The Role of the Business Model and Business Model Innovation as Essential Components to Commercialization, Entrepreneurship, and Strategic Renewal

John M. York^*
*Correspondence: John M. York, Institute of the Global Entrepreneur and Rady School of Management, Cranfield School of Management, University of California, San Diego, USA, Tel: +18052382485, Email:

Keywords

Business model • Business model assessment • Business model canvas • Business model development • Business model innovation • Business model reconfiguration • Discovery driven planning • Innovation approaches • Lean canvas • Lean startup • Parallel play • Reinventing the wheel

Introduction

Novel business models have been a cornerstone of innovation for both startups and established firms. They have provided the ability to change an industry's nature and define the competitive playing field and standards. Such to the importance of the business models that scholars have viewed them as or even more important than a particular idea or technology [1,2].

The concept of a business model emanated as a manifestation of the strategy field [3]. Several management philosophies (e.g., resource-based view, transactional cost economic, system, and strategic network theories) influenced its development [4,5]. This term has existed as part of the business vernacular for many decades, emanating from Peter Drucker's writings [3]. However, scholars, practitioners, and the media ingrained the term within the business lexicon during the late 1990s due to the surge of internet-based business during the dot.com era [6]. Since this time, both the academic and general business communities have devoted significant interest in the business model, along with the process of business model innovation [2,7-9].

The review's purpose is to address the question concerning the current knowledge regarding the business model and business model innovation constructs. The narrative breaks down these two interrelated entities into several component sections. For business models, the paper starts by exploring the diverse range of definitions around the concept. It continues by discussing a systematic review, the components, ties to lean startup, and types of business models. It closes out considerations around the assessment of the business model. The paper transitions to business model innovation. This section starts by exploring various definitions and systematic literature reviews. This discussion transitions to examine several approaches, such as business model development, business model reconfiguration, parallel play, and reinvention of the wheel. The business model innovation section closes by exploring the role of this process with learning and strategies for assessment.

Business Model Definition

In general, academics proffer a diverse collection of definitions (Table 1) [3,8]. Unfortunately, no agreed-on or universal definition exists [9]. This lack of consensus reflects a diversity of disciplines interested in this multifaceted concept [10].

Several definitions provide a broad view that exists among academicians. For example, one literature review notes definitions that include a statement, a description, a representation, architecture, conceptual tool or model, a structural template, a framework, a pattern, and a set [10]. Further, in this analysis of 103 papers, the authors note that 37% do define the concept, 44% fail to conceptualize or describe its full components completely, and 19% refer to the work of other scholars [10]. To this end, current research lacks clarity, consistency, and direction [11].

Various contributions support the conceptual under pinning’s of the business model. Scholars describe the business model as a unit of analysis to characterize how a business works [12]. Others depict it as an overarching framework that coalesces internal and external components enabling the venture to function effectively [13-16] Other academics define it as the "logic of the firm [3]."Another characterizes it as an articulated story on how a firm operates [16].

Two leading scholars observe that the business model depicts the content, the structure, and the governance of transactions fashioned to create value via the seizing of business opportunities [17]. They update this description in 2010 to include the concept of an interdependent system, and again in 2013,to add how the firm conducts its business [10,18]. Several researchers see it as a reflection of strategy and indicate that it represents an instrument that a firm can use to analyze and articulate such choices [3,19]. Other scholars characterize it as a bridge that connects innovation, technology, and economic value creation [20].

A cross-section of definitions begin to classify how scholars view the business model based on conceptual (e.g., activities, value) or scope perspectives (e.g., network, enterprise) [8,19]. First, from a network activity perspective, some might describe it as an interdependent activity system, which others commonly cite [10]. This interdependent system transcends and spans the focal firm's boundaries to other ecosystem players (e.g., partners, customers), enabling the firm, along with its partners, to create, deliver, and distribute Value [10]. From a network value perspective, others view the business model as the varied roles and relationships among a firm's customers, partners, and suppliers that identifies the significant flows for the product, information, and currency, and the primary benefits to all such participants [21]. Others view it from an enterprise activity perspective. Such includes (1) a set of activities a firm performs; (2) how and when it performs them in using resources, given its industry; (3) create superior customer value (low-cost vs. differentiated products);and (4) put itself in place to distribute value [10,22]. Finally, from an enterprise value perspective, scholars define it as the rationale of how a firm creates, delivers, and captures value [2,10,14].

A 2010 literature review coalesces several emerging themes concerning a business model [15]. Such could stimulate a more unified use of the term. First, it is emerging as a new "unit of analysis," distinct from, yet centered on, the firm, its products, industry, or network [15]. Second, the business model emphasizes a system-level, all-inclusive approach to describing how firms "do business" [10]. Third, firm activities enact a vital role in the proposed business model conceptualizations [15]. Finally, business models explain how value is created and captured [15].

Interestingly, one leading scholar refines this concept by describing it as the value architecture of the firm [2]. He characterizes it as the way a firm creates and delivers value to customers and then converts revenues to profit [2]. Others cite this definition throughout the literature [12,23-25]. This scholar, along with others, argues that it enables the commercialization of new technology [1,2].

