Business Model Innovation: How Iconic Business Models Emerge

Transcription

1 Business Model Innovation: How Iconic Business Models Emerge Tatiana Mikhalkina, Lancaster University Management School (Entrepreneurship, Strategy, Innovation) Laure Cabantous, Cass Business School, City University London ESRC Seminar Series Business Models: Shaping Organisations and Markets June 2016

2 Cognitive perspectives to BM BM concept Role of business models in individual cognition Role of business models in social cognition Business models as a way of reasoning in management Understanding business model as an abstract concept Business model innovation: how iconic business models emerge Business models: insights from categorization theory

3 From business model (BM) emergence to the emergence of iconic BMs Phenomenon: innovative business models become icons In business model literature: the process of business model innovation - importance of experimentation/learning and analogical reasoning (McGrath, 2010; Enkel & Mezger, 2013) in BM emergence But this literature is silent on the processes by which an innovative BM becomes iconic, i.e. come to be used as a new way of categorizing firms Our question: How do some innovative BMs become iconic? Yet, BM literature points to the classificatory function of BM (Baden- Fuller & Morgan, 2010): market actors use them to make sense of their environment through categorization

4 Insights from the market categorization literature The categorization literature suggests two things in relation with iconic BM emergence: 1. Iconic BMs essentially function as prototypical exemplars, capturing the essence of a particular category of BM (i.e., particular way of creating and capturing value) exemplar view of category prototype a category prototype is an actual member of the category (Glynn & Navis, 2013: 1126) 2. Media play an important role in the process of emergence and maintenance of market categories (Hirsch, 1972; Rosa et al, 1999). They aid collective market sensemaking (Kennedy, 2008).

5 Research question Based on the categorization literature, we can re-formulate our research question about the emergence of iconic BM as follows: How do innovative business models become prototypical exemplars for new categories of firms?

6 Method and data Case selection: rapid emergence of an iconic BM widely publicised Data collection: 347 articles from 6 newspapers, between and , mentioning Airbnb 665 fragments of text Coding: 1 st order concepts and 2 nd order themes Airbnb And The Unstoppable Rise Of The Share Economy. Forbes, There are a lot of copycats, said Matt Murphy, a partner at Kleiner Perkins Caufield & Byers, bemoaning the number of pitches he has heard that start with: I m the Airbnb of X, Y, Z. (FT, ); The sharing economy typified by companies like Airbnb or Uber, both of which now have market capitalizations in the billions is the latest fashion craze among business writers (Guardian, )

7 Data Structure

8 Main finding: Airbnb shifted from target to source in analogy 35% 30% 25% 20% 15% 10% 5% AirBnB s shifting from target to source in analogy 0% T1. Airbnb defined by analogy T5. Airbnb as source domain

9 Phase 1: Assimilating Airbnb s business model through analogies ( ) ebay-style marketplace (FT, 30 July 2011) firm operating a website which functions as an ebay-style intermediary... (FT 29 July 2011) upgraded version of couchsurfing (NYT 17 May 2009) grown-up couchsurfing (Guardian 8 September 2012). Airbnb is primarily defined through analogies Attempts to assimilate the novel BM within existing category system Natural analogy used is with hotel, BUT it is not entirely satisfactory Multiple analogies at play

10 Phase 2: Elaborating Airbnb s business model and legitimacy tipping point (2011) Publicity for the site has been fuelled in part by its eye-catching valuation (FT July 2011). Airbnb's business model is simple: the company takes a 6%-12% cut on each booking. Guests pay Airbnb in advance by credit card in their local currency. The company holds the payment until 24 hours after the guest arrives to ensure that the accommodation is as described (The Times 16 November 2010). Public discourse around Airbnb increasingly focused on Airbnb s performance Media built a richer understanding of Airbnb s business model as way of explaining its success An elaborate picture of how exactly Airbnb creates value for different parties emerged

11 Phase 3: Airbnb is solidified as representation of a new type of firm ( ) Established accommodation businesses have also come under threat from companies such as Airbnb They have a different product, but they're going after the same customers, said Mr Mooney (FT 12 April 2013) [Airbnb has] been so successful that half the tech start-ups these days go around flattering themselves with Airbnb comparisons: there's an Airbnb for boats, and one for power tools (NYT 12 May 2013). AirBnB is increasingly seen as threat to hotel industry Shifting analogies pattern: inside and outside the industry AirBnB is increasingly used to exemplify new type of firm Airbnb s as label for a business model, or a type of organisation, is increasingly disassociated from AirBnB as a firm

12 Contributions Business model literature Advancing cognitive perspective to business models innovation: how business model innovation takes place beyond entrepreneurs minds Understanding of the role analogical reasoning in the process of collective enactment of business model innovation Categorization literature, especially category emergence How business models can serve as an alternative basis for firm categorization based on logic of value creation and value capture Explaining how a particular type of category prototype iconic business model come into existence in public arena by a collective sensemaking process. Mikhalkina, T., & Cabantous, L. (2015). Business model innovation: How iconic business models emerge. Advances in Strategic Management (SI Business models and modelling) (pp ).

