Slides from my PhD defense at Aarhus BSS, Aarhus University, presented on 6 January 2017.
The dissertation aims to inform and improve the management’s strategizing activities, when the intended business development initiatives may augment the existing business model:
- Which trajectories of business model change can management consider taking?
- How can changes in the (other firm’s) business model be tracked via public data sources?
- How can the process of business model innovation be conceptualized? What are the major factors inhibiting and facilitating the process?
- How can management track the progress of their own firm’s evolution towards a new business model?
Presentation by Andreas Schleicher Tackling the School Absenteeism Crisis 30 ...
Business Model Innovation: From Understanding the Process to Tracking the Change
1. SERGEJS GROSKOVS
PHD CANDIDATE
6 JANUARY 2017
BUSINESS MODEL INNOVATION:
FROM UNDERSTANDING THE PROCESS
TO TRACKING THE CHANGE
PHD DEFENSE
Sergejs Groskovs
6 January 2017
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SERGEJS GROSKOVS
PHD CANDIDATE
AGENDA
1. INTRODUCTION
Positioning and purpose
2. PAPERS
Business model innovation as a process (Paper 1)
Tracking business model change (Paper 2)
Trajectories of business model change (Paper 3)
Designing a process for tracking business model change (Paper 4)
3. CONCLUSION
So what and what’s next?
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PHD CANDIDATE
POSITIONING OF THE DISSERTATION
Strategic Management Entrepreneurship Technology & Innovation
Management
Business Models
Business Model Innovation
Process/Activity System School
SAP
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PURPOSE
The four included papers propose:
conceptual understanding of the process of business model innovation
strategic trajectories of business model change
approaches to tracking business model changes externally and internally
Aiming to inform and improve the strategic management processes related to business
model innovation, with a pragmatic twist
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PRAGMATISM
The aim of pragmatic inquiry is to generate useful knowledge that can improve our lives,
rather than discover objective universal laws (as in positivism) or understand the unique
subjective perspectives (as in interpretivism). The insights from other approaches however
can serve as valuable inputs into pragmatic research which results in finding “what works”.
My philosophical approach is most closely aligned with Martela (2015), who takes
inspiration from John Dewey, one of the “founding fathers” of pragmatism. According to
Dewey, in a pragmatic inquiry “we begin in a situation where we don’t know our way
around, and inquiry comes to an end when we do” (Hookway 2015).
Pragmatist research, such as design science and/or action research, is quite uncommon in
organization and management sciences (van Aken 2004; van Aken & Romme 2009;
Jelinek, Romme & Boland 2008).
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PHD CANDIDATE
CONCEPTUAL STRUCTURE
Strategy:
Which directions
to take?
Tactics:
Which initiatives
to implement?
KPIs:
How to track
progress?
Paper 3
Paper 4
Paper 2
Paper 1
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AGENDA
1. INTRODUCTION
Positioning and purpose
2. PAPERS
Business model innovation as a process (Paper 1)
Tracking business model change (Paper 2)
Trajectories of business model change (Paper 3)
Designing a process for tracking business model change (Paper 4)
3. CONCLUSION
So what and what’s next?
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PHD CANDIDATE
Theoretical point of departure
Business model is of corporate
strategic importance as it can
influence firm performance
(Bock et al. 2012; Malone et al.
2006; Teece 2010; Zott & Amit
2007), e.g. margin growth (Pohle
& Chapman 2006), shareholder
value (Amit & Zott 2012)
Yet the process of business
model innovation remains poorly
understood (Bucherer et al.2012)
The literature on the process of
business model innovation is
rather new and offers only a
handful of contributions (Zott &
Amit 2015)
Contributions to knowledge base
A higher-level conceptualization of the process of
business model innovation, grounded in seminal ideas
from entrepreneurship and organizational change,
providing an opportunity to unify the few existing rather
different contributions – i.e. Bucherer et al. (2012),
Cavalcante et al. (2011), Morris et al. (2005), Siggelkow
(2002), Zott & Amit (2015), Blank & Dorf (2012)
Iterative cycles – in line with Blank (2013), Zott & Amit
(2015), but challenging linear staged process models
such as e.g. Bucherer et al. (2012), Morris et al. (2005)
Some of the key factors that may influence the
successful outcome of the process, for further research
Methodological approach
Expert review/survey of the
broader entrepreneurship and
organization literatures (32
seminal papers) to
conceptualize a process of
business model
innovation/renewal as cycles of
search and change
Systematic literature review/
survey (65 papers) to identify
some of the critical factors that
may influence the outcome of a
business model innovation effort
in an established firm
Interpretivistic with a touch of
pragmatism; search for meaning
and useful insights in the variety
of received views
Contributions to management practice
Guidance for how a process of business model renewal
can be thought of and structured – iterative cycles of
search and change
An account and elaboration of the forces at play in each
cycle to increase the odds of successful completion of
the overall process
PAPER 1:
BUSINESS MODEL INNOVATION AS A PROCESS
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EXECUTE BUSINESS MODEL
CHANGE
BUSINESS
MODEL
SEARCH
BUSINESS
MODEL
SYNTHESIZED HIGH-LEVEL PROCESS OF BUSINESS MODEL INNOVATION
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EXPERT REVIEW TO SYNTHESIZE A HIGH-LEVEL PROCESS OF BMI
Automation of production and decision-making routines vs systems
design by humans (Simon 1960)
Organizations as shifting dominant coalitions (Cyert & March 1963;
Thomas 1994)
Organizational ambidexterity (Duncan 1967; March 1991)
Organization’s institutional level to initiate large-scale change
(Thompson 1967)
Buffering the core from environment (Thompson 1967)
Strategic choice (Child 1972)
Organizational slack (Galbraith 1973) supporting organizational