Adding a more current perspective are those from a 2016 debate on the topic [22,26]. This discussion adds to the formal description around the firm's architecture to include that it represents attributes of a "real firm" and cognitive/linguistic schemas [22].

Overall, one can characterize a business model as the firm's architecture that engages with the external ecosystem (or network) and explains how the organization "does business" [2,8,10]. This structure supports and facilitates the business delivery system, which involves activities and resources within the firm and with external players (customers, partners, suppliers), all of which play a vital role [10,27]. The model defines the logics through which a firm identifies, creates, captures, and appropriates value (and profits) [2,5]. Finally, the structure supports and facilitates a business learning system [27].

Published Literature Review

A systematic review analyzes the empiric research from 1996 to 2010 [8]. In a review of 69 empirical papers, culled from 375, they find that 67% of the papers were in the business and management fields, 44% covered information, media, and telecom industries, and 43% came from European sources [8]. These authors report that 73% of the studies collected data to add to the business model concept; the remaining 27% use the business model concept as a unit of analysis for collecting information [8]. They observe increased evidence for the business model as a unit of analysis [8]. These authors add that the business model moves beyond to consider how relations with network participants, partners, and customers connect with performance [8].

This review offers three themes. The business model is (1) the basis for enterprise classification, (2) enterprise performance, and (3) model innovation [8]. For enterprise classification, they find that business model components and their relationships are specific to industry, venture, and/or region [8]. Further, these authors report that studies identify relationships between business model (or business model innovation) with success; however, they caution that definitions for performance varied among studies from financial metrics transferability of the model to new markets [8]. Finally, in examining business model innovation, they highlight that the importance of a firm's focus, motivation, ability, and adaptability to forces (e.g., technological, market), and changing conditions (e.g., factor, conflict) raise the potential to improve performance [8]. However, they note that case studies define much of the evidentiary support [8].

Components and Frameworks

Consistent with their lack of a consistent definition for a business model, scholars maintain divergent views on the elements that a business model should contain. The literature reflects significant efforts to translate the business model concepts to its basic building blocks [25].

One review highlights the analytic dimensions related to value in the business model [9]. These authors characterize the various pieces. First, they defined the value prop as what the firm offers and value creation as the firm's internal characteristics (e.g., resources, activities, processes, and skills) [28]. Next, they define value delivery as the firm's organization to deliver (e.g., distribution) and appropriation as to how a firm captures value and profits [9]. Finally, these authors refer to networking as to how the firm coordinates with partners to create Value [9].

One framework conceptualizes four essential elements, including (1) strategy (Porter's generic strategies), (2) strategic resources (competencies, strategic assets, and critical processes [inputs and outputs]), (3) user interaction (user interaction, feedback, customer relationship dynamics), and (4) value network (company relationships with partners) [29]. Connecting these elements are activity configuration (unique combinations of competencies),benefits to customers (linking strategy to customer needs), and enterprise restrictions (defines firm independent activities and direction partners) as three significant bridges [29]. Finally, considering that profit is the purpose of a business model, the framework includes efficiency, uniqueness, fit, and profit generators as vital benchmarks [25,29].

Other scholars provide further perspective on what the framework should include. One highlights mission, structure, processes, revenue, legal issues, and technology as essential elements [30]. Another discusses seven submodels, including value, resource, production, customer relations, revenue, capital, and market model [31]. The Four-Box Business Model ties together proposal values, profit formula, vital resources, and essential processes as the critical pieces [32].

Another common conceptualization is the Business Model Framework that ties together five dimensions of value-proposition, communication, creation, delivery, and capture [33].

One striking depiction of a business model is the "Magic Triangle" (Figure 1) [6]. This framework considers (1) who (target customer or segment), (2) what (value proposition); (3) how (creation/delivery of the value proposition); and value (creation of revenue)? [6]. The who situates at the center of the pyramid [9]. It is the point that connects with the what (the value proposition), the how (value chain), and the value (revenue model) to complete the framework [6].

A final perspective engages the concept of the business model to include a learning system (Figure 2) [27]. These authors conceptualize the business model from both its shared view, that of exploitation to include profit generation, to a broader view to include exploration [27]. This group includes in its description that of a business system divided into delivery and learning components [27]. It is the delivery system that exploits to create value and generate profit in the short term [9].

However, it also includes a learning system that allows the firm to identify value creation and growth opportunities for future exploitation [27].

When considering the different views on the business model concept and composition, several essential elements stand out. The value proposition, resources, processes, and profit model make up the short-term business delivery system to exploit opportunities [25]. However, some scholars emphasize that a business model should also include a learning system [27]. The inclusion of this element provides for a long-term view that allows for the identification and development of new opportunities to provide for sustained growth.

Ties with the Lean Startup: Business Model Canvas, the Lean Canvas, and the Lean Acceleration Canvas

One of the most significant and popular frameworks is the business model canvas (Figure 3), which some equate to the metaphorical equivalent to a "map" of reality [14.25,34]. This framework is an output from a doctoral thesis on the business model, which he initially characterizes as business model ontology [28,35]. Further, much of the work involving customer discovery and programs with lean startup activities (customer discovery and lean startup) utilize this framework [24,34,36,37].

