Innovation risk in digital business models: the German energy sector

Abstract

Purpose Past research demonstrated that novel IT-based business models generate tremendous returns for innovators. However, the risks associated with these innovations remain under-explored. This paper aims to address this critical gap analyzing risks and offering important insights particularly for practitioners. Design/methodology/approach The authors adopted an exploratory multiple-case study research design. It draws on 22 semi-structured interviews with managers from leading energy utilities, as well as leading providers of virtual power plants technology within the German energy industry. Findings The research reveals that main risks in new digital business models in the energy sector are associated with three forms of interdependence between innovation actors: the regulatory, the technological and the collaborative. To deal with these interdependencies, the authors propose an original multi-step risk management framework. This framework considers the outreach as a critical dimension for risk assessment and offers a new risk response matrix to draw individual and collective mitigation activities for specific types of risks. Practical implications This paper offers a framework for the management of interdependence risks that are fundamental for business model innovations based on IT. Thus, it is applicable in companies both inside the energy sector and beyond. Originality/value This paper analyzes an important digital business model innovation that has not yet been explored in management literature – the virtual power plant (VPP). It is based on original and current empirical work and proposes a novel risk management framework for business organizations.

Development of a Risk Framework for Industry 4.0 in the Context of Sustainability for Established Manufacturers

“…However, the linking of several partners in an ecosystem entails risks such as interdependencies and coordination difficulties, which calls for an alignment of the business model with the value network as well as strategic risk management in order to enable the ecosystem to be profitable, sustainable, and co-create value [12,43].…”

“…In business, each process and decision is affected by risk and uncertainty, leading to potential incorrect assessments, misjudgments, or unexpected changes, with versatile consequences for a company [42]. In addition, risks are not limited to the boundaries of a single enterprise, but rather are spread across an ecosystem, leading to interdependencies between suppliers, customers, competitors, and the company itself [43]. This is amplified through digital advancements such as CPS, IoT, and Cloud Computing, which are subsumed under the term Industry 4.0 or IIoT.…”

Reviewing Literature on Digitalization, Business Model Innovation, and Sustainable Industry: Past Achievements and Future Promises

“…There is wide consensus among researchers that the business ecosystems external to the company will become much more important and affect value delivery significantly. This is because relationships become intensified, interdependent, and globally distributed [20,27,39,47]. The collection, storing and sharing of data will require firms to become more collaborative, facilitating higher information transparency, inter-company connectivity, and joint data analysis [39,42,47].…”

“…This is because relationships become intensified, interdependent, and globally distributed [20,27,39,47]. The collection, storing and sharing of data will require firms to become more collaborative, facilitating higher information transparency, inter-company connectivity, and joint data analysis [39,42,47]. This need for intensified collaboration is of particular benefit to young firms because their future depends on partnerships that will succeed [37].…”

Measuring and Integrating Risk Management into Green Innovation Practices for Green Manufacturing under the Global Value Chain

“…Therefore, managing the risk of green innovation in the manufacturing industry is of great theoretical and practical significance to reduce the possibility of risk occurrence and the severity of consequences. In order to create comprehensive value, it is necessary to manage green innovation risk scientifically and effectively [11]. The identification of green innovation risk can not only determine whether different risk factors affect green innovation activities but also determine the degree of influence [12].…”