experimentation and learning (Cyert & March 1963; Levitt & March
1988)
Strategic windows (Abell 1978)
Cycles of solving entrepreneurial, engineering and administrative
problems (Miles & Snow 1978)
Experiential learning vs long-term planning (Hedberg 1981; March
1988)
Tacit knowledge of workforce (Nelson & Winter 1982)
Speed of strategic change (Eisenhardt 1989)
Loose coupling (Orton & Weick 1990)
Four motors of organizational change: life-cycle, teleology,
dialectics, evolution (Van de Ven & Poole 1995)
Four types of organizational forms: rigid, planned, flexible, chaotic
(Volberda 1996)
Dynamic capabilities (Teece, Pisano & Shuen 1997)
Business model life-cycle (Morris et al 2005)
Bricolage (Nelson & Baker 2005)
Business model search (Blank 2005; Blank & Dorf 2012), lean startup
(Ries 2011), business model canvas (Osterwalder & Pigneur 2010)
Open innovation (Chesbrough 2006)
Effectuation (Sarasvathy 2008)
Experimentation and discovery-driven approach (Chesbrough 2010;
McGrath 2010; Sosna, Trevinyo-Rodríguez & Velamuri 2010)
Concurrent balancing of stability and change (Schreyögg & Sydow
2010)
Business model change typology (Cavalcante, Kesting & Ulhøi
2011)
Goodness of fit (Huber 2011)
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Simon 1960
Cyert & March 1963
Duncan 1967
Thompson 1967
Child 1972
Galbraith 1973
Abell 1978
Miles & Snow 1978
Hedberg 1981
Nelson & Winter 1982
Levitt & March 1988
March 1988
Eisenhardt 1989
Orton & Weick 1990
March 1991
Thomas 1994
Van de Ven & Poole 1995
Volberda 1996
Teece et al 1997
Blank 2005
Morris et al 2005
Nelson & Baker 2005
Chesbrough 2006
Sarasvathy 2008
Chesbrough 2010
McGrath 2010
Sosna et al 2010
Osterwalder & Pigneur 2010
Schreyögg & Sydow 2010
Cavalcante et al 2011
Huber 2011
Ries 2011
Blank & Dorf 2012
EXPERT REVIEW TO SYNTHESIZE A HIGH-LEVEL PROCESS OF BMI
1960s 1970s 1980s 1990s 2000s 2010s
BM
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P6: CAPABILITY TO CHANGE (+)
BUSINESS MODEL
CHANGE SUCCESS
P7: Commitmentofsenior management (+)
P8: Involvementofmiddle management(+)
P9: Involvementofemployees (+)
P10: Change processimplementation (+/-)
P11: Introduction of new technology (+/-)
EXECUTE BUSINESS MODEL
CHANGE
BUSINESS
MODEL
SEARCH
BUSINESS
MODEL
P1: ENTREPRENEURIAL CAPABILITY (+)
BUSINESS MODEL
SEARCH SUCCESS
P2: Understanding environment(+)
P3: Presence ofentrepreneurial people (+)
P4: Commitmentofsenior management(+)
P5: Dedicating resources and funding (+)
IDENTIFIED BARRIERS AND DRIVERS
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SYSTEMATIC REVIEW TO IDENTIFY BARRIERS AND DRIVERS
QUERY
Business development “business development”
AND
(barrier* OR
obstacle* OR
break* OR
prevent* OR
imped* OR
slow* OR
fail*)
OR
(driv* OR
enabl* OR
facilitat* OR
speed* OR
accelerat* OR
fast OR
success* OR
succeed*)
Renewal / turnaround (firm OR compan* OR corporat* OR
organization* OR organisation* OR strateg*)
AND (renewal OR turnaround)
Corporate entrepreneurship (“corporate entrepreneurship” OR
intrapreneurship)
Organizational change (“organisational change” OR “organizational
change”)
Business model innovation/
change
“business model innovation” OR “business
model change” —
Initial list: 13,369 papers from 4 major databases (ABI Inform, Web of Science, Scopus, Business Source Complete)
Final list: 65 papers
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AGENDA
1. INTRODUCTION
Positioning and purpose
2. PAPERS
Business model innovation as a process (Paper 1)
Tracking business model change (Paper 2)
Trajectories of business model change (Paper 3)
Designing a process for tracking business model change (Paper 4)
3. CONCLUSION
So what and what’s next?
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PHD CANDIDATE
Theoretical point of departure
Not much progress since the first
calls to develop methods for
studying business model change
(Pateli & Giaglis 2004)
Analytical leaps in case studies
are usually shrouded in mystery,
depend on the individual
researcher, and are normally not
disclosed in publications
(Eisenhardt 1989; Fiss 2009;
Miles & Huberman 1984)
Activity-based view of the
business model (Amit & Zott
2001, 2013), value chain
concept (Porter 1985), typology
of business model change
(Cavalcante et al. 2011)
Contributions to knowledge base
Detailed guidance on systematic data collection and
processing to enable further analysis in case studies on
business model change (Pateli & Giaglis 2004) and case
studies in general (Eisenhardt 1989; Fiss 2009; Miles &
Huberman 1984)
Argumentation for the use of secondary data as a
sufficient source for tracking business model changes of
public firms, in line with existing practice in social
science (Scott 2006; Kuckartz 2014; Forster 2006)
Review of contemporary approaches to studying
business model change – advantages, limitations, data
sources, measures of business model change
Methodological approach
Systematic literature review of
the business model innovation
literature (43 papers) in an
attempt to understand the
methods used so far
Design science (implicit) –
creation of a methodological
artifact and trying it out on an
illustrative case of a rapidly
growing firm
Pragmatist philosophy of science
Contributions to management practice
Tracking the emerging strategies of competitors as input
to own strategy making
Benchmarking against the strategic peer group of firms
Assisting to determine a strategic fit in mergers and
acquisitions between the acquiring and the target firms
PAPER 2:
TRACKING BUSINESS MODEL CHANGE
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Five-step technique:
Step 1: Choose business model definition
Step 2: Collect relevant quotations
Step 3: Classify collected quotations
Step 4: Tabulate changes in activities
Step 5: Transform and visualize data
Illustrative case of a rapidly growing technology firm
(revenues CAGR 31% in 2007-2012)
Data: 7 years of reporting – 57 documents, 818 pages
(annual, half-year, quarterly reports and announcements to
the stock exchange)
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AGENDA
1. INTRODUCTION
Positioning and purpose
2. PAPERS
Business model innovation as a process (Paper 1)
Tracking business model change (Paper 2)
Trajectories of business model change (Paper 3)
Designing a process for tracking business model change (Paper 4)
3. CONCLUSION
So what and what’s next?