The canvas comprises nine pieces that cover four significant business areas customers, supply chain, infrastructure, and financial structure [25]. One can divide the canvas into two major segments (Value and operations) or three pillars (value proposition, value infrastructure, and value formula) [26,38]. Others have tied these three pillars to risks that entrepreneurs and managers need to assess with their business models, such as desirability for a value proposition, feasibility for infrastructure, and viability for value formula [39].

Specific to the value proposition, the upper right-hand side consists of four significant pieces. Two essential components are (1) customer segments (different people or organizations a firm wants to engage and serve, and (2) value proposition (the value created for particular customer segments through a firm's products or services) [14]. The next two focus on engaging the target audiences with the value proposition via (1) customer relationships (types of relationships the firm establishes with the customer segment and how it creates, keeps, and expands them, and (2) channels (how a business delivers the product or service) [14].

The value infrastructure, in the upper left-hand side, supports the value proposition [14]. It consists of three components. First, there are key resources [14]. These are assets to make a business work, including people, intellectual property, physical, and capital. Second, there are key activities [14]. This piece delineates the essential activities a firm needs to make the business model work. These can include, for example, research, manufacturing, sales, market, and distribution. The final piece involves key partnerships [14]. This section defines the supply chain and partners to operate the model) [14].

To account for the inflows and outflow of funds to support the business is the value formula, which sits at the bottom below the: (1) revenue model (sources of income for each segment); and (2) cost structure (defines all fixed and variable costs in implementing the business model [14].

There is a second canvas, the lean canvas, that some use with the lean startup (Figure 4) [40]. It helps entrepreneurs to deconstruct their ideas into their essential assumptions. It consists of nine elements, like business model canvas, and breaks them into three sections- product, market, and accounting. On the canvas's left side, the product section is unique from the business model canvas. While it shares the value proposition, this section includes, unlike the business model canvas, the following elements: (1) the problem that exists, (2) the solution, and (3) key metrics [40]. In the market section on the right side of the canvas, the lean canvas shares (1) customer segments and (2) channels [40]. It does, however, contain a new element [40]. The unfair advantage element defines the point of difference versus the competition [40]. Finally, the accounting section situates at the bottom and consists of cost structure and revenue streams, instead of revenue models; these elements are similar to what is in the business model canvas [40].

Recently introduced is a new model, the lean acceleration canvas [41]. This framework is specific to the needs of academic spin-offs, embraces the spirit of the lean methodology, and draws from elements of the lean canvas [41]. The methodology attempts to address spin-out challenges, notably: (1) excessive attention to the technology; and (2) a mechanism to evaluate all risk areas and identify market misalignment [41]. Further, it addresses areas that neither the lean models (e.g., business model canvas or lean canvas) fully consider, specifically: (1) governance and organization; (2) networking and stakeholders; (3) management skills; (4) motivation and commitment; (5) scientific research or underlying technology; and (6) project timing [41].

The "lean accelerator canvas" addresses five fundamental risk areas (Figure 5). The first involves the problem/solution fit, which considers market risks (product and customer) [41]. The second is innovations fit, which takes on technological risk [41]. The third piece encompasses operations fit, which address the risk of implementation [40]. The fourth is stakeholders fit, which engages the risk of governance [41]. The final piece considers economic fit, which takes on economic and financial risk [41].

Interestingly, with each piece are key performance indicators for startups to monitor [41]. Also, critical factors of learning and development (that determine success in learning and implementing a sustainable and scalable business model) tie in with these key performance indicators (that depict the improvements in each area concerning the seeking of such a model) [41]. In their discussion, these authors use these quantitative metrics, along with qualitative data, to monitor, evaluate, and make support recommendations concerning program spin-outs [41].

Types of Business Models

There are multiple permutations of the business model that firms can utilize to target and engage customer segments and to deliver value through their internal capabilities or external partnerships.

A few scholars characterize four broad business models under the context of strategic approaches in which they can compete (Figure 6) [42]. The first involves that of intellectual property to control the innovation and identify a path to create value within an established market via licenses or outright sale (i.e., building a moat and collaborating with others) [42]. The second encompasses the developing and controlling of a new value chain, while protecting intellectual property, via a platform business (i.e., building a moat and competing) [42]. The third considers creating value within the existing value chain (i.e., storm a hill and collaborate) [42]. The final compass direction embraces disruption by competing directly with incumbents vis-à-vis the actions of surprise and rapid execution (i.e., storm a hill and compete).

However, others highlight that more than four exist [6,43]. Stemming from the traction gained in using the term during the late 1990s, a variety of business models exist for digital enterprises on the web. These include forty-two grouped into nine broad categories [44]. The first three involve (1) Brokerage (e.g., marketplace exchange, buy/sell fulfillment, demand collection systems, auction broker, transaction broker, distributor, search agent, virtual marketplace); (2) Advertising (e.g., portal, classifieds, user registration, query-based paid placement, contextual advertising/behavioral marketing, content-targeted advertising, intromercials, ultramercials); and (3) Intromediary (e.g., advertising networks, audience management services, incentive marketing, metamediary) models [44]. The next three include (1) Merchant (e.g., virtual merchant, catalog merchant, click and mortar, bit vendor); (2) Manufacturer/direct (e.g., purchase, lease, license, brand integrated content); and (3) Affiliate (e.g., banner exchange, payper- click, revenue sharing) models [44]. The final three encompasses (1) Community (e.g., open-source, open content, public broadcasting, social networking); (2) Subscription (e.g., content services, person-to-person networking services, trust services, internet services provider); and (3) Utility (e.g., metered usage, metered subscriptions) models [44].

