Solution business models: Transformation along four continua

Using a business model perspective, we identify four continua that are of specific relevance for industrial firms transforming toward solution business models: customer embeddedness, offering integratedness, operational adaptiveness, and organizational networkedness. Using these continua, we explore the opportunities and challenges related to solution business model development in two different business logics that are of particular importance in an industrial context: ‘installed-base’ (IB) and ‘input-to-process’ (I2P). The paper draws on eight independent research projects, spanning an eleven-year period, involving a total of 52 multinational enterprises. The findings show that the nature and importance of the continua differ between the I2P and IB business logics. IB firms can almost naturally transition toward solutions, usually through increasing customer embeddedness and offering integratedness, and then by addressing issues around the other continua. For I2P firms, the changes needed are less transitional. Rather, they have to completely change their mental models and address the development needs on all continua simultaneously.     

Network configuration,customer centricity,and performance of open business models: A solution provider perspective

While research has shown a positive impact of open business models on value creation, it has remained silent on the configuration of the corresponding partner networks and their effect on performance. Studying three cases of solution providers which involve external service partners for solution delivery, we find that solution customer centricity – the degree to which the focal firm focuses on solution customers in the joint delivery of solutions – moderates the relationship between partner networks and open business model performance. For open business models with low solution customer centricity, a network configuration characterized by many weak ties to service partners leads to superior performance. Conversely, for open business models with high solution customer centricity, few but strong ties to partners lead to superior performance. Based on these findings, three ideal configurations of networks for open business models are derived: the controlled, the joint, and the supported model.     

The transition from products to solutions: External business model fit and dynamics

This article provides empirical evidence and contributes to theory building concerning business model fit and dynamics in the area of solutions business. Business models are seen in this context as going beyond considerations such as offerings and internal processes or even relationships, and as including network and market considerations. Indeed the paper highlights the fact that a business model is not firm-focused, nor dyad-focused, but rather network-, and even market-focused, demonstrating that a business model is not static, but dynamic. Manufacturer and customer continuously shift form and content of their respective business models to adapt both to the needs of the counterpart and to market context. A qualitative case study approach is adopted, with subsequent content analysis. The case study relates to the aerospace industry with focus on a complex engineering firm, one of the largest aircraft manufacturers in the world, its customer — a national airline — and their network partners of various kinds. The data were collected through multiple face-to-face interviews with managers in both companies, as a part and parcel of a network of actors that influences and is influenced by the supplier–buyer relationship. Relationships over time between these firms and network partners are described, highlighting the interplay of products and services related to the provision of solutions. Findings highlight the dynamic nature of business models over the relationship lifecycle between supplier and customer in a complex engineering environment, and the need for reciprocal adjustment of models.     

Networked business model development for emerging technology-based services

This study examines the development of a networked business model for emerging technology-based services. Few studies explore the development and use of business models, and research on networked business models is particularly scarce. With observation and interview data from a network pilot of technology-based services the study presents the concept of a networked business model as a dynamic device in planning an emerging business in a net of actors. The findings identify phases of business net evolution when business opportunities are identified, created, and potentially exploited and recognize the role of entrepreneurial actors in the development.     

The business model in entrepreneurial marketing: A communication perspective on business angels' opportunity interpretation

Entrepreneurial marketing has emerged as a recent perspective within the marketing field, taking the challenges and characteristics of small firms and founding teams into account. Specifically, in the early stages of entrepreneurial marketing, besides potential customers a variety of other stakeholders tend to be in the center of attention. Among these stakeholders, business angels as early-stage investors represent a vital target group. In this paper, we aim to shed light on entrepreneurial marketing in the early phases of new venture creation, in which entrepreneurial firms have an inherent need to market the value of a business opportunity toward potential investors. In particular, we contribute to the literature by introducing the business model as a narrative device for the marketing of early-stage new ventures toward potential business angels. In this regard, the business model is suggested as playing a critical role through making the inherent economic value of a technology explicit. Building on narrative theory, we investigate the role that the business model plays in the decision-making process of 17 business angels. Based on our findings, we propose a model that links the business model to a business angel's interpretation of an investment opportunity and discuss implications for theory and practice.     

Broadband business by utilities infrastructure exploitation: A multistage competition model

A promising broadband business opportunity is the exploitation of the physical resources owned by municipalities and utility-based firms. In this study, the new broadband business opportunities owned by these authorities are analyzed through the development of a decision analysis model. The proposed model analyzes the broadband business into stages, integrates real options and game theory and provides business equilibrium in terms of the time of entry in the market, quantity offer and price definition. Finally, a real world case study is discussed showing how the model can be applied.     

