because the business idea does not fit into the existing business model. The potential for these spin off companies is enormous;
with different business models find profitable, external paths to the market for an idea Chesbrough, 2006.
external IP to fuel their own business model and to speed up and nurture their own research engine.
valuable add-on to the current business model of firms To conclude, open innovation in firms can take many different forms.
Open business models: How to thrive in a new innovation landscape. Harvard Business school Press: Boston, MA
business models ï nd proï table, external paths to the market. The decision of ï rms to license out depends on
one†s business model and to speed up and nurture internal research engines To conclude, in comparison with the closed model, the
-nology fusion, new business models and knowledge leveraging. We argue that especially the ï rst three
Open Business models: How to Thrive in a New Innovation Landscape. Harvard Business school Press, Boston, MA
business models ï nd proï table, external paths to the market. The decision of ï rms to license out depends on
one†s business model and to speed up and nurture internal research engines To conclude, in comparison with the closed model, the
-nology fusion, new business models and knowledge leveraging. We argue that especially the ï rst three
Open Business models: How to Thrive in a New Innovation Landscape. Harvard Business school Press, Boston, MA
2 Business model innovation in low-tech SMES...14 2. 1. Business model innovation in SMES to sidestep the commodity trap...
14 2. 2. The role of the initial business concept or vision...15 2. 3. Innovate beyond products and services:
3 A dynamic view on business model innovation...37 3. 1. Stepwise discovery of new business models...
37 3. 2. The process of discovering new applications...40 3. 3. Diversify or not?..
4 How SMES build new business models through open innovation?..54 4. 1. Benefiting from open innovation:
Business model innovation at Curana...38 Figure 6: Case Innovacelli...42 Figure 7: Case Jaga...47
business model. A major liability is that small firms lack the required internal financial resources and technical capabilities.
business model to seize new business opportunities and boost profitability. Their limited financial and human resources and the lack of technological capabilities force them to look for different types of
business models are crucial for unlocking the latent value of new or existing technologies 6 Technology per se has no economic value;
companies develop and commercialize it through a particular business model. In all our interviews managers emphasized that business models play a primary role in SMES in low-and medium-tech
industries, not the technology. Most SMES we examine in this report did not have internal technological competencies,
but they set up new business models to leverage commercial value from technologies that existed in other organizations
A business model has two important functions: it must describe the way in which the company creates
analyzed using a business model framework. Despite the fact that the term â€oebusiness model†is used widely in the business world, academic research is relatively sparse,
because researchers define business models in different ways 8 Applying existing business model innovation) frameworks to low-tech SMES is not trivial
because the open innovation network is at the core of the business model. The existing business model (innovation) frameworks do not pay attention
to strategic partners or they incorporate them as a module in the model without analyzing interactions
with other modules in the framework. We will examine in detail, therefore, how a business model framework must be adapted to fit business model innovations based on open innovation in low-tech
SMES. Examining which implications our findings have for the theoretical modeling of business model innovation, which has received significant attention among strategy scholars,
is beyond the scope of this report Business model innovations based on an open innovation imply that there are cost-increasing effects
of technology sourcing and technology co-development 9 The new revenue streams resulting from business model innovation must be balanced against the costs of setting up
and managing the external network of partners. Moreover, SMES have limited financial means to seize new business
opportunities. Accordingly, they may have to work in several consecutive steps, which in some cases look like a bootstrapping strategy
Business models take thus a central place in analyzing open innovation in small firms. This has
In Chapter 2, we analyze the business model innovations of the SMES we interviewed. First, we pay attention to how small firms develop strategies to create value
firms can appropriate part of the value they create with the new business model. Appropriating value can be non-trivial for a small company,
new ways to gain significantly more profits with the new business models. In Chapter 3, we enter the
dynamics of business model innovation. The firms that have reached the most spectacular results with their business model innovation realized this in several consecutive steps.
In SMES, new businesses are developed stepwise using new product projects as tools to move forward.
2 Business model innovation in low-tech SMES Analyzing the open innovation activities of SMES in traditional industries starts with a broader analysis
of the business model innovation of those companies. The role of open innovation can only be
companies we interviewed sidestep the commoditization pressure by changing their business model Next, we focus on the initial entrepreneurial act to initiate such a business model change.