More recently, two entrepreneurs turned authors to discuss six standard digital business models as part of their book on metrics titled Lean Analytics [45]. The first two involved e-commerce (i.e., website shopping, Amazon) and two-sided marketplace (i.e., platforms attracting buyers and sellers, eBay, or Angie's List) models [45]. The next two involve software-as-a- Service (i.e., cloud-based software products, Qualtrics, or Hootsuite) and free mobile app (i.e., web-based programs obtained via the Apple and Android app stores for engagement and consist of payment tiers such as Google Drive or Candy Crush)models. The final two included media (i.e., syndicated subscription information and publications such as the New York Times) and user-generated content (i.e., an engaged community that creates content such as Wikipedia, Reddit, or Quora) [45].

Interestingly, in many ways, there may be no real need to develop something new but instead look to one's industry and past models. The term "reinventing the wheel" describes the repurposing of historical or current models when developing a business model [6].

Scholars report such recurrence from a study examining industry innovations over the last hundred years [6]. Their research maps out well over a hundred of significant business model events or revolutions [46]. Interestingly, from these data, these scholars identify fifty-five unique, repetitive business model patterns [6]. These represent one of the most comprehensive lists of business models, no less ones that recur, and include the following types: affiliation; aikido; auction; barter; cash machine; cross-selling; crowd funding; customer loyalty; crowd sourcing; digitalization; direct selling; e-commerce; experience selling; flat rate; fractional ownership; Franchising; freemium; from push to pull; guaranteed availability; hidden revenue; ingredient branding; integrator; layer player; leverage customer data; license lockin; long tail; make more of it; mass customization; no-frills; open business model; open-source; orchestrator; pay per use; pay what one wants; peerto- peer; performance-based contracting; razor and blade; rent instead of buy; revenue share; reverse engineer; reverse innovation; robin hood; selfservice; shop-in-shop; service provider; subscription; supermarket; target the poor; trash-to-cash; two-sided market; ultimate luxury; user-designed; and white label [6].

Interestingly, other researchers note the replication of business models using the five value dimensions (proposition, communication, creation, delivery, and capture) [33].

They note that such can lead to systematic generation multiple permutations of business models, which they illustrate in their study of the electric mobility industry [33].

Assessment of a Business Model

Considering the number of definitions and types of business models, such would require some type of assessment or model against which to benchmark. Two leading scholars put forth an early model with four indicators, NICE, that define value in the e-business space that some indicators can be used ex-ante [4]. First is that of novelty, which considers new transaction structures and content, and partners [4]. Second is lock-In, which involves switching costs and positive network effects [4]. The third involves complementariness between products and services for customers, on-line and off-line assets, technologies, and activities [4]. Finally, there is efficiency, which encompasses search costs, selection range, symmetric info, simplicity, speed, sale [4]. Another framework is from The Business Model Institute, with the premise that successful firms provide a unique offer, capability monetarization, and sustainability [47]. This group offers assessment criteria, such as market attractiveness, unique proposal value, profit model, model success selling, sustainable competitive advantage, stage innovations, avoid the obstacle, and exit strategy [47].

Probably the most notable are questions (Table 2) one thought leader offers in his 2010 treatment of business models [2]. Related to this framework, one group of researchers describe a five-point Likert scale that draws on the above questions and uses defined examples as anchors for ex-ante business model assessment [48]. They discuss how its use and testing within a business model training workshop [48]. They find that indicators one (value proposition utility to the customer) and three (market size in terms) are statistically significant and represent 59% of the intuitive assessment models weight, 33% and 26%, respectively [48]. Further, these researchers find indicator four (explaining the value proposition benefits to the customers) and five (customer readiness to pay) are significant and represent 22% of the model, 11% each [48].

Business Model Innovation

Characterizations and Definition

As with the business model, the ability to define business model innovation is just as challenging, with no one agreed on the definition (Table 3). While smaller in scale (as compared with that of the business model), the business model innovation literature is vast and confusing [12,49].

To this extent, academics proffer a broad array of definitions (Table 3), as compiled by [12]. Such emphasize different aspects of business model innovation. An examination of each definition's content led to the identification of common themes (Table 4). The most common with multiple citations included value, process, novel, change, activities, core elements, model, and discovery.

Two thought leaders describe it as involving innovation in one or more of the foundational pieces to create, deliver, and capture value [50]. They continue that such gives the firm the ability to embrace unnoticed internal opportunities or new, hard to replicate capacities [50]. Some characterize it as a creation-oriented activity involving the implementation and validation of the new model [51]. Others view it as the significantly defined, novel changes that a firm makes to the essential elements to the business model and/or the underlying architecture linking these pieces [12]. Two leading academics define it as the reconceptualizing of the model's structure, content, and governance [50]. Another defines it as a process that changes a firm's core pieces and business logic [52]. Two other academics observe that it involves a search for new business logic and avenues to create and capture value, focusing on new revenues and value propositions [53]. Others note that it as what occurs when a firm either changes or improves a value dimension [33]. Two other scholars view it as the introduction of a new model focused on creating commercial Value [54]. Finally, one portrays it as several processes ranging from incremental changes of components to extensions to new parallel models, and finally to the disruption and replacement of the existing framework [55].

