Building Better Business Models for the Digital Economy

Supported by a £1 million grant from the EPSRC, and with match funding from Cass Business School, the Mack Centre at Wharton Business School and other sources, Professor Charles Baden-Fuller, Centenary Professor of Cass Business School and part of the CENTIVE team is leading an international team of experts to conduct cutting edge, industry focused research on how business models can be better designed, built and implemented to exploit the potential of digital technologies.

Sustainable advantage comes not only from new technologies, but from business models that have evolved and integrated with those technologies. Despite an emerging body of research on business models, we still lack a proper understanding of which models are best designed for any chosen technology. Other questions remain: what is the optimal timing for integrating business model thinking into the technological trajectory, and do established business models need to be fine-tuned - or even completely renewed - to align with new technologies as they emerge.

Many firms are strong in technology but underestimate the importance of co-designing business models that mobilise their technology. This lack of understanding hinders profitability.

Customer identification, value creation and monetisation are the elements that collectively define a business model and are vital for successful technology investment (in particular digital investment). This project will identify more precisely why appropriate business model adoption is key; what configurations of organisational practices that sum up to business model choice are suitable for which technologies and markets; when in a new technology's trajectory is the optimal moment for solving the business model question; and how managers can develop and introduce better business models into their organisations. These questions of why, what, when and how are of national economic importance, and vital to many businesses and organisations - both those on the edge of new technologies and in more traditional sectors that just use them.

We have assembled an international research team of senior scientists from leading business schools and social science departments located at City University London, Wharton, Grenoble, ETH Zurich, Sussex, Glasgow and LSE which include Professors Ian (Mac) MacMillan, Rahool Kapoor, Vincent Mangematin, Georg von Krogh, Paul Nightingale, Martin Kretschmer, Mary Morgan and Stefan Haefliger. Their work will be supported by a team of junior researchers located at Cass.

The project team will work on conceptual and practical agenda in parallel using a proven research design. This design involves building theory and collecting case based evidence at both firm and industry levels to tease out how the three business model elements - sensing, creating and monetising value - influence and are influenced by linking processes that both create interdependencies and drive performance. The theory elements will build on existing business model related research (such as Teece - 1986, McGrath and MacMillan - 2000, Amit and Zott - 2001, Baden-Fuller and Morgan - 2010, Casadesus-Masanell and Ricart - 2010, Kapoor and Lee - 2012), and link it to deeper philosophical thinking on the nature of models and how they are used in social science (Morgan, 2012).

The empirical work will involve undertaking sector studies to examine the co-evolution of technology and business models across important economic sectors (such as software, digital entertainment, pharmaceuticals and satellites). From this and other sources we will document more than 50 cases of successful (and less successful) business model design and execution. Some of these cases will explore the 'messy' elements of how firms go about introducing business model thinking (such comparing Google's and Yahoo's development paths) to identify more precisely the factors that determine success and failure in different new technology environments. Other cases will catalogue examples of established business model designs in different contexts, tracing their economic consequences, and harvesting hints and possibilities for future endeavours. We expect our first cases to be available quite soon. We will build longer-term capacity along the whole spectrum of the research community to ensure better understanding and integration of the business model agenda into that of technology development.

A major element of our work will be an annual week-long research training workshop to engage with UK researchers involved in RCUK digital and other technology programmes, and their international counterparts. These seminars will allow for the active dissemination of latest thinking and development of leading ideas among juniors and seniors from across the business model and technology research communities. The project will also devise some greater in-depth training on conceptual and empirical tools for groups of junior researchers - utilizing the resources of Cass and our partners. We will engage with executives in established technology companies by running sector specific seminars and workshops tailored to specific firm needs, as well as making our cases and related tool kits widely available. We will work closely with existing communities to spread understanding among new start-ups and emerging firms, utilising the support of the Cass Entrepreneurship Fund, a £10 million venture capital pool. We will also liaise with the City of London financial community and with UK and EU policy makers, running high level seminars to address important strategic issues. We already know that boards of directors, policy advisors and financial institutions influence business model choice - these communities need to understand how the business model agenda has to interact with technology development if the firms are to be profitable and if society is to get the best from new technological developments.

Further updates will be posted here on Cass Knowledge, and on Cass Business School's CENTIVE website. CENTIVE is the Centre for New Technologies, Innovation and Enterprise. It focuses its research on three sectors vital to the UK economy: cultural industries, information and communication technology, and biotechnology.