The sites and practices of business models

This paper examines the concept of business models. Drawing on the business model literature, we first identify technology, market offering and network architecture as the three core elements of business models. The theoretical routes of each element are then examined through the associated literatures: technology and innovation studies, industrial marketing, operations strategy, and evolutionary economics. Multiple dimensions of each element are identified and the resultant framework is used to explore developments within the recorded music market across three centuries.Through changes in the recorded music market since the 1870s, we explore how business models emerged, took on multiple sites and evolved through their practice over time. We look at how interlinking business models become spread out across the business network as different network actors play their part. The recorded music market generates important insights into how business models are created, developed and practiced. We suggest that firms, business networks and markets form embedded systems within which multiple overlapping business models can be considered as constituent parts. In this way, the business model is understood as having agency to shape action; but in turn actions (of others in the business network as well as within the firms themselves) also shape the business model.     

A service science perspective on business model innovation

Using four basic principles of service science, we systematically explore value-proposition design as one type of business model innovation. Service science combines organization and human understanding with business and technological understanding to categorize and explain service systems, including how they interact and evolve to cocreate value. Our goal is to apply a scientific approach to advance design and innovation in service systems. Our foundation is service-dominant logic, which provides perspective, vocabulary, and assumptions on which to build a theory. Our basic theoretical construct is the service system, entities that are dynamic configurations of four kinds of resources. Our core principles center on the way value is computed within and among entities, how interaction is based on access to resources and their capabilities, and on how value computation and interaction depend on symbol processing and language guided by mutually agreed-to value propositions. In this context, service science can inform and accelerate value-proposition design by systematizing the search for adaptive advantages that improve existing offerings, create new offerings, or reconfigure the value-creating ecosystem.     

Relationships in the purchasing of business to business professional services: The role of personal relationships

There has been a shift from transactional to relational exchange and relationship marketing both in the business to business and professional services contexts. This paper seeks to explore the manner in which personal relationships affect the process and outcomes of purchasing of professional business services. Specifically, it focuses on the role of the professional service providers as boundary spanners in the formation of personal relationships. These personal relationships constitute the underlying basis of long-term relationships between the purchasing and provider organizations in such complex service settings. The findings of this study demonstrate that the manner in which the boundary spanners cultivate relationships support the concept of relationship specific tasks. It extends this conception by use of the data to outline the chronological process over time Understanding the roles, function, and ultimately importance, of these relationships facilitates the identification and development of appropriate strategies to manage these relationships.     

Business model innovation and competitive imitation: The case of sponsor‐based business models

This paper provides the first formal model of business model innovation. Our analysis focuses on sponsor‐based business model innovations where a firm monetizes its product through sponsors rather than setting prices to its customer base. We analyze strategic interactions between an innovative entrant and an incumbent where the incumbent may imitate the entrant's business model innovation once it is revealed. The results suggest that an entrant needs to strategically choose whether to reveal its innovation by competing through the new business model, or conceal it by adopting a traditional business model. We also show that the value of business model innovation may be so substantial that an incumbent may prefer to compete in a duopoly rather than to remain a monopolist. Copyright © 2012 John Wiley & Sons, Ltd.     

The fit between product market strategy and business model: implications for firm performance

We examine the fit between a firm's product market strategy and its business model. We develop a formal model in order to analyze the contingent effects of product market strategy and business model choices on firm performance. We investigate a unique, manually collected dataset, and find that novelty‐centered business models—coupled with product market strategies that emphasize differentiation, cost leadership, or early market entry—can enhance firm performance. Our data suggest that business model and product market strategy are complements, not substitutes. Copyright © 2007 John Wiley & Sons, Ltd.     

A survey of sales management practices

When ascertaining what sales management tools and practices to use, one approach would be for sales managers to compare the tools and practices they are presently using (or contemplating) with those used in other firms. This article provides sales managers with the opportunity for such a comparison by presenting the results of a study that examined what tools and practices sales managers are currently employing.     

Emotions, trust and relationship development in business relationships: A conceptual model for buyer-seller dyads

Existing research on buyer-seller relationships has focused on the role played by trust in shaping the dynamics of interpersonal interaction between the buyer and the seller. While this is undoubtedly an important variable in governing the interactional dynamics it is by no means the only variable. The paper begins by reviewing the existing literature on buyer-seller relationships. The role played by emotions is articulated. Finally, it is recognized that the emotions that emerge in a buyer-seller relationship do so at multiple levels. A model and propositions highlighting the impact of emotions on interpersonal relationships are developed. Illustrative cases are used to ground the propositions empirically.     