Nevertheless, when considering these points, business model innovation comprises three essential pieces, all of which tie into the business model concept [2,56]. First, there is a value proposition as related to what is of importance to a specific customer group [56]. Second, there is value creation and delivery that considers how a firm develops and brings the value proposition to the customer [56]. Finally, there is value capture, which is related to how the firm captures, profits, and distributes the Value [1,2,56,57].

Finally, two leading academics emphasize three essential design elements that characterize a business model system [57]. These parts include the content (refers to activities a firm and other system participants perform), the structure (defines how the activities connect), and the governance (identifies who is performing the activities) of a system [57]. In essence, the what, how, and how of a system. These three pieces are highly interdependent and define the transactions that create value by exploiting opportunities [57]. Leveraging these elements, either individually or together, facilitate the process that leads to innovation of the business model [57].

Systematic Literature Reviews

Two systematic reviews help to consolidate and define the research streams of business model innovation. The first review highlights three essential streams of literature that involved 35 articles [49]. These themes include (1) Prerequisites of conducting, (2) The elements and process, and (3) The effects achieved vis-à-vis a business model innovation [49]. The second stream highlights the challenges that exist in defining a distinction between the intertwined process and the content of business model innovation and the definition of the elements [49]. They also note a range of approaches to process, emphasizing the leadership role, and noting similarities to product development [49]. These authors characterize most of the work here as exploratory [49]. The third stream categorizes the studies in this space within three types of effects that business model innovation exerts: (1) On industry and market structures; (2) Individual firm results; and (3) On firm capabilities [49].

A second and more current review examines 150 articles [12]. This review critiques the present literature and identified gaps by noting "deep ambiguity" in defining the concept (e.g., process versus outcome) and a reflecting lack of specificity among many of the definitions [12]. These authors add that the literature covers vast differences in the definition and the conceptualization of a construct [12].

This evaluation identifies four distinct literature streams: (1) Conceptualization and classification of; (2) Business model innovation as a process; and (3) Business model innovation and organizational implications/performance [12]. The review highlights the ambiguity that exists in the literature in defining what a business model innovation is and shares a broad range of definitions [12]. The first stream offers definitions and conceptualizations [12]. The second stream, the organizational change process, discusses extensively: (1) Different stages; (2) Organizational capabilities and process to support change; (3) The importance of experimentation and learning; and (4) Process management tools for practitioners [12]. The third stream examines a variety of case studies that would claim an unprecedented change in the model; however, it notes that these contributions fall short of building on prior streams or providing any robust criteria for the novelty [12]. The final stream addresses the organization's performance aspects. It discusses a few examples in which the innovation translates to performance and others in which investigators empirically evaluated performance with new business models [12]. They comment that the existence of only a few studies looking rigorously at performance might be due to the complexities involved with tying the two pieces together [12].

The review identifies several significant research gaps. The first involves defining and dimensionalizing of the construct (e.g., unit of analysis) [12]. It is noteworthy that the literature contains vast differences in the definition and conceptualization of the essential construct [12]. The second considers the congruence and identification of antecedents and outcomes (e.g., performance) [12]. These authors note few articles that critically evaluate the theoretical basis in prior literature [12]. Further, they comment on the paucity of literature that discusses in-depth how business model innovation directly enhances performance, such as competitive advantage, innovativeness, profitability, or other organizational success factors [12]. They add all of which might be due to the sheer complexity involved with connecting these two phenomena [12]. The third involves contingency and moderating variables (e.g., organization capabilities and leadership, learning and experimentation, cognition, organizational design, and other organizational factors) [12]. In this case, these authors make a note of organization capabilities, leadership, cognition, organizational design, and other factors (e.g., strategic flexibility) [12]. They highlight the concept of strategic agility and three meta capabilities that support it− strategic sensitivity, leadership unity, and resource fluidity [12,58]. These authors recognize the literature's extensive coverage in the areas of learning and experimentation [12]. The final gap area involves that of boundary conditions, which the authors note that the literature does not directly address [12]. However, these scholars do note the importance of providing such since they do recognize the variabilities among firms and industries to address (e.g., entrepreneurial/incumbent, high-tech/traditional, young/old, single industry/diversified) [12].

Approaches to Business Model Innovation

Scholars relate the concept of business model design to the ability to create a new business model from nothing, which occurs commonly with startups [25]. They observe that this effort involves strategic choices concerning the value proposition, customer segments, marketing mix, organization design, cooperative networks, resources, and activities [14,25].

Academics recognize the increasing attention towards business model design, despite its inherent theoretical foundation issues, within the entrepreneurship space [24,59]. Also, others emphasize that the design and changes are essential to technology-based firms and in rapidly changing uncertain environments [60,61]. Further, within the technology space, scholars explain that the business model as the focus of innovation and competitive advantage [62].

