Dynamic Business Model Development in Multi-Sided Markets -a case study of entrepreneurial firms

Abstract: Through a multiple case study of entrepreneurial firms operating in two-sided markets, we investigate how customers' and consumers' are affecting the business model development. By taking a dynamic approach to the business model concept we found that firms' customers and consumers affect the business model development continuously through the firm's process of choosing what customers and consumers to target, understanding these and developing a relevant value proposition.We show that the interdependencies between the platform's two user groups are adding to the complexity in the business model development, both since firms have to deliver two separate value propositions simultaneously and since the volume and qualities of one user group are internalized in the value proposition of the other.Furthermore, the tensions that arise between the two user groups affect the business model development since firms deal with the tensions by adapting their business models. Through developing an in-depth understanding of their user-bases, platform owners can create business models that align the two user groups and increases the value for each side of the platform.