In section 2. 3, we look at how several companies transitioned from products or services to experiences in their
to accomplish these major business model changes 2. 1. Business model innovation in SMES to sidestep the commodity trap
Many SMES face severe commoditization pressure in their markets. Just as each product or technology has a li fe cycle,
As the burgeoning management literature on business model innovation has shown during the last decade, SMES can take different approaches to reshaping offerings and seizing new growth
A business model defines the way companies deliver value to a set of customers at a
attractiveness and financial viability of a business model erodes over time as price competition starts to dominate.
Companies that are successful in business model innovation gain a unique position in the competitive space that is difficult for others to imitate.
different business model to exploit. Each in their own way, many other management authors have suggested methods and models to implement business models and business model innovations
SMES that successfully sidestepped the commodity trap have changed their existing business model successfully to deliver more value for the customer at a profit.
In contrast with large firms, SMES 15 sometimes develop their business model in a rather intuitive way, based on strong but informed vision
conviction or basic insight. We observed in all the SMES we interviewed that open innovation is always
overall strategy or business model. We thus explore the strategy of innovating SMES in this and the
It is the business model that determines the economic value of a new technology by indicating how customer value will be created
but when isolated from SMES€ strategies and business model development, they are useless in explaining why
Developing a start-up†s business model or reinventing the existing strategy of an SME usually starts
In other cases, it takes more time to articulate the customer value proposition of a new business model
It took a stepwise approach of more than three years before the business model for a functional quilt was developed in great detail.
Curana (see p 24) is another example that illustrates how developing a new business model is a
and developing a new business model Sometimes, the business model is straightforward, as we have seen in the case of Isobionics.
This represents an instance when the company is replacing existing product offerings with a new one at
thus far examined several ways to develop a business model. Some companies, such as Devan Chemicals, start with key concepts that act as fundamental guidelines for many years.
but not for game-changing and highly profitable business model innovations 18 Next, business models cannot be anticipated fully in advance
and articulating them may take time Innovative business models are sometimes hard to articulate because too many questions remain
unanswered. The needs of the target customer might not be explicit. Or, it might not be clear how
Game-changing business model innovations cannot be planned analytically because many of the variables relevant to their success are unknown at the o utset.
have to experiment to discover new business models. Moreover, experimentation is path-dependent that is, early experiments and choices shape the trajectory for to evolve the business mode further
business model 19 Figure 1: Case Devan 20 21 22 2. 3. Innovate beyond products and services:
DNA Interactif Fashion proposed a new business model for fashion shopping. It changes shopping for fashion goods into a completely new experience for the customer.
So, far we have focused on how small companies develop new business models and how this move
the business concept and the potential of turning business models that are product and service oriented into more profitable business models based that generate experiences for customers.
The role of open innovation is not in business model innovation is discussed not here. This is the subject of
chapter four in which the role of open innovation in new business development is analysed in detail
Curana innovated its business model primarily in response t o these shifts in the marketplace. In fact, Curana changed its business model
and embraced an ODM model and later a proactive design strategy as a competitive driver.
business model innovations in SMES. Sometimes, new regulations may increase fixed costs of doing business, which drives out players that are too small to amortize the costs.
business models to revamp or grow their business. However, we must also look at value drivers to
explain successful business model innovations in SMES. Small firms can benefit from having several advantages compared to large companies depending on the activities that drive profits in different
developing a new business model. A business model defines the way a company delivers value for a specific customer group at a profit.
The value of open innovation activities in SMES can only be estimated correctly within the context of their broader strategic objectives
ï New strategic objectives of a company should be analyzed via a business model innovation framework ï All firms have in common that their efforts are focused on creating value for a particular target
and highly profitable business models will usually not be developed by questioning existing customers ï Sometimes, the business model is straightforward.
