A business model which represents the way how a firm does its business (Teece, 2010) is undoubtedly an important factor in explaining the heterogeneity of firms in terms of their competitive advantage or performance outcomes. For this reason, many firms find business model innovation – developing a new business model or replacing a firm’s existing business model with a new one (Foss and Saebi, 2017) –important to sustain competitive advantage, promote growth, and generate superior returns.
However, is BMI always a good thing? Unfortunately, evidence from both the literature and practice, suggests that this is not the case. The shift to a new BM may not always be a positive experience for the organization: whilst beneficial for some firms, others are unable to achieve the expected benefits, with their performance weakened as a result (Christensen et al., 2016). Moreover, a failure in how BMI is undertaken may yield rather devastating consequences, possibly jeopardizing firms’ survival (Chesbrough & Rosenbloom, 2002; Sosna et al., 2010). Finally, BMI could also generate negative consequences for stakeholders, despite the firm itself benefitting; examples include employees struggling with new ways of working, suppliers finding themselves no longer needed, or local economies negatively affected by changes in supply chains (Dreyer et al., 2017; Girotra & Netessine, 2013; Lange et al., 2015). We conceptualize this phenomenon as the dark side of BMI.
Recognizing the importance of understanding the dark side of BMI, the three of us (La Ode Sabaruddin from Universitas Airlangga, Jillian Macbryde from University of Strathclyde, and Beatrice D’Ippolito from University of York) systematically review the existing BMI literature to gather prior research on the phenomenon and thereby develop a conceptual understanding of the dark side of BMI. We found that there are three clusters of negative consequences resulting from BMI, including those affecting the firm as an entity, those affecting the firm’s stakeholders, and those that are specific or context-dependent. In a similar fashion, we identify the driving factors and circumstances leading to these negative consequences and group them into four clusters: (1) managerial choices and processes, and three underpinning circumstances that influence such choices or processes; (2) trade-offs between the new and current business models; (3) managers’ ability to manage BMI; and (4) context within which BMI is situated.
By connecting the negative consequences and the driving factors and circumstances, we propose a model that explains how the dark side of BMI may occur. We base the explanation of our model on three streams of literature. First, disruptive innovation literature captures the disruptive nature of BMI in which the dark side of BMI may occur due to the trade-off between the new and current BMs in existing businesses and the industry (Christensen, 1997; Christensen et al., 2016). Second, dynamic capabilities, which capture the required capabilities needing to be possessed by the managers or the firm (Chesbrough, 2010; Helfat & Martin, 2015; Sosna et al., 2010; Teece, 2018) in such a way that the absence or lack of these capabilities would lead BMI to the dark side. Third, contingency theory (Lawrence & Lorsch, 1967), which captures the context in which a BMI has been situated matters—the likelihood that the dark side occurs is high based on certain contexts or settings.
We contribute to the literature in three folds. First, we inform ongoing debates on the theorization of the consequences that may derive from BMI and how these can be managed to support firms’ innovative growth, arguing how the disruptive innovation literature can only partially explain the phenomenon. Second, our model provides important foundations to further distill the complex link between BMI and performance. Finally, we suggest a number of future research avenues, accounting for different dimensions of the phenomenon.
For managers, we offer one valuable practical insight, that is, the use of problem as the unit of analysis in capability development for managing BMI (Björkdahl & Holmen, 2016). That is, firms can direct the creation or acquisition of new knowledge and relevant capabilities once valuable problems of BMI are identified (Björkdahl & Holmen, 2016), rather than acquiring as much new knowledge as possible and building a portfolio of capabilities accordingly (Teece, 2018). In this regard, the negative consequences that may result from BMI, and their driving factors and circumstances discussed above, draw attention to common issues that firms may have to tackle when innovating their BMs and, as such, using ‘the problem’ as the unit of analysis may constitute a meaningful approach to follow; this would enable firms to treat given strategic actions as BMI related problems, which could drive organizational change aimed at mitigating, or coping with, the dark side of BMI.
Author: Dr. La Ode Sabaruddin, SE.,M.Si.
Journal link: https://onlinelibrary.wiley.com/doi/abs/10.1111/ijmr.12309
