Abstract

     The digital transformation is forcing manufacturing firms to innovate beyond new products and services and to develop their digital business model innovation (BMI) processes in order to stay competitive. This study explores how the innovation processes of manufacturing firms can be designed in order to develop novel business models to address the challenges of digitalization. The study uses a multiple-case study approach, where data on BMI processes was collected in six manufacturing firms. The results show that the design of BMI processes in the digital age differs conceptually between B2C and B2B manufacturing firms. While BMI processes in B2C firms follow a semi-structured approach that considers experimentation, process models in B2B firms show similarities with a new product development (NPD) hybrid model comprising stage-gate methods and agility. This new typology aims to structure the heterogeneity of BMI process models described in the literature. Finally, this study proposes two archetype process models for digital BMI for B2C and B2B firms with specific digital process characteristics that manufacturing firms could consider when designing a BMI process in the context of digital transformation without reinventing the wheel over and over again.

Introduction

     Manufacturing firms in the digital age operate in an environment marked by the emergence of digital technologies and blurred industry boundaries (Porter and Heppelmann, 2014). Startups and high-tech firms such as Uber or Google are threatening existing industry structures (Kagermann, 2015), and established firms are seeing their traditional business models challenged and at risk (Bharadwaj et al., 2013; Christensen et al., 2016). Business Model Innovation (BMI) has been identified as a promising approach to provide firms with a sustainable competitive advantage, particularly in times of high environmental volatility (Wirtz et al., 2016). Research shows that although manufacturing firms have a lot of experience in exploring technologies and products, ‘they often have little if any ability to innovate the business models […]’ (Chesbrough, 2010, p. 354). This explains why BMI is often viewed as the task of start-ups, ‘who are less constrained by path dependencies and inertia than more established firms’ (Zott and Amit, 2007, p. 182). Unsurprisingly, the same applies for digital business models, which are mainly associated with successful former startups such as Airbnb (Sorescu, 2017; Tesch and Brillinger, 2017). However, innovating digital business models is not only the task of startups, but of incumbent firms as well (Burmeister et al., 2016), although these firms often struggle to apply the new logic of innovation that may deviate from existing knowledge (Remane et al., 2017). Hence, aside from new technologies and product innovations (Tesch and Brillinger, 2017), manufacturing firms encounter significant challenges when developing new business models (Koen et al., 2011).

Conclusion

     This paper investigated how BMI processes in the context of the digital transformation of manufacturing firms are organized, what digital process characteristics need to be considered when designing a BMI process, and how the BMI process could be influenced by NPD-related path dependency and process characteristics. Relying on a multiple case study approach, we propose that the design of BMI processes in the digital age differs conceptually between B2C- and B2B-manufacturing firms. Consistent with Cooper (2016), the process models of B2B firms can be characterized as ‘hybrid models’ combining stage-gate structure and agility. Such an approach is consistent with the concern raised by Burmeister et al. (2016), who state that manufacturing firms might miss central opportunities if digital BMI is only regarded as an extension of NPD. In B2C firms, however, BMI processes seem to follow a semi-structured approach that considers agility and trial and error across the phases. BMI processes in B2C firms do not indicate NPD-related path dependency and organizational structures to such a degree. B2C firms receive feedback from their customers much quicker. As a result, agile methods can result more quickly in an entire solution than in B2B firms. In contrast, a more traditional stage-gate process may persist longer in B2B firms due to the lower degree of customer dynamics. In addition, B2C firms are characterized by a stronger service orientation than B2B firms. Hence, the findings are consistent with previous findings in literature that indicate that firms with a stronger service focus are less likely to adopt formalized stage-gate processes (Schultz et al., 2019). Similar to the BMI models in B2B firms, the processes of B2C firms show one gate between the front-end and back-end part. However, unlike in B2B firms, management decides if a spinoff, the setup of a partnership, or a hand-over to the line management will take place dependent on the necessary environmental setting enabling successful scaling.