In the other cases, conceptualizing and articulating a business model is a more complex process. It may take months and even years
to clearly articulate the customer value of an idea. Innovative business models are sometimes hard to articulate
because the needs of the target customer might not be explicit, uncertainty might exist about which technologies to use and
business model innovations cannot be planned analytically because many of the variables relevant to their success are unknown at the outset.
discover new business models. It is driven a discovery process ï Most of the SMES use business model innovation to fight commoditization of their products
They can increase functionality or reliability of the products, they can create more convenient products for the customers.
3 A dynamic view on business model innovation Business model innovation should not only be analyzed cross-sectionally, but also dynamically
because they develop and change over time. In this chapter, we analyze some aspects of business model innovation in SMES.
First, we look at the possibility of changing business models. Change may not occur just once, but several times, moving stepwise toward a business model that creates more
interesting value propositions and results in higher profitability. Second, we examine the process of discovering new applications after a small firm has introduced a new technology to solve a problem in
Developing a dynamic view on business model innovation is also important to understand the dynamics in the open innovation networks of the companies we examined.
3. 1. Stepwise discovery of new business models In the previous chapter, we described how Curana has changed its strategy from an OEM model to a
Why did he change the business model several times? Some managers continuously probe ne w business models, with each new model building on the strength of its predecessor.
Switching to a new business model creates opportunities to change it again for a second or a third time.
It is a path -dependent process in that opportunities to change the business model into a more profitable model
can only be detected after the previous business model has materialized fully. SMES thus change their business model in a stepwise way
To illustrate this concept, we take the example of Curana and use a scheme suggested by Dirk Vens
see figure 5, p 38. The scheme shows his company†s business model innovations between 1999 and
2010. Curana, a small, family-owned bicycle accessories manufacturer started as a typical OEM: it
manufacturers, which is why Dirk Vens chose to change his company†s business model 38 Figure 5:
Business model innovation at Curana The transformation from an OEM to an ODM model was made possible through a new product
enabled Curana to change its business model from an OEM model to an ODM model. In an ODM
Most SME-managers would be inclined to stick to this new business model because avoiding the commodity trap and price competition are their main concerns.
changed its business model again. It established an internal design office because design had become the heart of the company.
Dirk Vens was searching for a new business model that would bring growth and profitability. He started with one product development project that resulted in the
successful launch of the B†Lite and the start of the ODM business model. The B†lite, however, was not
Let†s look again at the four business models in figure 5 (p. 38. Once Curana had adopted the ODM model,
if the company had remained with the ODM business model, several competitors might already be imitating Curana†s strategy
Curana†s successive business model changes also offered it a unique position in the market. Curana
The PROF business model brings together several companies with complementary competencies to develop a new idea or
ï Successful SMES do not remain with one business model forever. They are continuously probing new business models.
Each new business model builds on the strength of the previous business model and improves its value proposition and profitability.
This constitutes a path-dependent process because new opportunities to transform the business model into being more profitable can only be detected after the previous business model has materialized
fully. In business model innovation, too much uncertainty exists to plan analytically a way to move forward.
Indeed, SMES change their business model in a stepwise way ï Business model innovations are designed to create more value
and generate more profits and increasing profitability can be the result of several changes. We have emphasized
innovating SMES can increase profitability by increasing the number of control points and creating a unique offering.
In the case of Curana, the company gained control points to differentiate itself from the competition.
In addition, its accessories were incorporated unique great designs, and combined new materials in a way no other single producer could copy
4 How SMES build new business models through open innovation In the previous chapters, we explored how small firms can boost their competiveness in the long run
by changing their business model. So far, we have not been emphasizing the role of the innovation
open innovation as they develop new business models. We have explained already why the business model approach is useful in the context of SMES that want to improve their competitive position
Business models also play a central role in open innovation as the continuous sourcing from and
The business model literature however, has been marginalizing partnerships to outsourcing or acquiring particular activities or assets
collaboration with external partners can add value to the business model of SMES A business model describes how an SME creates value for a particular customer group and how it
captures a portion of that value. Open innovation uses the division of innovation labor to both create
Business model innovation starts with discovering or recognizing new forms of value creation for a particular customer group.
