Business Model Transition in an incumbent firm

Abstract: Business model innovation has become increasingly important for firms to remain competitive in the market. Although a vast body of research has explored the business model innovation process, less research has been devoted to the implementation phase. Many incumbent firms are struggling when transitioning to a new business model, where tensions may arise as a result of the change. Prior literature has acknowledged that organizational tensions are inherent in organizational change, but insufficient attention has been given to the intra-organizational tensions that may arise when firms undergo a business model transition. To address this knowledge gap, this paper, therefore, explores this phenomenon from the perspective of middle managers in a large incumbent firm within an IT-unit. The findings of this study are that four triggers, namely, flexibility in the implementation, lack of vision and top-down commitment, traditional financial system, and two conflicting structures generated five tensions, which are strong BU identity, discrepancies about resource allocation, high employee utilization, internal competition, and fear of loss of power and control. These tensions were found to lead to three specific outcomes, lack of understanding of the new model, sub-optimal resource allocation and illusory change.