysed scientific and non-scientific documents to determine the past and currently occurring adaptations within the forest industry’s value creation logic. I conducted interviews to identify the possible future value creation logic of forestry service providers and the readiness of forest owners to respond to the occurring changes. According to the findings, the forest sector’s value creation logic is incrementally changing towards holistically sustainable, collaborative and cross-sectoral value co-creation logic. The sector has been able to reconfigure its networks and value creation logic in the past and it seems that the sector’s actors have understood the importance of cross-sectoral collaboration and intangible resources in the sustainable value-creating activities. They have acknowledged that their attitudes and actions will affect the future value creation within the sector. To reach holistic sustainability, actors need to consider the whole forest ecosystem as a capital and a resource base from where value and benefits for the common good are co-created in a forest-based sector.

ЦИРКУЛЯРНА ЕКОНОМІКА: КОНЦЕПТУАЛЬНІ ОСОБЛИВОСТІ, ПЕРЕШКОДИ ВПРОВАДЖЕННЯ В УКРАЇНІ

The article discusses the factors hindering the development of the circular economy were identified, the systematization of which allowed the author to identify five main groups of such obstacles: sociocultural, legislative, informational, technological and economic. The mentioned obstacles are considered from the point of view of the influence they have on various subjects of such a process: the public sector, the private sector, and society. The expediency of dividing the entire diversity of such factors, within the framework of three different subjects, into three main spheres of manifestation: financial and economic, institutional, and technological spheres is noted. It was concluded that the analysis of such obstacles is important for the development of the circular economy in our country. The transition to a closed-loop economy creates opportunities not only for reformatting the entire logic of value creation, with the motivation of reducing pressure on ecosystems, but a comprehensive shift in favor of longterm sustainability in order to ensure economic, environmental and social benefits. This approach requires the application of progressive innovative solutions at all stages of the product life cycle. The main goal of circular business models is to preserve resources in circulation (cycle) as long as possible, as well as to replace resources that are completely renewable, recycled or biodegradable. Circular business models involve companies in increasing the efficiency of product use and disposal to create new opportunities for resource reuse, product sharing, and optimization of the entire value chain. It has been established that, from the point of view of public administration bodies, the assessment of the significance of such obstacles is necessary both for the formation of resource-efficient state policy and for the identification of levers for increasing interest in the use of secondary resources. For companies that concentrate or process waste, such an assessment will be useful when considering the issue of implementing circular technological cycles. For enterprises that use secondary raw materials and waste in their activities, overcoming barriers is very important for their further development. For consumers who use products from secondary raw materials, this is also very important, because the formation of consumer demand for ecological goods contributes to the formation of an economy that cares for nature, and the everyday choices of millions of consumers significantly affect the environment.

ПРОБЛЕМИ РОЗВИТКУ ЦИРКУЛЯРНОЇ ЕКОНОМІКИ ЯК ФАКТОРУ СТАЛОГО РОЗВИТКУ УКРАЇНИ

The article discusses the factors hindering the development of the circular economy were identified, the systematization of which allowed the author to identify five main groups of such obstacles: socio-cultural, legislative, informational, technological and economic. The mentioned obstacles are considered from the point of view of the influence they have on various subjects of such a process: the public sector, the private sector, and society. The expediency of dividing the entire diversity of such factors, within the framework of three different subjects, into three main spheres of manifestation: financial and economic, institutional, and technological spheres is noted. It was concluded that the analysis of such obstacles is important for the development of the circular economy in our country. The transition to a closed-loop economy creates opportunities not only for reformatting the entire logic of value creation, with the motivation of reducing pressure on ecosystems, but a comprehensive shift in favor of long-term sustainability in order to ensure economic, environmental and social benefits. This approach requires the application of progressive innovative solutions at all stages of the product life cycle. The main goal of circular business models is to preserve resources in circulation (cycle) as long as possible, as well as to replace resources that are completely renewable, recycled or biodegradable. Circular business models involve companies in increasing the efficiency of product use and disposal to create new opportunities for resource reuse, product sharing, and optimization of the entire value chain. It has been established that, from the point of view of public administration bodies, the assessment of the significance of such obstacles is necessary both for the formation of resource-efficient state policy and for the identification of levers for increasing interest in the use of secondary resources. For companies that concentrate or process waste, such an assessment will be useful when considering the issue of implementing circular technological cycles. For enterprises that use secondary raw materials and waste in their activities, overcoming barriers is very important for their further development. For consumers who use products from secondary raw materials, this is also very important, because the formation of consumer demand for ecological goods contributes to the formation of an economy that cares for nature, and the everyday choices of millions of consumers significantly affect the environment.

Pathways to Service System Smartness for Firms

As smart technology develops at an ever-increasing pace, firms are investing heavily in boosting the smartness of their service systems. To support these endeavors, practitioners and researchers call for guidance on how to account for customers’ complex needs and wants when making smartness decisions. This research adopts the firm’s perspective on investigating how and why decisions on smartness are undertaken. It examines how firms configure the smartness of service systems and communicate the intended value to customers through value propositions. Critically, it further unravels why firms make these decisions on the basis of their reasoning about aligning resources to create value for customers—that is, the firm’s value creation logic. Our analysis of multiple case studies across several industry sectors reveals a number of pathways to service system smartness. These are labeled cautious, tailored, premium, and balanced pathways, and each entails specific combinations of smartness configurations and customer value propositions, underpinned by particular logics. A more nuanced analysis shows that firms may pursue multiple pathways simultaneously when targeting different customer segments and indicates how firms’ characteristics may shape their pathways to smartness. The resulting framework can operate as a guiding tool for managers and consultants when making important smartness decisions.

Startups Experimenting with Technology- and Service-driven Sustainable Business Models

The transition to the sustainable circular economy is shaping global markets and suggests significant potential for startups to improve economic, environmental, and social performance with technological- and service-driven innovations and sustainable business models (BMs). This requires startups to adjust their sustainable novel offerings and BMs to surrounding business partnerships. However, there is a knowledge gap in the startup literature on how startups have developed and refined their BMs through experiments with partnerships and identified their value creation logic toward sustainable transformation. To address this gap, we present a multiple case study of six sustainable startups that looks at how they have developed their BMs through iterative and processual collaborative experiments. The results reveal that sustainable startups experiment by both developing elements of their BMs and their sustainability impact through input from diverse partnerships. With their innovative technologies and services and co-created BMs, they can contribute to their surrounding networks by adapting their businesses either incrementally or radically. Based on the results, we present a matrix model of BM development path archetypes for sustainable startups. These insights can help both startup and mature companies to develop their own BMs by experimenting and ensure their sustainability and innovativeness impact.