Studies focus on the process of business model innovation as performed by start-up firms, while incumbent industrial firms’ attempts to innovate their business models often fail, being hindered by path-dependency. There is a lack of understanding of what in a business model of such firms is modified to produce an innovation that gives rise to value creation. Based on explorations of twenty-two incumbent industrial firms, five dimensions of a business model are identified that, when modified, may result in business model innovation by incumbents. These dimensions are exchangeable, activity, actor, transaction mechanism, and governance setup. The results show how business model innovation can be systemically characterized in terms of several dimensions that must be modified in concert to produce an innovative business model. The results also show that such business model innovations require novel uses of digital technologies that enable new activities to be incorporated into existing business models.
The century-old industrial firm Klockner ¨ & Co. is a large producer and independent distributor of steel and metal goods and services. One day, it dared to reinvent its future. Its business model innovation repositioned the firm to capture new value and establish a unique position within its business network. Rather than becoming disintermediated by digital platforms linking steel and metal producers directly with their customers, Klockner ¨ & Co. established two of its own platforms: one for its own services only and another provider-independent platform that links customers with providers. Klockner & Co. not only achieved new revenues, surpassing its industry peers, but also more importantly positioned itself for the future by tackling the challenges related to the industry’s overcapacity and high fixed costs in a volatile market (Hasler, Schallmo, Hackl, & Lang, 2020; Kortov & Sack, 2019).
The success rate for business model innovation among industrial incumbent firms is unfortunately very low (Aspara, Lamberg, Laukia, & Tikkanen, 2013; Haftor, Climent, & Lundstrom, ¨ 2021; Naor, Druehl, & Bernardes, 2018; Santos, Spector, & Van der Heyden, 2009). For example, one study shows that two-thirds of incumbent firms that attempt such innovation fail (Markides & Oyon, 2010), whereas another study shows that only 5 % succeed with the innovation of their business model (Nebuloni, Hernandez, & Carter, 2019). Nonetheless, business model innovation is on the agenda of many executives, who regard it as a key source of firm performance, comparable with product innovation and operational optimization (Sohl, Vroom, & Fitza, 2020; Zott, Amit, & Massa, 2011).
5.3. Limitations and future research
First, the results of this study are based on multiple case explorations. Despite theoretical saturation in the data analysis, the results should be confirmed or else refuted in an alternative empirical setting. Second, the empirical data consisted of large industrial incumbent firms, so the results of this study are potentially only applicable to such firms. However, there is nothing to suggest that the five dimensions of business model innovation and their systemic nature would not apply to the business models of other firms. In any case, to confirm this applicability, this study should be replicated in an empirical setting that includes other kinds of firms.
A final consideration is that although this study focuses on the business model dimensions that influence business model themes, which then affect firm performance, the organization and strategy literature shows that there is seldom one solution that fits all contexts (Volberda et al., 2012). Therefore, future research should examine potential contingency factors that may be related to the five dimensions of business model innovation and explore the nature of such relationships in their influence on business model themes and firm performance.