Digital Disruption of the Value Creation Ecosystem-- How new business models

emerge

Lorraine Warren, University of Southampton

Ted Fuller, Faculty of Business and Law, Lincoln, University

ISBE, 2013, November

Business model?• Term draws on many theoretical and conceptual approaches (Zott et al,

2011; Camison and Villar-Lopez, 2010; Casadesus-Masanell and Ricart, 2010).

• Simple expressions of how a firm will make money (Stewart and Zhao, 2000) through to far more powerful understandings that attempt to capture the full range of stakeholder relationships necessary to firm prosperity (Baden-Fuller and Morgan, 2010).

• In these wider systemic perspectives, the business model is, at heart, an integrating construct that can explain value creation in different contexts (Zott and Amit, 2010).

• Taking a broader system view brings actor independencies and interactions to the foreground of our understanding of business model development. Thus, value creation transcends business frontiers (Amit and Zott, 2001; Dyer and Singh, 1998; Chesbrough, 2003).

Perspectives..• value chain analysis, innovation theory, transaction cost theory,

the resource based view and strategic process approaches (Amit and Zott, 2001).

• industrial organization, resource based view and strategic process perspectives to explain how information and communication technologies create value Timmers, 1998; Hedman and Kalling, 2002).

• Transaction cost theorists emphasise structural and behavioural interactions (Zott and Amit, 2010; Amit and Zott, 2001; Tapscott, 2001; Tapscott et al, 2000).

• Chesbrough (2003, 2006) and Chesbrough and Rosenbloom, 2002) highlight open business model capacities in relation to the potential to create value across organizational boundaries

Digital Economy?• Firstly, falling prices in a range of areas have lowered entry barriers to new

forms of technological innovation: widespread access to broadband technologies; smartphones and tablets; social media; increasing availability of government datasets to the public.

• Secondly, traditional incubation pathways have been supplemented by free-form crowd-driven patterns of activity, often linked to social media, such as crowd funding (de Buysere et al, 2012) or the intricate multidisciplinary ‘barcamp’, or ‘unconference’ style events, (Kemp et al, 2012).

• Digital Economy (Normann, 2001) has liberated us from so many constraints of time, place, actor and constellation.

• Yoo et al (2012) point out how the Digital Economy has transformed what we think of as the horizontal and the vertical in terms of competitive space and sector

• ‘Disposable’ business model? Ries (2012) Blank (2011) Osterwalder &Peigneur (2010)

Case studies underway

• 3DBare• http://benjaminmawson.com/3D-BAR

E/

Region of interest

FFE

FFE

• Many unanswered questions• Markham et al, (2010) • Boocock, Warren et al, (2009) • Barr et al, (2009) • Collaborative, network, project based innovation• address multiple contexts and levels presenting an

analytical challenge to management researchers (Pettigrew et al, 2001)

• Multiple and indeterminate outcomes

Systems in a complex dynamic (unpredictable) economy

Stability and Variation

Flows, emergence and temporary structures

(small worlds -> disruptive innovation)

From To

Situation analysis Experiments and models

Sustainability as engineering

resilience

Sustainability as evolutionary

agility

Value-creating ecologies

• Consumers to co creators of value• Value chains to value networks• Product value to network value• Simple co-operation or competition to complex co-

opetition• Individual firm strategy to strategy in relation to value

ecologies• Hearn, G. and C. Pace, Value-creating ecologies: understanding next generation business systems.

foresight, 2006. 8(1).• Hearn, G., Roodhouse, S. and Blakey, J. (2007), From value chain to value creating ecology,

International Journal of Cultural Policy, 13, 4, pp. 419-436.

Entrepreneurial processes in creating and protecting value

• Experimenting– New structural practices

• Reflexive Identity– What do we take as value in our interactions with

others?• Organising

– What should be our everyday practices?• Sensitivity to Conditions

– Anticipation of threats…knowledge… reaction… propensity to survive…

Individual (Level A)

Intention, agency, personality, cognitive process

Interaction (Level B)

Discourse patterns, symbolic interaction, collaboration, negotiation

Ephemeral Emergents (Level C)

Topic, context, interactional frame, participation structure; relative role and status

Stable Emergents (Level D)

Group sub-cultures, group slang and catchphrases, conversational routines, shared social practices, collective memory)

Social Structure (Level E)

Written texts (procedures, laws, regulations); material systems and infrastructures (architecture, urban design, communication and transport networks)

The Emergence Paradigm (Sawyer 2005, p211), showing the ‘circle of emergence’ (p220), i.e. that area which is subject to social emergence

Emergence

• Entrepreneurial relational processes • Emergents with

causal properties

Anticipation of valueduring innovation

Fuller, T. and Warren, L (2008) Sustaining entrepreneurial business; a complexity perspective on processes that produce emergent practice, International Entrepreneurship and Management Journal, Vol 4/1, pp1-17 Fuller, T. and Warren, L., Thelwall, S., Alamdar, F. and D. Rae (2010), Rethinking Business Models As Value Creating Systems, Leonardo Transactions , VOLUME 43, ISSUE 1, 2010Warren, L. and Fuller, T. (2010), Capturing The Dynamics Of Co-Production And Collaboration In The Digital Economy, Leonardo Transactions , VOLUME 43, ISSUE 2, 2010Warren, L. and Fuller, T., (2009) Contrasting approaches to preparedness: A reflection on two case studies International Journal of Enterprise Information Systems 5/3, 60-71

Emergents as value models:• not ‘real’ artefacts such as products and services• temporal visions of alternate futures consisting of interlinked, multilevel constructs

that resonate between:

– Past, present and future products and services– Past, present and future technologies (perhaps supported by tangibles such as proof of

concept, prototype, IP)– Past, present and future markets or organising domains (perhaps supported by market

research or constructions of future industry sectors)– Past, present and future dominant logics (extant and potential business practices, relations

with stakeholders, consumer/societal behaviours)– Past, present and future business models, relating the creation and capture of value: (e.g.

economic, technological, social, cultural, artistic, environmental)– Past, present and future identities, expertises

• Emergents embrace a discursive understanding of some, or all the above elements, an entity to support the exchange of value in all its forms.

Stabilisation of value model

Processes of value creation (EROS processes)

Processes of stabilisation:Tangibles (IP, contracts, proof of concept, prototype, business plan, incubator)Intangibles (reputation, track record, identity, expertise)

Processes of value capture:Attraction of resource, causality

Value Model Products,

Services….