Business Model Innovation in Incumbent Organizations: : Challenges and Success Routes

Abstract: In this thesis major challenges of creating business models at incumbents within mature industries are identified along with a mitigation plan. Pressure is upon incumbent organizations in order to keep up with the latest rapid technological advancements, the launching of startups that almost cover every field of business and the continuous change in customers’ tastes and needs. That along with various factors either forced organizations to continually reevaluate their current business models or miss out on great opportunities. How some incumbents have dealt and are dealing with business model innovation challenges over the past few years is demonstrated through several cases of incumbents. The sources surveyed include recent scientific articles, books, firsthand accounts with executives in the area of business models, innovation and business development, online sources and contemporary business publications. In order to overcome those challenges, we propose a framework which is derived mainly from the sources mentioned above. In order to overcome such challenges, thesis propose a framework that can be used to successfully engender new business models and make a transition from current to new business model. By successful business model innovation, firms can increase the extent of their offerings, meet yet unmet market demands and untapped customer segments. Additionally, organizations can create new value propositions and gain highly sustainable competitive position through business model innovation which is not easy to imitate or copy by the competition. Our findings attest to the fact that business models are highly situational however there are general steps for incumbent organizations that would lead to a successful business model innovation approach. First an organization must have a clear strategy. Establishing separate innovation centers for firms do enhance and foster the mindset of innovation as they take innovation outside the parent organization’s logic. Other approaches include open innovation, partnerships and ensuring that resources are constantly allocated to create disruptive innovations internally and is led by the right personalities. Solving customer needs should be the core of any business and finally there are no best practices in business model innovation. The significance of our findings gives insights on how to overcome some challenges in practice for incumbents to create suitable business models and contributes to theory since there were some empirical findings that weren’t pronounced in literature.