and referring to any factor that enhances the total value created by a change in the business model
allows companies to implement business models that generate more profits. We provide illustrations from the SMES we have analyzed
its business model in 2011 when it was exploring the potential of a new, revolutionary patented
business model to benefit from this promising technology in a different way 5. Open innovation also means openness in communication and in reporting among the innovation
Open innovation as an integral part of business model innovations In the past, the open innovation literature has focused too much on the direct benefits of open
major changes in their business model to seize new business opportunities and to boost profitability Lack of internal competencies then forces them to look for innovation partners.
benefits of open innovation-based business model changes differ from the classic open innovation benefits identified for large firms
partners to realize major business model changes. Open innovation is a direct consequence of a small
firm†s ambition to change its business model A business model describes how a firm creates value for a particular customer group and how it
captures a portion of that value. We examined a range of possibilities how small firms jointly create
ï With which small firms a company innovates is determined largely by the new business model the
collaborating with partners are defined by the business model ï Most of the small firms that collaborate intensively do so with value chain partners and less with
Developing technology can be very important in realizing the business model, but it is always a supporting activity
ï More radical business model changes combine knowledge from unrelated fields. Companies pull in expertise from industries and fields that have never been related previously to the current
Good business models also guarantee profitability. The SMES we interviewed work together with different innovation partners to create,
innovation helps in executing business models with higher profitability. We enumerate a few possibilities ï Taking a dynamic lead in applying technologies to a particular product market
3. Curana has changed its business model three times and with each step it could increase its profitability
do not fit your business model. In the Airfryer case, this translated into opportunities for both
business model of SMES. A quilts manufacturer defining the company as â€oea provider of healthy sleepâ€
In open business models, therefore, one has to analyze the joint value creation together with the value distribution among the different partners.
Business model innovations are high-risk ventures because a firm must search for new technologies and develop new products.
SMES change their business model in a stepwise way. In most cases companies begin with a (radically) new product or service,
SMES unfold their business model innovation in several consecutive steps, building new competencies and a stronger financial position at the same time.
Finally, a business model change creates opportunities to change a second and a third time. Curana switched from an OEM to an ODM
business model. Once the company was recognized as an ODM, it changed its business model again by proactively designing bicycle parts.
Because of this change, the company was recognized in the industry as a trendsetter. This, in turn, triggered Curana to build a brand-based strategy.
company stayed tuned to the ODM business model, it would already be confronted with several competitors imitating the ODM move
innovation based business model. The competitive strength of the SMES is no longer (only) related to its internal competencies,
business models: How to thrive in the new innovation landscape, Harvard Business school Press, Harvard Boston: MA
business models: How to thrive in the new innovation landscape, Harvard Business school Press, Harvard Boston: MA
Chesbrough, H. W. 2007), Why companies should have open business models, MIT Sloan Management Review, 48 (2), 22-28
There are different approaches to business models. Different authors have analyzed the business models along different frameworks. Prominent approaches are:
Afuah, A (2004), Business models: A strategic management approach, Mcgraw-hill; Morris, M. and Schindehutte, M. 2005), The entrepreneur†s business
model: Toward a unified perspective, Journal of Business Research, 4, 123-128; Osterwalder, A. 2004
The business model ontology †a proposition in a design science approach, Ph d. Thesis University Lausanne, Ecole des Hautes Etudes Commerciales HEC. 173 p;
2005), Clarifying business models: Origins, present, and future of the concept, Communications of the Association for Information systems, Vol. 16,1-25-25;
power of business models, Business Horizons, 48 (3), 199-207. Chesbrough, H. W. and Rosenbloom, R. S
2002), The role of the business model in capturing value from innovation: evidence from Xerox Corporation†s technology spin-off companies, Industrial and Corporate Change, 11 (3), 529-555;
. and Kagermann, H. 2008), Reinventing your business model. Harvard Business Review, December, 51-59.;and Johnson, M. W. 2010;
Business model innovation for growth and renewal, Harvard Business Press, Boston: MA 9 Faems, D.,de Visser, M.,Andries, P. and Van Looy, B. 2010;
A business model can be defined in different ways. A. Osterwalder and Y. Pigneur (2009 Business model Generation is one of the most influential books on business model innovation
besides M. W.,Johnson (2011) Seizing the white space: Business model innovation for growth 96 and renewal, Harvard Business Press, Harvard:
MA. The core ideas of this book are summarised in the following HBR article: Other definitions of open innovation have been provided by Johnson
M. W.,Christensen, C. M. and Kagermann, H. 2008), Reinventing your business model. Harvard Business Review, December, 51-59.