The sustainability syndicate: Shared responsibility in a trans-organizational business model

This paper proposes design principles for the ‘sustainability syndicate’: shared responsibility among diverse stakeholders for sustainability; an agenda for unifying economic and ethical rationales; and plural governance based primarily on markets, contracts and collaborative relationships. The paper suggests a research agenda directed at issues that constrain sustainability syndicates. Syndication's contributions to sustainability build upon its trans-organizational structures for shared responsibility. Syndication works as an insurance cooperative that reduces the financial burden of risk. In addition, members could rent skill sets from other stakeholders, reduce barriers to entry into bigger projects, and improve efficiencies. As underlying sustainability are both economic and ethical rationales for shared responsibility, sustainability syndicates induct diverse non-commercial stakeholders into inclusive settings. A unifying agenda in these settings, as it grapples with externalities and constructs welfare-enhancing solutions, enhances sustainability brand differentiation. Plural self-governance, as it corrects for failures of individual self-governance modes, enables market making and market access, reduces transaction costs in contracting, and enables members to build the trust and commitment necessary for collaborations. Sustainability syndicates obviate the need for command-and-control interventions. Although institutional, performance and instrumental constraints still remain, syndicate business models offer potentially game-changing strategies in sustainability marketing.     

Interaction behaviors in business relationships and heuristics: Issues for management and research agenda

Various empirical studies have evidenced that interaction is a critical process in the development of buyer–seller relationships in business-to-business markets. Research examining the different aspects of interaction processes and the consequences of interaction in business relationships for the development of the businesses involved has tended to black-box the interaction process. Limited attention has been given to how interaction behaviors of individuals arise and the interplay between cognition and behaviors in interaction. At the same time, recent research offers some insights into the use and role of heuristics in contexts analogous to those individual actors face when they interact in business relationships. In this paper we review current research on interaction processes in business relationships as well as on heuristics in the management context and argue that focusing on heuristics used in interaction in business relationships offers valuable insights on how interaction behaviors emerge. In particular, we discuss the notion of heuristics as an “adaptive toolbox,” and how it relates to adaptations in business relationships. We also discuss implications for management and outline a future research agenda.     

Investment flexibility and competition modeling for broadband business

In the new era of the telecommunications business field, a large number of potential investors are capable of entering into the market of the broadband services provision. This paper provides a model for analyzing the new perspectives for new investors in this field. It integrates compound Real Options and Game Theory techniques and adopts price competition analysis, for the broadband services provision, in order to find the optimal business strategy. Finally, it applies the analysis to a real life business case by formulating and solving it.     

A business and ICT architecture for a logistics city

The city of Melbourne, Australia, stands to benefit from achieving the logistics city status. The planning theme of a logistics city is designed around achieving efficiencies and long term sustainability out of the legacy of dispersed groups of intensive “logistics activity areas”. This is not to re-invent solutions particularly in Melbourne, where the existence of a legacy logistics infrastructure and ad hoc growth has resulted in the business architecture that is constantly in the “catch-up” mode. This is seen as a unique opportunity for developing business models to meet the future challenges of the growth of trade, freight movement and maintaining economic, environmental and urban sustainability. Enterprise architecture will enable attention to be focused on the development of a collaborative business model, which will help to achieve efficiencies in view of the complex set of economic, social and environmental parameters. The logistics city business architecture responds to the shift to a services economy, which is generating different patterns of workforce travel to ensure good access to skilled workers, to other services, to business clients and to national and international markets.     

Outcome-based contracts as new business model: The role of partnership and value-driven relational assets

This paper investigates the new business model of outcome-based contracts where the firm is tasked to achieve outcomes of equipment as a service contract instead of the traditional maintenance, repair and overhaul activities (e.g., power-by-the-hour® engine service contract). Through a qualitative study of two outcome-based contracts between BAE Systems, MBDA and the UK Ministry of Defence, we derive three value drivers of information, material and people transformation. Mapping it with transaction cost literature we propose five relational assets based on the value drivers; three value-driven alignments and two partnership inputs. We then study the relationships between the relational assets and contract performance through a quantitative survey by applying the partial least square (PLS) method. Our study shows that behavioral and information alignments are important to achieve outcomes. However, material and equipment alignment (i.e., joint supply chain) does not have a significant effect on contract performance. In addition, perceived control and empowerment mediated the relationship between partnership inputs and value-driven alignments. Our study provides a more integrated view of how various theoretical management domains overlap in the understanding of business models, and contribute to the understanding of value drivers and partnership factors in achieving performance in outcome-based contracts.     

Interaction in business relationships: A time perspective

Interaction is central to the relationship framework in business markets. Yet there is some theoretical imprecision with regard to the way interaction works in time. Clarification of this nexus further develops the interaction concept and provides theoretical support for the dynamic view of business relationships being developed by the industrial marketing and purchasing (IMP) group.The role of time as a backdrop for interaction is elaborated in conjunction with the cognitive ability of humans to arrive at an understanding of interfirm interaction. This elaboration extends the concept of horizontal relationship time (i.e., past, present, future), illustrates constraints on interfirm interaction, and analytically distinguishes between interaction as exchange versus adaptation while also displaying the importance of the actor in business relationships. In addition, theoretical grounds are provided for dismissing business relationship life cycle theories. Finally, the cognitive nature of time and relationships provides a means for theory development and management implications free from cultural and normative overtones.