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SERGEJS GROSKOVS
PHD CANDIDATE
Theoretical point of departure
A firm’s life cycle classically
follows stages of introduction,
growth, maturity and decline
(Utterback & Abernathy 1975)
Rapidly growing firms contribute
disproportionately to new job
creation (Birch & Medoff 1994)
Literature on high-growth firms
describes a variety of
antecedents and consequences
of growth, but stays surprisingly
silent about the role of business
model innovation
Business model innovation
literature focuses either on
startups or on mature firms with
the latter receiving significantly
less attention (Demil et al. 2015)
Contributions to knowledge base
Adding to the debate on how growing ventures can
plan successful strategies (Phelps, Adams & Bessant
2007) by suggesting three possible directions, which
exhibit ways out of the stability of business models
during periods of rapid growth when efficiency and
predictability are normally sought after to scale up
operations (Doz & Kosonen 2008, 2010)
Trajectory 1 – “enhancing the core” – somewhat similar to other
change types/patterns/themes (Cavalcante et al. 2011; Linder &
Cantrell 2000; Siggelkow 2002; Zott & Amit 2010; Demil et al. 2015)
Trajectory 2 – “unlocking the nucleus” – somewhat similar to finding
new product/market opportunities (Cardozo et al. 1993; Herbert &
Deresky, 1987), but the idea that the new business is to be found
within the already conducted activities is new and seems powerful
Trajectory 3 – “expanding beyond the core” – echoed by a recent
paper by Bertels, Koen & Elsum (2015)
The three trajectories are available for future empirical
studies aiming e.g. to test their links to performance
outcomes such as revenue growth
Methodological approach
Retrospective longitudinal case
study of a rapidly growing firm,
based on the analysis of public
reports, news and interviews
Data analysis follows a
previously developed technique
(see Paper 2) and further refines
the final steps to enable the
discovery of high-level
trajectories of business model
change
Interpretivistic with elements of
hermeneutic and grounded
theory approach to analyzing
text, facilitated by the data
transformation and visualization
technique
Contributions to management practice
Three strategic trajectories of business model change as
options to consider when planning for growth
PAPER 3:
TRAJECTORIES OF BUSINESS MODEL CHANGE
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FOCAL FIRM
Tesla Motors is a young rapidly growing firm in the
automotive industry; it focuses on the design and
manufacturing of fully electric vehicles.
Tesla Motors was founded in 2003 and to date (beginning
of 2015) has introduced two vehicle models – the Roadster
and the Model S. The company is headquartered in
California and sells its vehicles over the internet directly to
end consumers in North America, Europe and Asia.
Since 2012, the company has had a manufacturing plant in
California, and in 2014 it started building a giant battery
factory in Nevada. The company also runs its own network
of stores/galleries, service centers, and chargers.
Additionally, the company designs, develops and sells
electric powertrains and components as well as sells
regulatory emission-related credits to other automakers.
To identify a case for this study, I used the Orbis database
to find the biggest among the young rapidly growing firms.
“Young rapidly growing firm” – a firm of no more than 10
years of age that has increased its revenues at the rate of
at least 50% each year for a period of 3 consecutive years.
48 such firms among US listed public companies. The 2013
sales figures from USD 0.3 mio to USD 2,013 mio.
The firm that achieved the highest level of revenues was
Tesla Motors Inc. Compound annual growth rate 158% in
2010-2013 (and 450% since first sales in 2007).
The high absolute sales figure makes the case especially
interesting because it signifies the scale of the firm’s
operations where a certain level of complexity and
possible changes in the business model may be found.
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DATA AND THE ANALYTICAL TECHNIQUE
Data includes 76 annual, quarterly and current reports (3,671 pages),
covering the firm’s business activities in 2007–2014, retrieved from the
EDGAR database of the US Securities and Exchange Commission
Analysis follows a specially developed analytical technique (see
Paper 2) based on qualitative content analysis of public information:
Step 1: Choose business model definition
Step 2: Collect relevant quotations
Step 3: Classify collected quotations
Step 4: Organize data
Step 5: Transform and visualize data
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STEP 1: CHOOSE BUSINESS MODEL DEFINITION
The business model is defined as a set of activities (core business processes) that the
focal firm and its collaborators repeatedly conduct to transform inputs (raw materials,
components, ideas etc.) into an output (a value proposition for a specific customer
segment). Cf. Zott & Amit (2010, 2013), Cavalcante, Kesting & Ulhøi (2011)
OTHER FIRM’S BUSINESS MODEL OTHER FIRM’S BUSINESS MODEL
FOCAL FIRM’S BUSINESS MODEL
OTHER
FIRM’S
ACTIVITY
OTHER
FIRM’S
ACTIVITY
OTHER
FIRM’S
ACTIVITY
OTHER
FIRM’S
ACTIVITY
FOCAL
FIRM’S
ACTIVITY
FOCAL
FIRM’S
ACTIVITY
FOCAL
FIRM’S
ACTIVITY
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STEP 2: COLLECT
RELEVANT QUOTATIONS
Doc Pg Y Q ID Quotation Set Activity Subactivity GOV CON STR = == + -- =+ =- =+-
20120215
current 7 2011 Q4 166
During the quarter, we opened three New Design stores in Bellevue, WA, Chicago, IL and Newport Beach, CA, and a Tesla Gallery
in Houston, TX. We now have stores or galleries in 20 locations globally. 8:M&S
Market
vehicles/brand
Manage
stores/galleries - x - - x - - - - -
20120215
current 7 2011 Q4 167
Vehicle development and factory preparation remain on track to support our goal of initial Model S deliveries by July of this year.
