System dynamics for corporate business model innovation

Abstract

Business model innovation is a process that allows firms to build and maintain competitive advantages. However, it imposes major challenges to managers who rely on incomplete cognitive representations while attempting to understand the environmental dynamics that determine a business model's prospective performance. System Dynamics is a computational approach potentially useful in enhancing managerial understanding and decision-making during business model innovation, yet its effects lack sound empirical evidence. This study of five cases inside BMW assesses the usefulness of System Dynamics along the different phases of business model innovation processes. In order to develop a nuanced understanding we triangulate insights from the multiple-case study approach with results from a Q-Sort exercise. Our emergent theory highlights that System Dynamics enables managers to develop more accurate cognitive representations about their business models. Unexpectedly, we find that this process leads to a cognition gap apparent in the communication with managers not involved in the modelling process. We observe two strategies to overcome this gap. A second key insight is that System Dynamics has a tendency to consolidate mental models by different managers that need to be managed cautiously. We develop a set of 11 propositions that represents the core of our theoretical insights.

Defining business model key performance indicators using intentional linguistic summaries

“…Not surprisingly, business model evaluation is argued to positively influence business model innovation and innovation success [ 57 ]. To structure and support business model evaluation, several tools and techniques have been proposed, which can be divided into qualitative-oriented techniques based on criteria analysis, elicitation techniques or expert opinions [ 13 , 19 – 21 , 43 ] and quantitatively oriented support based on simulation modeling and financial metrics [ 7 , 19 – 22 , 45 ]. These tools enable decision makers analyze business models and to generate insights on their expected performance.…”

“…Therefore, to support decision making, such KPIs should be catered to the characteristics of the innovation process, gradually quantifying as the business model design concretizes. However, examining current literature, we observe that research generally focuses on techniques toward the definition of quantitative (business model) KPIs [ 26 , 33 , 45 ]. As a result, these techniques offer limited guidance on the definition of qualitative KPIs suitable for use in early phases of business model innovation, as well as describing how these KPIs should be gradually quantified to support decision making.…”

A Formal Basis for Business Model Evaluation with Linguistic Summaries

“…Business model evaluation is argued to positively influence business model innovation [28]. Although some tools exist with respect to business model evaluation, either qualitativelyoriented [20,29] or quantitatively-oriented [13,30,31], limited normative guidance has been investigated for structuring business model evaluation, especially in the context of business model innovation [1,32]. Simmert et al [14] propose a process-oriented, multistep evaluation approach to support business model improvement.…”

The DSR grid: six core dimensions for effectively planning and communicating design science research projects

“…In introducing the papers in this way, we demonstrate the use and usefulness of the six dimensions for capturing a DSR project effectively. The paper "System dynamics for corporate business model innovation" is co-authored by Thomas Moellers and Oliver Gassmann of the University of St. Gallen, Lars von der Burg from the Boston Consulting Group, and Bastian Bansemir and Max Pretzl from the BMW Group (Moellers et al 2019). The paper addresses the problem of the lack of understanding about the environmental dynamics that are relevant to the performance of BMW's business model.…”