13 Future research: Exploring the socio-cognitive dimension of business models Socio-cognitive process of category labelling Business models as performative categories I think what we ve had is a handful of investors who have extreme vision who make great investments in things that are amazing businesses: Facebook, Google, Uber. And then everybody else reacts to that success by trying to do the thing that most approximates the thing that s working. As a result, most of those businesses are fundamentally not good, they re poorly run, and they never should have been invested in in the first place. But the capital came in because the person who had control of the capital was able to justify it intellectually to themselves versus something else that could have become the next Facebook or Google. Chamath Palihapitiya Founder of The Social+Capital Partnership Uber model, it turns out, does not translate New York Times, March 2016

14 Thank you Forthcoming in Advances in Strategic Management, SI on Business Models

15 Data Structure

16 Methods and Data Data collection: Factiva search for period from 1st of January 2008 to 31st of December 2013 returned 2458 articles from more than 15 sources selected 347 articles from the six newspapers (top-5 printed sources by the number of articles in print mentioning AirBnB + Washington Post) Data analysis: An automatic search identified 1052 instances when Airbnb was mentioned; meaningful units of analysis rule consisting in creating fragments with 30 words immediately preceding and following the term Airbnb 665 fragments of text; Qualitative content analysis Source All Document Count Print Document Count The Times (U.K.)* The New York Times* The Wall Street Journal* Financial Times* The Guardian * Washington Post* Number of articles and fragments of text mentioning Airbnb Articles Fragments

17 Results and Findings Overview Percentage (%) each theme in the total number of coded fragments of text 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% T1. Airbnb defined by analogy T2. Airbnb as a firm T3. Airbnb as a BM T4. Airbnb & traditional econ. T5. Airbnb as source domain T6. Airbnb examplar of sharing economy 0% 7% 3% 4% 0% 6% 5% 7% 12% 13% 14% 12% 7% 13% 47% 26% 23% 33% 25% 13% 22% 45% 33% 22% 39% 23% 27% 9% 5% 6% Phase 1 Attempts to assimilate innovative business model within existing market category system Multiple analogies at work Phase 2 Legitimacy tipping point Business model elaboration Phase 3 Shifting analogy: from target to source Exemplification of a new type of organisation Divergence of business model from instigator company

18 Phase 1: Assimilating Airbnb s business model through analogies ( ) Aibnb defined through analogies: Main analogies Since its debut in 2008, the company ( ) has booked more than two million nights of lodging all over the 40% 38% 20% 20% 20% 13% 25% 25% Couchsurfing ebay Others Hotel 31% 15% 46% 70% 20% 41% 12% 41% 0% 8% 10% 6% world. But it's not a hotel. Instead, it allows people to rent out their entire home or apartment - or just a room or a bed - to others who find Marriott boring or want to see life in a new area as a local would (New York Times, 12 November 2011). ebay-style marketplace (FT, 30 July 2011); firm operating a website which functions as an ebaystyle intermediary... (FT 29 July 2011); upgraded version of couchsurfing (NYT 17 May 2009); grown-up couchsurfing (Guardian 8 September 2012). The theme Airbnb defined through analogies has been a dominant theme during the two first years Initial attempt to assimilate the novel business model within existing category system; position the company within hospitably industry; natural analogy with hotel, BUT not entirely satisfactory Multiple analogies at play revealing different aspects, or important difference of the novel business model

19 Phase 2: Elaborating Airbnb s business model and legitimacy tipping point (2011) % of Code "Business Model" Over Time 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 44% 27% 25% 27% 21% Business Model Elements Count Over Time

20 Phase 3: Airbnb is solidified as representation of a new type of firm ( ) AirBnB is increasingly seen as threat to hotel industry Shifting analogies pattern: AirBnB is increasingly used as source, rather than target of analogy, helping to define other firms, including increasingly those outside travel and hospitality industry AirBnB is increasingly used to exemplify new type of economy (sharing or peer-to-peer economy): the company that spurred the sharing trend with air mattresses in a San Francisco apartment. (TWP 8 September 2013). Airbnb s as label for a business model, or a type of organisation, is increasingly disassociated from AirBnB as a firm Established accommodation businesses have also come under threat from companies such as Airbnb, which allow homeowners to rent spare rooms to travellers - often charging less than a standard hostel. They have a different product, but they're going after the same customers, said Mr Mooney (FT 12 April 2013) [Airbnb has] been so successful that half the tech start-ups these days go around flattering themselves with Airbnb comparisons: there's an Airbnb for boats, and one for power tools, and probably one that will let you rent out your extra sheep to fertilize somebody's lawn (NYT 12 May 2013). Venture capitalists last fall valued the sharing economy's rising star a service called Airbnb Inc. that lets people rent their homes, or rooms in their homes, to strangers at $2.5 billion (WSJ 14 January 2013).

21 Phase 3: Airbnb is solidified as representation of a new type of firm ( ) % Sharing Economy 7% 6% 6% 5% 4% 3% 2% 2% 4% 5% 10% % of Codes Co-Occurrence: AirBnB as a firm & AirBnB as a source 1% 9% 9% 0% 0% % 7% 14% 12% 10% 8% 6% AirBnB and the Traditional Business Dynamics 6% 5% 4% 3% 2% 1% 0% 0% 0% % 1% 4% 2% 0% Regulatory Issues Threat to Hotels