Almost 100% of the factory equipment needed to manufacture Model S is now in place. [..] We expect to complete building our Beta
vehicles and start building Release Candidate vehicles in the first quarter. During this process we are continuing to fine-tune our
production processes and incorporate a higher percentage of production-intent components into the cars. 6:O
Manufacture
vehicles Manufacture vehicles - x x - - - - - - x
SOURCE ELEMENT CHANGE TYPE (SUBACTIVITY)EVENT VALUE CHAIN
Collected 333 relevant quotations
from 3,671 pages of reports
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STEP 3: CLASSIFY COLLECTED QUOTATIONS
Classified all quotations into:
9 sets of activities
(Porter’s value chain)
24 activities
(determined inductively)
58 subactivities
(determined inductively)
Doc Pg Y Q ID Quotation Set Activity Subactivity GOV CON STR = == + -- =+ =- =+-
20120215
current 7 2011 Q4 166
During the quarter, we opened three New Design stores in Bellevue, WA, Chicago, IL and Newport Beach, CA, and a Tesla Gallery
in Houston, TX. We now have stores or galleries in 20 locations globally. 8:M&S
Market
vehicles/brand
Manage
stores/galleries - x - - x - - - - -
20120215
current 7 2011 Q4 167
Vehicle development and factory preparation remain on track to support our goal of initial Model S deliveries by July of this year.
Almost 100% of the factory equipment needed to manufacture Model S is now in place. [..] We expect to complete building our Beta
vehicles and start building Release Candidate vehicles in the first quarter. During this process we are continuing to fine-tune our
production processes and incorporate a higher percentage of production-intent components into the cars. 6:O
Manufacture
vehicles Manufacture vehicles - x x - - - - - - x
SOURCE ELEMENT CHANGE TYPE (SUBACTIVITY)EVENT VALUE CHAIN
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STEP 4: ORGANIZE DATA
Organized all quotations into 18 diagrams,
one per each reporting quarter
The visual organization of the diagrams
largely follows the guidelines of the
industry standard notation for business
process modeling (BPMN)
Printed as A0-size posters, hung on the
walls and tried to makes sense
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STEP 5: TRANSFORM
AND VISUALIZE DATA
Reduced all data to
one diagram
Continued thinking,
trying to understand,
find meaning…
How exactly was Tesla
Motors’ business model
changing, at a higher
level of abstraction?
ELECTRICVEHICLES(EV)
DEVELOPMENT
PROJECTS
SALES/SERVICENETWORK
FINANCIAL
SERVICES
REGUL
CREDITS
RoadsterLeasing
Power-
trainStores
Service
centers
RngersRVGModelSModelXModelIII
Super-
chargrs
WebZEVetc.
Battery
packs
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct
= R&D
+ Pre-Sell
= R&D/Pre-Sell/Produce
+ Deliver/Sell/Service
+ Sell/Deliver –
= R&D/Service
– Produce/Deliver/Sell
+ Sell/Deliver
= R&D
+ Pre-Sell
= R&D/Pre-Sell
+ Produce/Deliver/Sell/Service
+ R&D (?)
+ Service EVs
= R&D/Pre-Sell
+ Produce
= R&D
+ Produce
= R&D/Produce
+ Sell/Deliver
+ Sell (Banks)
+ Sell/Deliver
+ Sell/Service EVs = Sell EVs
– Service EVs
+ Service EVs = Service EVs
+ Sell EVs
= R&D (?)
+ Sell Access
= Pre-Sell
=+ R&D (Toyota)
=+ R&D (Factory)
+ R&D (?)
+ R&D (?)
+ R&D (?)
= Produce/Sell/Deliver
=+ R&D (Factory w/Panasonic)
+ R&D
+ R&D = R&D/Sell/Deliver
+ Market
+ Pre-Sell EVs
= R&D/Pre-Sell/Deliver/Sell/Service
=+– Produce
+ R&D = Produce/Sell/Deliver
=+ R&D (Panasonic)
= R&D
+ Produce
+ Earn/Sell = Sell
+ Earn
= Sell
– Earn
= R&D/Produce
+ Sell/Deliver
Additionofanewactivitysettoabusinessmodel
Additionofanewactivitytoanactivityset
Removalofanactivityfromanactivityset
Continuationofanactivity
Additionandremovalofsub-activitiesto/fromanactivity
Removalofanactivitysetfromthebusinessmodel
Formationofanactivitysetleadingtothefirstdelivery
Formationofanactivitysetafterthefirstdelivery
+Sell
–Sell
+
=Sell
=+–Sell
–
= Pre-Sell
=+ R&D (Daimler)
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TESLA’S TRAJECTORIES
OF BM CHANGE
Three strategic trajectories of
business model change:
Enhancing the core business model
“Unlocking the nucleus” of the core
business model
Expanding beyond the core
business model
Unlock
new product
Enhance
core
Unlock
new market
Unlock
new market
Unlock
new market
UNLOCKINGTHENUCLEUSENHANCINGTHECORE
Unlock
new product
Unlock
new product
Unlock
new market
Enhance
core
?
?
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Enhance
core
Unlock
new market
UNLOCKINGTHENUCLEUSENHANCINGTHECORE
Unlock
new product
EXPANDINGBEYONDTHECORE
Add
unrelated
product
Unlock
new market
TRAJECTORIES OF CHANGE
Enhancing the core
…adding new complementary activities, i.e. those that are vital
for additional sales of the core product (electric vehicles) and
add up to the totality of customer experience (own
sales/service network, financial services)
“Unlocking the nucleus”
…commercializing those activities that the firm is already
conducting and that are of value to other markets (powertrains
and batteries for aspiring EV manufacturers, regulatory credits
for auto manufacturers who are not selling enough EVs)
Expanding beyond the core
…expansion into other businesses by adding unrelated activity
sets with the resulting new product outputs for new markets;
such a trajectory would mark the firm’s evolution towards
becoming a diversified conglomerate (logical inference, not
based on case data)
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AGENDA
1. INTRODUCTION
Positioning and purpose
2. PAPERS
Business model innovation as a process (Paper 1)
Tracking business model change (Paper 2)
Trajectories of business model change (Paper 3)
Designing a process for tracking business model change (Paper 4)
3. CONCLUSION
So what and what’s next?
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Theoretical point of departure
Lack of normative guidance as
to how to design a process of
revising KPIs, incl. those related
to business model change
Five theory-inspired design
guidelines distilled from the
relevant literature streams:
Process innovation – operations
mgmt (e.g. Harry 1998; Grover et al.