A discovery-driven process is one essential effort involved with designing, developing, and innovating a business model and strategic thinking [7]. This concept's originator indicates that search and discovery drive the design process [7]. She elaborates that experimentation and learning are essential to this process and its success [7]. This academic continues that the process involves bringing the customer in, engaging in critical conversations, defining a unit of business, experimenting, employing metrics, and utilizing failure and learning [7]. She contrasts this approach with the more traditional "Black Hole" investment strategies and explains how it provides investors "real options" to make small investments and manage risk as the startup learns and earns its way into a novel and encouraging area [7]. She and others emphasize that the business model is not final at the start, but rather develops out of this experimentation and development process that involves customers, partners, and other stakeholders [7,25,63].

The customer discovery process, emanating from the discovery-driven approach, is one of the best-known efforts to develop a business model utilizing search and discovery methods with customers to test hypotheses and learn from the market [64]. Scholars explain that its value is that it considers the ambiguities that entrepreneurs encounter when starting a business [7,25,63]. They observe that it obviates an initial business plan [25]. The development of customer discovery includes the incorporation of the business model canvas [24,63]. Practitioners and academics widely utilized this particular tool [1,14]. The driving thought leader behind this process explains that the first step involves populating this tool with hypotheses [36]. He adds that step 2 requires the entrepreneur to "get out of the building" to interview customers to get to know them, test their hypothesis, and learn [36]. Then, he continues that step 3 involves validating or disproving these "guesses" [36]. He and others emphasize the need to continue this process until the entrepreneur has validated all the canvas and product assumptions concerning customer needs, leading to a state of product/market fit [36]. Some scholars observe that this effectuation-like approach is, in essence, a pre-business plan planning process that solidifies assumptions to allow for the next phase that involves a business plan development to raise capital and scale the venture [25,26].

Another strategy thought leader explains that successful new or refined business models can result in reduced costs or increased customer value provided competitors cannot easily replicate it [2]. In essence, the model establishes a sustainable competitive advantage. This scholar outlines several steps for a competitively sustainable business model [2]. First, one need to segment the market, followed by creating a value proposition for each segment and mechanisms to capture value [2].

He emphasizes that the firm would need to identify, develop, and implement means, or isolating mechanisms, to stem or block competitor imitation and cut out intermediaries [2]. He elaborates on three critical characteristics: (1) hard to replicate assets, elements, systems, and processes; (2) opacity that competitors and outsiders find difficult to discern or understand; and (3) constraints on incumbents around product cannibalization or customer relationships [2].

Concerning reconfiguration, scholars define it within the context of a more established and successful firm [32]. Such activity is part of the strategic planning process within firms to respond to business environment dynamics [49]. Through this process, firms seek competitive advantages, vis-à-vis the exploration of new opportunities using present capabilities and resources [51]. In defining a leadership agenda, two leading scholars that agility is essential to success and requires strategic sensitivities, unique leadership, and flexible resources [58]. Another adds that successful reconfiguration requires creativity, solid insight into the current business, and substantial customer, competitor, and supplier information [2]. However, this effort requires firms to overcome several internal barriers, including cognitive, structural, lack of understanding for the need, and general resistance to change [1].

Business model reconfiguration can range from the changing of a least one essential element to stretching the boundaries of one or more pieces to revisions throughout the whole model. Interestingly, a few scholars articulate the rule of three [10,65]. Several notable experts on business model innovation highlight that a firm can reconfigure the business model through the addition of new activities, the connection of existing activities in a new way, or by changing those performing the activities [10,15]. In discussing how to innovate the business model successfully, others classify such changes into three models: (1) industrial innovation (i.e., innovating an industry's value chain from the perspectives of entering, redefining, or creating new industries); (2) revenue innovation (i.e., revenue generation via value proposition revision or reworking, new pricing, new revenue models, or customer encumbrances; and (3) enterprise (i.e., changing role of a firm within a value change in existing business segments) [65].

Several Dutch scholars add another consideration regarding the intertwining of cognitive and action-based learning modes with the business model innovation processes over time [66]. Through case study research in established firms, these investigators identify two patterns that involve experiential learning and cognitive search processes, both of which are organizational learning processes [66,67]. They observe that it is a process involving multiple steps and mechanisms and can facilitate radical business model innovations [66]. These researchers add that the innovations will vary based on whether the model emanates from an existing one and the point of which it begins to operate [66].

The first pattern these scholars describe involves that of “drifting,” an effort that initiates with experiential learning and then progresses to more of a cognitive endeavor [66]. They characterize the process prompted reconceptualization of the firm’s existing business model through the reuse of multiple components and medication of several via experiential learning [66]. These scholars add that operationalization starts early, and the scaling process triggers the shift to cognition to systematically evaluate the configuration [66].

They characterize the second form as “leaping,” a process that takes the opposite direction, starting first with cognition and shifting to experiential learning [66]. These researchers explain that it is a process triggered by the definition of a new value proposition and “off-line” development [66]. They continue that the operationalization of the business model, which occurs later in the process, facilitates the transition to the experiential mode, in which the process necessitates adaptation components within the initial model setup [66].

