+This research was supported by an Australian Government Research Training Program Scholarship
Extended Abstract
Context
Foundational work on business models initially understood business models as a static concept (Casadesus-Masanell and Ricart, 2007). This was reinforced by the entrepreneur- and practitioner-oriented tools commonly used to understand the complex components of value creation, delivery and capture, such as the business model canvas (Osterwalder and Pigneur, 2010). Such analyses provide insight into the business model at a snapshot in time, but offer limited opportunity to document or understand business model change. ‘Collaborative’ or ‘open’ business models are particularly dynamic, as a key competitive advantage offered by openness to external sources of innovation is business model agility (Chaurasia et al., 2020; Liao et al., 2019). In sustainable business model (SBM) innovation specifically, collaborative innovation has been identified as an important strategic driver to improve an organisation’s “dynamic capabilities” to sense, seize and transform itself to respond to evolving market conditions (Bocken and Geradts, 2020).
Scholars have called for a greater understanding of the dynamic nature of not only business models generally (Zott and Amit, 2019), but also, more specifically, of SBMs (Snihur and Bocken, 2022), collaborative (or open) business models (Saebi and Foss, 2015) and of transformative business partnerships that seek to tackle social challenges (Austin and Seitanidi, 2012).
These calls highlight the lack of frameworks to understand the dynamism that is inherent in collaborative ways of operating, particularly with the increasing speed at which organisations must adapt to meet evolving market and societal demands.
Overview and Method
The central research question under examination was, “what role does openness to external collaboration in business model design play in explaining the dynamics of sustainable value creation?” The study applied an adaptive theory process (Layder, 1998), through which a number of visual tools were examined for their ability to explain the rationale, significance and structure of changes in collaborative SBM designs. The process was initiated with the established sustainable value exchange mapping approach of Brehmer et al. (2018). Value exchange maps were created for five energy sector organisations with ‘open business models’ based on semi-structured interviews. These are all organisations whose value creation and capture cannot be explained without mentioning collaboration (Weiblen, 2016). As specific limitations of the method for revealing key facets of SBM dynamics were identified, other (not sustainability-oriented) visual tools were explored to overcome these challenges. This included the simplified value chain representation of Frankenberger et al. (2013), and evolved to incorporate critical elements of Wardley’s (2013) value chain mapping approach, more commonly applied to developing product market strategy.
While the findings were developed across a range of case studies, the proposed tool and approach is explained through a single detailed case study of a collaborative energy retailer.
Results & Discussion
A hybridised approach
Value exchange maps afforded substantial contextual depth and flexibility of representation of SBM features but demonstrated three key limitations: 1) all exchanges are represented on the one image, which loses important distinctions between portfolios of BM variants that were important in understanding change across the sample of highly collaborative BMs, 2) depletion or destruction of social or environmental value (Bocken et al., 2014; van Bommel, 2018) was not identifiable, and 3) comparisons between organisations – particularly with the unsustainable incumbents that these organisations are attempting to supplant – was challenging.1 This relativity was critical to understand how open/collaborative innovation delivered sustainable outcomes compared to existing market norms.
The proposed tool hybridises the base analytical framework of Wardley’s (2013) value chain maps, which incorporates the level of ‘evolution’ of each element in the value chain, with sustainability coding elements (drawing on Brehmer et al., 2018), augmented with symbology to quickly identify actual or potential social or environmental tensions (or externalities) in the BM.
Granularity of analysis
The business model concept has evolved from a product-level description of value creation and capture, towards an organisational-level abstraction (Wirtz et al., 2016). Yet this level of abstraction was found to mask the underlying dynamics inherent in highly collaborative SBMs. The key benefit of openness in BM design is BM agility, allowing the organisation to adapt to changing market circumstances or progressively introduce new sustainable innovations. Therefore, the tool was applied at the level of the ‘BM variant’ to reveal these changes.
Collaboration as a platform for sustainable innovation
Answers to the research question are illustrated on the sustainable value chain mapping tool for the case of an energy retailer. Open business models were found to create new, diverse, ‘specialised’ customer offers as mechanisms for diverse forms of social (red) and environmental (green) value creation, which cluster at the top of the value chain, as highlighted in Figure 1 below. To successfully attract social and environmental partners, some differentiation from incumbents further down the value chain is also required. This is often through eliminating a social or environmental tension associated with rivals’ BMs.
Figure 1: Sustainable partner innovation trends highlighted on the value chain mapping tool
Source: Underlying (blank) Wardley template provided under Creative Commons CC BY-SA 4.0 License, courtesy of Simon Wardley and Ben Mosior, accessed via miro.com.
Collaborative SBMs also generally leverage the focal organisation’s willingness and ability to ‘unbundle’ its capabilities to empower organisations with shared social or environmental values and/or systems change goals and complementary offerings. Multiple partners are commonly connected at one (or sometimes more) specific, efficient integration points in the value chain. In the retailer case, a standardised, ‘white-labelled’ (unbranded) customer offer enables new customer-facing BM innovations to be developed on top of retail functions that were hitherto controlled by vertically integrated incumbents.
Conclusions
Understanding SBM dynamics and how it relates to BM design requires a framework to identify how and why a BM has changed from its prior form, as well as the nature of the change that enables its novel sustainability features. The value chain mapping tool, developed by combining and augmenting elements of pre-existing visual BM and strategy tools, contributes to filling this gap in helping to understand the structure and function of openness in SBM dynamics.
Keywords
Collaboration, sustainability, sustainable business model, open business model, value chain, visualisation
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