1993; Womack et al. 1990 ), design
thinking (e.g. Fraser 2007; Liedtka
2000), co-design and participatory
innovation (Sanders & Stappers
2008; Buur & Matthews 2008)
Performance management –
balanced scorecards (Kaplan &
Norton 1992), development of KPIs
(e.g. Parmenter 2007, 2015)
Tracking business model change –
see Paper 2
Contributions to knowledge base
Design science research project compliant with DSR
guidelines (Hevner et al. 2004); created two artifacts:
Instantiation – a key management process of revising KPIs on an
ongoing basis in an organization operating in a dynamic industry
Method – how KPI revision processes can be designed from the
bottom up (a variation of the design thinking process)
Elaboration of the initial theory-inspired guidelines:
Process innovation – balance stakeholder involvement in co-
design with their interest to invest energy/time (new)
Performance management – ensure diversity of KPIs; revise ad-hoc
during the calendar year (confirmed)
Tracking business model change – include BM-related KPIs on the
mgmt scorecard, rather than track separately; design concrete
initiative-specific metrics through the proposed process (new)
Methodological approach
Design science research – 12
months on site as a “researcher-
in-residence” (Marshall et al.
2014) in a real-life organization
to create an improved process of
revising KPIs
Data: 28 internal documents, 32
employee interviews, 4 design
verification sessions, literature
review of 45 papers, own
research journal
Pragmatist philosophy of science
Contributions to management practice
Concrete proposition what a key strategic process of
monitoring progress, including towards a new business
model, can look like in a specific organization
More general methodological guidance for the design of
such processes in other organizations
PAPER 4:
DESIGNING A PROCESS FOR
TRACKING BUSINESS MODEL CHANGE
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SERGEJS GROSKOVS
PHD CANDIDATE
FOCAL FIRM AND ITS PROBLEM SITUATION
The focal firm is a subsidiary of a large global corporation – “TechCorp” – operating in the ICT industry.
Geographically and culturally, the firm is located in Europe and employs staff of local and international
origin, whereas the global headquarters are based elsewhere.
The business environment in the ICT industry is generally characterized by rather low technological
barriers of entry and shifting customer preferences, which collectively creates a permanent threat of
new entrants and substitutes that can address the same need in a new way and take share from the
present market leaders.
The specific problem situation that the focal firm faced is basically a way to cope with changing
business conditions by drawing managers’ attention to the key drivers of performance, where these
very key drivers need to be rethought and updated on a regular basis. The process initiated by the
corporate headquarters has resulted in the production of KPIs of uncertain utility to the actual everyday
management of the local subsidiary.
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SERGEJS GROSKOVS
PHD CANDIDATE
RESEARCH PROCESS
The research project took about 12 months and
employed a variety of data sources.
My inquiry process consisted of four phases:
(1) engagement with the focal firm
(2) problem understanding
(3) (co-)designing a new KPI revision process
(4) final reflection
Firm’s annual strategic
management cycle
Inquiry phase Data sources
Strategy planning for
three yearsQ2
(1) Engagement with
the focal firm
Internal documents (28 documents
related to change initiatives)
Interviews (16 employees, total of
10 hours and 9 minutes)
Daily interaction with employees
Q3 Budget planning for next
year
Q4 KPI revision
Q1 (2) Problem
understanding
Interviews (16 employees, total of 7
hours and 12 minutes)
(3) (Co-)designing a
new KPI revision
process
Literature review (45 papers)
Formulation of process
requirements (1 document)
Verification of the emerging design
with stakeholders (5 one-to-one
and group meetings)
Strategy planning for
three years (next cycle)Q2
(4) Final reflection Research journal (21,000+ words)
Write-up of this paper
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SERGEJS GROSKOVS
PHD CANDIDATE
RESEARCH PROCESS, PHASE 1
The first phase of immersion in the field went on for 6 months.
During this time I studied internal documents related to business model change and interviewed 16
employees involved in these initiatives – managers from business development, product, customer
service, and marketing functions as well as senior management.
My primary goal was to retrieve historical information on each of the recent initiatives that are likely to
exhibit changes in the business model of the firm in the near future. For that, I recorded and transcribed
all interviews, and organized the essential insights into themes.
A positive side effect of these interviews was also getting to know and building trust with the people
across the organization, which proved useful for the future intervention.
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SERGEJS GROSKOVS
PHD CANDIDATE
RESEARCH PROCESS, PHASE 2
Management recognizing potential issues with the KPI revision
marked the beginning of the second phase.
Over 2 weeks I conducted targeted interviews with 16 of the
20 employees who were involved in the latest KPI revision
process during the prior 3 months. The interviewees included
managers from business development, product, finance, and
marketing functions as well as senior executives.
The main purpose of these interviews was to understand the
individual experiences of the KPI revision process and to invite
personal evaluations of its outcomes, thus paving the way for
the formulation of user requirements for a better process.
All interviews were recorded and key points distilled into a set
of 30 requirements for a new design responding to the issues.