Other scholars examine the process of experimentation relative to business model innovation [68]. Using a qualitative approach with two startups involving in-depth interviews with executives, archival data, and observations around their business modeling processes, they learn that experimentation is essential to determining the sensibility of business and its business model before venturing forth [68]. More significantly, these researchers explore the different roles involved with experimentation [68].These scholars find that their data translate into three second-order concepts− (1) learning from the environment, (2) signaling of intent, and (3) convincing others (e.g., customers, investors, partners) to engage with the firm [68]. These authors explain that the latter two are symbolic of the processes of strategic legitimization and enactment [68]. They adds that particularly that of legitimization is essential during their nascent period [68]. They also report that the three roles interact throughout the business model development process in a simultaneous and complementary fashion [68]. These scholars highlight two interactions with the environment that the three roles participate in impacting the business model [68]. They elaborate that learning engages the environment to validate, abandon, or modify the business model, whereas signaling and convincing enact with the environment to gain strategic legitimization [68].

These researchers also report other valuable learnings from their research [68]. Most notable, these scholars identify two forms of experimentation− (1) purposeful interactions and (2) experimental projects [68]. They note with purposeful interactions, the entrepreneurs start with a question about the business model, then follow with hypotheses that they test in the market and learn [68].

Such a process, these scholars indicate, allows the entrepreneur to validate, modify, or abandon the model or parts of it [68]. The authors note that these are small, personal with a type of stakeholder, and continuous in the individual’s daily work [68]. With experimental projects, they characterize these as more extensive, purposeful, time-bound, and multi stakeholder endeavors [68]. They add that such efforts test multiple hypotheses [68]. Finally, these authors explain that these two forms support the roles of experimentation in a slightly different fashion; purposeful interaction supports learning and signaling, whereas projects engage all three roles [68].

Another business model innovation approach involves using already established business models, the “reinvention of the wheel” business model innovation paradigm [46]. Already; scholars report the existence of fiftyfive recurring business models [6]. Another scholar adds that some firms use the lens of the past to see the future when developing innovations [46]. He indicates that this approach, which firms can use with other innovation strategies, involves a mindset that draws on past ideas and resources applied to future opportunities offered through new trends [46]. The approach brings a combination of approaches including bricolage, blue ocean strategy, and lean startup [46,61,69,70].

This scholar describes the traits, steps, and considerations with an approach. Shared traits among firms that use this approach include (1) Past resources and assets for repurposing or reinvention; (2) Digital technologies in the reinvention process; (3) The customer experience/ journey at the reinvention’s core; and (4) A new wheel emerging due to different connections and a novel value architecture [46].

Further, the process involves five steps. It begins with a critical survey of the “old wheel” to learn which assets to keep and leverage (and those to drop) [46]. These lead to disclosing the reinvention by viewing the present (i.e., new markets, technologies, and trends) through the lens of the past [46]. Next is the leveraging of current, up-to-date components that pattern past processes and combine with past resources and models to minimize resistance [46]. What experimenting or learning that occurs is from the past rather than the future [46]. Then, there is the reinterpreting of traditional models, to obtain a reinvented wheel that combines old ideas with new shapes [46]. Finally, firms considering this approach should examine the industry’s “history,” firm’s traditions, customer and customer journey/ connection characteristics (e.g., nostalgic and revampable), and the ability to gain organizational support for assets and business model [46].

A more recent approach involves that of parallel play. This approach defines a process to help firms formulate strategies and business models for nascent markets, in which competitive forces are continually changing [71].

This approach, an alternative that has challenged conventional strategy and focused commitment, mimics the way young children (three to four years of age) explore, play, and learn, as individuals, but drawing on what their peers are doing and imitating them [71]. It reflects a natural behavior when one enters unchartered markets without much knowledge [71].

Research finds that three types of parallel play behaviors distinguish high-performing enterprises in new or emerging markets [71]. The first involves the astute borrowing of ideas from peer firms, rather than trying to differentiate from these competitors [71]. The second engages relentless experimentation with various templates for creating and capturing value (via the testing of hypotheses rather than an early focused commitment) and learning from these tests [71]. Finally, the third practice consists of reflection− pausing, watching, and waiting [71]. This behavior entails committing to a general BM template (and several essential elements) but leaves it unfinished and irresolute; such firms postpone the optimization of the business model for flexibility as nascent markets are unpredictable and present surprises [71].

Business model innovation learning and assessment

The common theme with business model innovation involves that of learning [2,7,12,72]. Two leading scholars reviewing the literature on business model innovation identify it as a process, which includes that of learning mechanisms [12]. They highlight in the stream the importance of experimentation and learning and the complexities associated with different learning approaches [12,72,73]. Another leading academic highlight in his critical review on business models, strategy, and innovation the importance of business models and learning [2]. In this piece, he emphasizes how experimentation, learning, and adapting are requisite in the business model innovation process [2]. This reality is becausethe business model is amorphous at the outset due ambiguities and dynamics involve customers, the market, society, competition, and cost structure that the entrepreneur/ manager needs to be understood [2].This scholar emphasizes the importance of the entrepreneur being fast in the learning process to make the required adjustments in evolving one’s business model [2].

