It can be argued that the last decade has brought a fundamental transformation to traditional business models and in many cases, either challenged existing theories or completely rewritten the rules. Ready-made examples can be found in organisations such as Facebook, Netflix, Uber and Airbnb. In the current climate, agility and continuous innovation with regard to operating models are becoming mandatory requirements in order for organisations to successfully compete. Consequently, research and focus on business models from a scholarly perspective has become ever more important.
Why read it?
I found this article to be a very timely and comprehensive critical review of existing business model literature and how it relates to business strategy. Broken down into three sections, it is easy to read and well-constructed.
Business model definition
The authors examine the various definitions of a business model and posit the following:
Business models as attributes of real firms having a direct impact on business operations
Business models as cognitive/linguistic schema
Business models as formal conceptual representations of how an organisation functions
With reference to a wealth of existing scholarly material including Porter, Christensen and Markides, they discuss each of these interpretations in a clear and concise manner with the inclusion of relevant examples. The examination of cognitive/linguistic schema is of particular interest and not something I had come across previously. In this case, it is suggested that business models are not fixed attributes of the firm; but instead reside in managers’ heads. This can have serious consequences if not handled correctly. Examples including Xerox and Polaroid are included to highlight this point.
The relationship between business models and strategy
In this section, the authors examine the two main positions when referring to potential linkage between business models and strategy. On one side, they argue, skeptics see business model research not as a separate literature stream but perhaps as ‘strategy in new bottles’ with little added value. In contrast, others view them as separate fields which should be studied both in isolation and jointly. The authors present views on both but ultimately support the latter.
What is interesting about this section is the discussion about why disagreement exists. In summary, the authors argue that business models may be challenging the assumptions of traditional theories of value creation and capture, namely that value creation is only a supply-side phenomenon. They elaborate that the business model perspective allows for value creation on both the supply and demand side and this therefore challenges two key traditional theories, the positioning view and the resourced based view (RBV). I found that the subsequent analysis certainly provided food for thought.
Future research directions
Finally, the authors present ways that the business model perspective could help explore meaningful questions in four fields: strategic management, technology and innovation management, strategic corporate entrepreneurship and sustainability. Along with analysis, they pose future research questions relevant to each section which I found to be quite useful.
About the author
Ronan is the business subject librarian at Dublin City University. With over six years’ experience in the business education sector including completion of Diplomas in both Management and Digital Marketing; Ronan has a wide understanding of business thought and theory. For further information on business related resources available at DCU Library or to contact Ronan directly, please check the business subject guide page.
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