27 Participants experienced that some KPIs are quite
similar and questioned their necessity
…end with a set of diverse
KPIs to comprehensively
measure the business
28 Participants know that some metrics are more important
than others, but it is not reflected in the scorecard
…end with KPIs that are
prioritized/ ordered
29 Participants experienced having ended up with some KPIs
covering broad areas of responsibility, multiple business
units and revenue streams, and lost track of the
underlying components
…end with traceable KPIs, if they
are aggregates, or
disaggregated KPIs that are
owned by single business units
30 Participants monitor some important but highly volatile
KPIs and want to avoid unnecessary discussions with
management, who do not necessarily understand the BU;
they also monitor lots of very specific KPIs on a daily
basis that are of no importance to general management
…end with some KPIs away from
the official scorecards
Experienced problem Therefore, the new process
must…
Process flow related requirements
1 Participants experienced lack of clarity and transparency
about who is in charge of the process, who initiates and
who approves new KPIs, what the steps and the
deadlines are
…follow a defined step-by-step
procedure (who delivers what to
whom and when) or include a
strong project leader (if the
process is not well-described)
2 Participants experienced Friday night requests with
deadlines on the same weekend, also shrinking deadlines
…include realistic deadlines for
requesting input
3 Participants experienced communicating on a number of
levels, lack of clarity, misunderstandings, changes
throughout the process
…include a series of alignment/
clarification meetings between
the central organization, local
management, and business unit
leaders
Experienced problem Therefore, the new process
must…
Process flow related requirements
1 Participants experienced lack of clarity and transparency
about who is in charge of the process, who initiates and
who approves new KPIs, what the steps and the
deadlines are
…follow a defined step-by-step
procedure (who delivers what to
whom and when) or include a
strong project leader (if the
process is not well-described)
2 Participants experienced Friday night requests with
deadlines on the same weekend, also shrinking deadlines
…include realistic deadlines for
requesting input
3 Participants experienced communicating on a number of
levels, lack of clarity, misunderstandings, changes
throughout the process
…include a series of alignment/
clarification meetings between
the central organization, local
management, and business unit
leaders
36. 6 JANUARY 2017
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SERGEJS GROSKOVS
PHD CANDIDATE
RESEARCH PROCESS, PHASE 3
After the distillation of requirements from the interviews, the
third phase proceeded with the actual artifact creation – a
new process design for revising the KPI scorecard – and its
verification with organizational stakeholders.
While thinking about the first iteration of a new KPI revision
process, I consulted the literature and formulated a set of
preliminary design guidelines.
This phase took 3 months to complete and included 4
interactions with stakeholders.
LITERATURE ON PROCESS INNOVATION:
Theory-inspired design guideline 1: An opportunity
should be provided for all employees concerned to co-
design the metrics during the development of KPIs.
LITERATURE ON PERFORMANCE MANAGEMENT:
Theory-inspired design guideline 2: A diversity of
perspectives on the metrics to be measured should be
ensured during the development of KPIs.
Theory-inspired design guideline 3: Ad-hoc revisions of
KPIs should be built into the process that follows the
initial development.
LITERATURE ON BUSINESS MODEL CHANGE:
Theory-inspired design guideline 4: In a dynamic
business environment, business model change as a
potent approach to improving firm performance
should be monitored by management.
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SERGEJS GROSKOVS
PHD CANDIDATE
RESEARCH PROCESS, PHASE 3
Using the theory-inspired design
guidelines (deduction from
theory) and the requirements
collected from process
participants (induction from
data), I created a new process
diagram.
Used BPMN and kept words to a
minimum.
1) PROPOSE KPIs 2) DISCUSS KPIs 3) TEST TRACKING 4) AGREE ON KPIs 5) AUTOMATE 6) STOP TRACKING
BUSINESS UNIT – LEVEL 2/3 KPIs
COUNTRY – LEVEL 1/2 KPIs
GROUP – LEVEL 1 KPIs
Analytics
General
Management
General
Management
Analytics
Team Leads
Individual
Contributors
D
B
C
A
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SERGEJS GROSKOVS
PHD CANDIDATE
RESEARCH PROCESS, PHASE 3
Evaluated the emerging design with the four groups of stakeholders identified in collaboration with the
senior manager who was in charge of the previous KPI revision process, and implemented the
following changes:
Analytics department: corrected the responsibilities of certain actors, de-cluttered and split the diagram into four
flows, each in its own drawing
Business units: added short descriptive texts and renamed some process stages to further clarify the meaning
Projects sponsors: created a short focused slide deck including the business case for the general management
General management: secured the approval of the local general management
39. 1) PROPOSE KPI 2) DISCUSS KPI 3) TEST TRACKING 4) AGREE ON KPI 5) TRACK KPI 6) STOP TRACKING
BUSINESS UNIT – LEVEL 2/3 KPIs
COUNTRY – LEVEL 1/2 KPIs
GROUP – LEVEL 1 KPIs
B
C
A
D
Outcome:
Idea for a new KPI is loosely
formulated
Lead time (max):
Not defined
Outcome:
Alignment on the business logic and
tentative KPI definition is reached
Lead time (max):
2 weeks
Outcome:
Techinical possibility to track the
proposed KPI is established
Lead time (max):
1 week
Outcome:
Final alignment on the KPI definition
is reached, given the technical
possibility
Lead time (max):
1 week
Outcome:
KPI reporting is launched as part of
the regular scorecard reporting
Lead time (max):
3 days
Outcome:
KPI reporting is stopped as it
becomes irrelevant due to changes in
business
Lead time (max):
2 days
WHEN A KPI IS PROPOSED BY GROUP GENERAL MANAGEMENT (A)…
8Sergejs Groskovs | 13 May 2016
Business Unit
Lead
Individual
Contributor
Group Analytics
Group General
Management
Country General
Management
Country
Analytics
The process can be
iniated any time of the
year as per business
need. The initiator of a
new KPI leads the
process to completion.
BUSINESS UNIT – LEVEL 2/3 KPIs
COUNTRY – LEVEL 1/2 KPIs
GROUP – LEVEL 1 KPIs
Business Unit
Lead
Individual
Contributor
Group Analytics
Group General
Management
Country General
Management
Country
Analytics
A
B
LEVEL1KPIsONLY
LEVEL1KPIsONLY
C
D
WHEN A KPI IS PROPOSED BY COUNTRY GENERAL MANAGEMENT (B)…
1) PROPOSE KPI 2) DISCUSS KPI 3) TEST TRACKING 4) AGREE ON KPI 5) TRACK KPI 6) STOP TRACKING
Outcome:
Idea for a new KPI is loosely
formulated
Lead time (max):
Not defined
The process can be
iniated any time of the
year as per business
need. The initiator of a
new KPI leads the
process to completion.
Outcome:
Alignment on the business logic and
tentative KPI definition is reached
Lead time (max):
2 weeks
Outcome:
Techinical possibility to track the
proposed KPI is established
Lead time (max):
1 week
Outcome:
Final alignment on the KPI definition
is reached, given the technical
possibility
Lead time (max):
1 week
Outcome:
KPI reporting is launched as part of
the regular scorecard reporting
Lead time (max):
3 days
Outcome:
KPI reporting is stopped as it
becomes irrelevant due to changes in
business
Lead time (max):
2 days
BUSINESS UNIT – LEVEL 2/3 KPIs
COUNTRY – LEVEL 1/2 KPIs
GROUP – LEVEL 1 KPIs
LEVEL2KPIsONLY
LEVEL2KPIsONLY
WHEN A KPI IS PROPOSED BY BUSINESS UNIT LEAD (C)…
10Sergejs Groskovs | 13 May 2016
The process can be
iniated any time of the
year as per business
need. The initiator of a
new KPI leads the
process to completion.