Further, the author of discovery-driven planning highlights the importance of experimentation and learning [7]. She emphasizes that for ambiguous, complicated, dynamic, and uncertain environments, rapid experimentation and evolutionary learning skills are as vital as those involved with traditional planning and execution [7].This scholar notes the importance of failure as part of this process, as such efforts enable the emergence of the final [7].

Finally, other academics discuss these points in the context of organizational learning [72]. They make note learning and experimentation as part of the entrepreneurial exploration process [72]. They continue by noting how entrepreneurs make conscious choices of action in using the lean start to conduct experimental trials (versus experiential learning) learning [72]. Such efforts help to inform future design efforts as the venture seeks product/market fit, which involves the confirming of a repeatable business model [36,74,75].

To aid this learning process, whether it be the need to design a new model, reconfigure an existing one, reinventing the wheel, entrepreneurs and managers must have some type of guidance. Several considerations drive this need. First, scholars emphasize different dimensions of business model innovation− leadership role, mental models, organizational culture, strategy, technologic impact, and value creation [1,2,14]. Second, the combination of insufficient foundations and the lack of an integrative framework can lead to unclear comprehension leading to risky trial and error when engaging the process [2,34,74]. To this end, the following six questions (Table 5) on the process that two thought leaders offer insight around business model innovation in defining the delivery, and capture of a value proposition, including that of a firm’s activities, structure, governance [57].

Considering assessment criteria, researchers from Germany highlight several integral elements for business model innovation when looking at the issue through the prism of success factors [56]. Their test areas include (1) Innovation culture, (2) Clear value proposition, (3) Clear product advantage, (4) Acquisition of technology and knowledge, (5) Innovation competence, (6) Business model innovation process, (7) Customer orientation, (8) Customer retention, (9) Network and partner collaboration, and (10) Price management [56]. Their hierarchical component model (using partial least squares structural equation modeling approach) draws on survey data involving 58 respondents (mechanical engineering, chemical engineering, pharmaceutical and chemicals, construction, automotive, metalworking), with 30into the “successful” cluster and 27 in the “less-successful” cluster [56]. Their analysis identifies four statistically significant factors. These include (1) Clear value proposition, (2) Clear product advantage, (3) Acquisition of technology and knowledge, and (4) Price management [56]. In comparing the two clusters, the investigators report higher scores in the “successful” versus the “unsuccessful” group [56]. Important areas from this comparison include (1) The emotional dimension of the customer’s perceived value, (2) The points of product differentiation, (3) The professional acquisition of technology and knowledge for the innovation, and (4) The customer’s price sensitivity and perceived product value due to a value-informed-pricing approach [56].

Conclusions

This review has sought to address the question concerning the current knowledge regarding the business model and business model innovation concepts. This analysis has brought to light several essential learnings around the business model and business model innovation. Concerning the business model, one essential conclusion has related to its essentialness in defining a path to innovation and successful commercialization. While multiple scholars have offered diverse definitions, this discussion has identified perspectives around scope (e.g., firm, network) and conceptualization (e.g., activities, value). Further, it observed that the business model functioned as the “unit of analysis” and captured the identification, creation, capturing, and apportionment of value. Most components tended to fit within these realms. While the model addressed who, what, and how questions, it also encompassed both a business and learning system to address short- and long-term needs. This research found that the use of the model enhanced the commercialization of technologies. Also, noteworthy was that the business model canvas was the most common to use with lean startup and customer discovery. However, the lean canvas and, in particular, the lean accelerator canvas offered additional pieces. Noteworthy was the finding that fifty-five different recurring models do exist. Finally, it identified that users should evaluate the effectiveness of the model by using Teece’s seven questions and Mateu and March-Chorda’s assessment tool, with a particular emphasis on the value proposition and market size.

Concerning business model innovation, this review had identified several important considerations. It recognized the diversity of definitions that scholars use to characterize the concept; however, this analysis culled several common themes within these descriptions- value, process, novel, change, activities, core elements, model, and discovery. Furthermore, it identified gaps for further exploration based on two extensive systematic literature review. Moreover, it found that these were multiple approaches, such as business model development, reconfiguration, discovery-driven planning, customer discovery, parallel play, and reinventing-the-wheel. Finally, this analysis found that business model innovation involved a critical organizational learning process, and, in particular, connected with that experimentation, signaling, and legitimization. Further, this process, and its activities, done properly fashioned a model that offered novelty and value to the firm and its ecosystem of customers, investors, and partners. Finally, like that seen with the business model, the need to evaluate success with the construct featuring Amit and Zott’s six questions.

In closing, further work exists to unify the definition and characterizations of these concepts, the canvases that represent the business model, and the process for its development. Additional research would benefit scholars and practitioners around the gaps identified concerning business model innovation that, in particular, Foss and Saebi identified in their review. Finally, further work should build on refining Teece’s and by Amit and Zott’s evaluation questions. Accordingly, more outcomes studies, such as that by Mateu and March-Chorda’s using a tool developed from the Teece questions to evaluate the robustness (and resilience) of a firm’s model and the process involved with developing the construct. Such learnings would further the science, understanding, and utility of both the business model and the innovation to develop novel and valuable constructs in the future.

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