Business models: A strategic management approach, Mcgraw-hill Irwin. Boston: MA; R. Amit and C. Zott (2001), Value creation in e-business, Strategic Management Review, 22,493-520
and Rosenbloom and H. W. Chesbrough (2002), The role of the business model in capturing value from innovation:
Business model innovation for growth and renewal, Harvard Business Press, Harvard: MA 14 The role of the business model creating economic value from technological inventions is one of
the central themes in Chesbrough, H. W. 2003), Open innovation; The new imperative for creating and profiting from technology, Harvard Business school Press, Harvard:
Chesbrough, H. W. and Rosenbloom, R. S. 2002), The role of the business model in capturing
M. W.,Christensen, C. M. and Kagermann, H. 2008), Reinventing your business model. Harvard Business Review, December, 51-59
Mcgrath (2010), Business models: A discovery driven approach, Long Range Planning, 43,247-261 20 Pine, B. G. and Gilmore, J. H. 2011), The experience economy, Harvard Business Review Press, Boston
2002), The role of the business model in capturing value from innovation: evidence from Xerox Corporation's technology spin†off companies, Industrial and Corporate Change, 11 (3), 529-555;
. and Allen, J. 2005), The entrepreneur†s business model: toward a unified perspective Journal of Business Research, 58,726-735;
business models, Business Horizons, 48,199-207; Osterwalder, A.,Pigneur, Y.,Tucci, C. L. 2005 Clarifying business models:
origins, present and future of the concept, Communications of the Association for Information systems Chapter 4
Chesbrough, H. 2007), Why companies should have open business models, MIT Sloan Management Review, Winter 2007,48, 2, 22-28;
-lection criteria, including for example market potential, sustainability of the business model, the quality of the 66 See http://www. whitehouse. gov/issues/startup-america
The business model is focused often on unique solutions for pilot customers With this business paradigm high growth is rarely achievable.
-lection criteria, including for example market potential, sustainability of the business model, the quality of the 66 See http://www. whitehouse. gov/issues/startup-america
The business model is focused often on unique solutions for pilot customers With this business paradigm high growth is rarely achievable.
traditional models, transforming value chains and calling for new business models Digitising and providing wider access to cultural resources offers enormous economic
new social and business models and new consumption patterns. Broadband is not simply a new communication
services and business models It will transform how people work and live by increasing both location independence
new business models, new services, and new marketing techniques. From an economist†s perspective, one needs to diff erentiate the
social and service innovation, new business models and practice-based innovation. All regions have a role to play in the knowledge economy,
-technology services, cross-sector technology integration, system and business model innovation which are today as important as the technology breakthrough innovation for SMES.
production and distribution methods and adapt their business models accordingly. European cultural and creative sectors are fragmented furthermore inherently along national and linguistic
''Developing new business models for SMES','Improving the urban environment ''Developing Business incubators,'Supporting the physical and economic regeneration of urban and rural areas and
-innovations and challenge existing firms and business models, or that deploy new environmental technologies •Improving access to finance, knowledge,
This needs new business models, industrial symbiosis, product service systems, product design full life cycle and cradle-to-cradle approaches.
technologies within the business model of a small and medium enterprise is a difficult job, but it
new business models is depending on attracting a critical mass of users. In the context of Romania†s current development and its opening towards the European
players within this type of business model rather than treating it solely as a threat. Many
and providing products, processes and business models to fit †at the risk of failure. The entrepreneur innovates by experimenting
potential for new business models and technologies to emerge in the new and small firm sector.
enable SMES to get support for new product and process development, new business model development, new service delivery and customer interface, new service development
managers to think about processes, business models or solutions to specific problems. This type of training is common in SMES
Creating New Business models to Serve the Poorâ€, Business Horizons, Vol. 48, No. 3, pp. 241-246
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