1) PROPOSE KPI 2) DISCUSS KPI 3) TEST TRACKING 4) AGREE ON KPI 5) TRACK KPI 6) STOP TRACKING
Outcome:
Idea for a new KPI is loosely
formulated
Lead time (max):
Not defined
Outcome:
Alignment on the business logic and
tentative KPI definition is reached
Lead time (max):
2 weeks
Outcome:
Techinical possibility to track the
proposed KPI is established
Lead time (max):
1 week
Outcome:
Final alignment on the KPI definition
is reached, given the technical
possibility
Lead time (max):
1 week
Outcome:
KPI reporting is launched as part of
the regular scorecard reporting
Lead time (max):
3 days
Outcome:
KPI reporting is stopped as it
becomes irrelevant due to changes in
business
Lead time (max):
2 days
Business Unit
Lead
Individual
Contributor
Group Analytics
Group General
Management
Country General
Management
Country
Analytics
A
B
C
D
A
B
C
D
WHEN A KPI IS PROPOSED BY INDIVIDUAL CONTRIBUTOR (D)…
BUSINESS UNIT – LEVEL 2/3 KPIs
COUNTRY – LEVEL 1/2 KPIs
GROUP – LEVEL 1 KPIs
The process can be
iniated any time of the
year as per business
need. The initiator of a
new KPI leads the
process to completion.
Business Unit
Team Lead
Individual
Contributor
Group Analytics
Group General
Management
Country General
Management
Country
Analytics
1) PROPOSE KPI 2) DISCUSS KPI 3) TEST TRACKING 4) AGREE ON KPI 5) TRACK KPI 6) STOP TRACKING
Outcome:
Idea for a new KPI is loosely
formulated
Lead time (max):
Not defined
Outcome:
Alignment on the business logic and
tentative KPI definition is reached
Lead time (max):
2 weeks
Outcome:
Techinical possibility to track the
proposed KPI is established
Lead time (max):
1 week
Outcome:
Final alignment on the KPI definition
is reached, given the technical
possibility
Lead time (max):
1 week
Outcome:
KPI reporting is launched as part of
the regular scorecard reporting
Lead time (max):
3 days
Outcome:
KPI reporting is stopped as it
becomes irrelevant due to changes in
business
Lead time (max):
2 days
40. 6 JANUARY 2017
40
SERGEJS GROSKOVS
PHD CANDIDATE
RESEARCH PROCESS, PHASE 4
The inquiry included four design cycles. In each cycle, I built on the outcomes of the prior cycle, acted
on this plan and reflected on the learnings to proceed into the next cycle. Finally I reached a stage
when the new artifact design was accepted by the organization. This marked the completion of the
design project at the local level of the multi-subsidiary corporation.
For a design project to become a design science project, a truly “reflective practitioner” (Schön, 1983)
would ask, “What have I learned through this design project?” This question sets the stage for the
development of a normative guide, which other organizations facing similar problems in similar
contexts could use to guide actions.
Throughout the project, I kept a personal research journal where on a daily basis I recorded important
events, action plans and reflections. My research journal contains daily entries over 12 months and
totals more than 21,000 words. This journal, together with the present paper write-up, was helpful in the
fourth and final phase of reflection resulting in a step-by-step guide of how to create a better process
of revising KPIs in a multi-subsidiary organization operating in a dynamic industry.
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SERGEJS GROSKOVS
PHD CANDIDATE
RESEARCH PROCESS, PHASE 4
Outcome: A five-step guide to a “bottom up” approach to
designing a new KPI revision process
(5)
COMMIT
• Commit project
sponsors and
management to
ensure future
implementation
of the new
process, by
building a
justified business
case
(4)
DESIGN
• Design the new
process to
respond to
requirements, by
iterating design
drafts based on
feedback from
process
participants
(3)
REFLECT
• Reflect on
recorded
experiences and
literature to
formulate design
requirements, by
addressing each
concern with a
proposition for
improvement
(2)
EMPATHIZE
• Empathize with
process
participants to
understand their
individual
experiences of
the current
process, by
means of one-
to-one in-depth
interviews
(1)
ENGAGE
• Engage with the
organization to
understand the
business agenda
and build trust
with employees,
by temporarily
becoming a part
of the
organization
Compare: An example of a design
thinking process (Stanford’s d.school)
43. 6 JANUARY 2017
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SERGEJS GROSKOVS
PHD CANDIDATE
AGENDA
1. INTRODUCTION
Positioning and purpose
2. PAPERS
Business model innovation as a process (Paper 1)
Tracking business model change (Paper 2)
Trajectories of business model change (Paper 3)
Designing a process for tracking business model change (Paper 4)
3. CONCLUSION
So what and what’s next?
44. 6 JANUARY 2017
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SERGEJS GROSKOVS
PHD CANDIDATE
SO WHAT
The dissertation aimed to inform and improve the
management’s strategizing activities, when the
intended business development initiatives may
augment the existing business model:
Which trajectories of business model change can
management consider taking? (Paper 3)
How can changes in the (other firm’s) business model be
tracked via public data sources? (Paper 2)
How can the process of business model innovation be
conceptualized? What are the major factors inhibiting and
facilitating the process? (Paper 1)
How can management track the progress of their own firm’s
evolution towards a new business model? (Paper 4)
Strategy:
Which directions
to take?
Tactics:
Which initiatives
to implement?
KPIs:
How to track
progress?
Paper 3
Paper 4
Paper 2
Paper 1
45. Paper 1: Contributions
A higher-level
conceptualization of the
process of business model
innovation, grounded in
seminal ideas from
entrepreneurship and
organizational change,
providing an opportunity to
unify the few existing rather
different contributions – i.e.
Bucherer et al. (2012),
Cavalcante et al. (2011),
Morris et al. (2005),
Siggelkow (2002), Zott &
Amit (2015), Blank & Dorf
(2012)
Iterative cycles – in line with
Blank (2013), Zott & Amit
(2015), but challenging
linear staged process
models such as e.g.
Bucherer et al. (2012),
Morris et al. (2005)
Some of the key factors
that may influence the
successful outcome of the
process, for further research
Paper 2: Contributions
Detailed guidance on
systematic data collection
and processing to enable
further analysis in case
studies on business model
change (Pateli & Giaglis
2004) and case studies in
general (Eisenhardt 1989;
Fiss 2009; Miles &
Huberman 1984)
Argumentation for the use
of secondary data as a
sufficient source for
tracking business model
changes of public firms, in
line with existing practice in
social science (Scott 2006;
Kuckartz 2014; Forster
2006)
Review of contemporary
approaches to studying
business model change –
advantages, limitations,
data sources, measures of
business model change
Paper 3: Contributions
Adding to the debate on how growing
ventures can plan successful strategies
(Phelps, Adams & Bessant 2007) by
suggesting three possible directions,
which exhibit ways out of the stability of
business models during periods of rapid
growth when efficiency and
predictability are normally sought after
to scale up operations (Doz & Kosonen
2008, 2010)
Trajectory 1 – “enhancing the core” –
somewhat similar to other change
types/patterns/themes (Cavalcante et al.
2011; Linder & Cantrell 2000; Siggelkow
2002; Zott & Amit 2010; Demil et al. 2015)
Trajectory 2 – “unlocking the nucleus” –
somewhat similar to finding new
product/market opportunities (Cardozo et al.
1993; Herbert & Deresky, 1987), but the idea
that the new business is to be found within
the already conducted activities is new and
seems powerful
Trajectory 3 – “expanding beyond the core” –
echoed by a recent paper by Bertels, Koen &
Elsum (2015)
The three trajectories are available for
future empirical studies aiming e.g. to
test their links to performance
outcomes such as revenue growth
Paper 4: Contributions
Design science research
project compliant with DSR
guidelines (Hevner et al. 2004);
created two artifacts:
Instantiation – a key management
process of revising KPIs on an
ongoing basis in an organization
operating in a dynamic industry
Method – how KPI revision
processes can be designed from
the bottom up (a variation of the
design thinking process)
Elaboration of the initial
theory-inspired guidelines:
Process innovation – balance
stakeholder involvement in co-
design with their interest to invest
energy/time (new)
Performance management –
ensure diversity of KPIs; revise ad-
hoc during the calendar year
(confirmed)
Tracking business model change –
include BM-related KPIs on the
mgmt scorecard, rather than track
separately; design concrete
initiative-specific metrics through
the proposed process (new)
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SERGEJS GROSKOVS
PHD CANDIDATE
WHAT’S NEXT: BUILDING ON PAPER 1
Case studies
How can the specific drivers and barriers manifest themselves on the micro-level?
Which other factors in addition to those discovered in the broader literature may exist?
Action/design science research
How to minimize the influence of destructive forces?
Which steps practitioners (e.g. managers, consultants, business developers) might take to mitigate
the identified challenges?
Larger sample, quantitative studies
To what extent do these factors influence outcomes (e.g. completion of projects, performance)?
How do various industrial and organizational contexts impact the outcomes?
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SERGEJS GROSKOVS
PHD CANDIDATE
WHAT’S NEXT: BUILDING ON PAPER 2
Case studies
How can the patterns in sequencing additions and removals of activities differ across firms?
Why do business models of some firms change via similar trajectories while others evolve
differently?
Action/Design science research
How might the technique be further improved, e.g. to lower the cost of human work to collect and
organize the data?
What other techniques may be useful to facilitate analysis and pattern detection?
Larger sample, quantitative studies
What is the relationship between various business model change patterns (involving a variety of
configurations and sequences of activities) and firm performance (e.g. revenue, profitability)?
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SERGEJS GROSKOVS
PHD CANDIDATE
WHAT’S NEXT: BUILDING ON PAPER 3
Case studies
In which circumstances is it more beneficial to choose one strategy over another?
What are the outcomes of choosing to pursue some of the trajectories simultaneously?
What are the processes behind the decisions to add/remove specific activities in business models?
Action/design science research
How to implement particular business model change strategies in particular types of firms, given
the multitude of drivers and barriers that can impact the outcome of the process?
Larger sample, quantitative studies
Which of the discovered trajectories can lead to better financial performance?
How do the strategies among the focal firm and external stakeholders (i.e. partners, suppliers, key
customers, competitors) interact in the marketplace?
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SERGEJS GROSKOVS
PHD CANDIDATE
WHAT’S NEXT: BUILDING ON PAPER 4
Case studies
How does the proposed KPI revision process design influence the effectiveness and efficiency of
the process after implementation (e.g. in terms of total time spent, employee satisfaction, usefulness
of the metrics to the management of the firm)?
Action/design science research
How might the KPI revision process look like in other organizations adapting their business models
(e.g. in slower-paced industries, with different cultural composition of staff, with different
governance models)?
Larger sample, quantitative studies
How do different KPI systems promote or inhibit business model innovation?
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SERGEJS GROSKOVS
PHD CANDIDATE
WHAT’S NEXT: BEYOND THE DISSERTATION
Strategy-as-practice perspective
The strategy-as-practice literature defines its broad research parameters as studying practitioners
(those people who do the work of strategy), practices (the social, symbolic and material tools
through which strategy work is done), and praxis (the flow of activity in which strategy is
accomplished) (Jarzabkowski 2005; Jarzabkowski et al. 2007; Johnson et al. 2007; Whittington
2006) (www.strategy-as-practice.org)
Praxis, practices and practitioners of business model innovation
How is the business model shaped through the ongoing strategy and tactical work (praxis)?
How do specific practices (e.g. strategic planning, annual reviews, workshops, off-sites, frameworks,
initiatives, business cases) influence the emergence of a new business model?
How is the business model molded by the (groups of) individuals inside the organization and their
choices of actions?