The impact of digitalization on business models

Published date12 March 2018
Date12 March 2018
DOIhttps://doi.org/10.1108/DPRG-07-2017-0039
Pages105-124
AuthorHarry Bouwman,Shahrokh Nikou,Francisco J. Molina-Castillo,Mark de Reuver
The impact of digitalization on business
models
Harry Bouwman, Shahrokh Nikou, Francisco J. Molina-Castillo and Mark de Reuver
Abstract
Purpose This paper aims to explore how digital technologies have forced small- to medium-sized
enterprises (SMEs) to reconsider and experiment with their business models (BMs) and how this
contributes to their innovativeness and performance.
Design/methodology/approach An empirical study has been conducted on 338 European SMEs
actively using social media and big data to innovate their BMs. Four in-depth case studies of companies
involved in BM innovation have also been carried out.
Findings Findings show that the use of social media and big data in BMI is mainly driven by
strategic and innovation-related internal motives. External technology turbulence plays a role too.
BMI driven by social media and big data has a positive impact on business performance. Analysis of
the case studies shows that BM is driven by big data rather than by social media.
Research limitations/implications Research into big data- and social media-driven BMs needs more
insight into how components are affected and how SMEs are experimenting with adjusting their BMs,
specifically in terms of human and organizational factors.
Practical implications Findings of this study can be used by managers and top-level executives to
better understand how firms experiment with BMI, what affects business model components and how
implementation might affect BMI performance.
Originality/value This paper is one of the first research contributions to analyse the impact of
digitalization, specifically the impact of social media and big data on a large number of European
SMEs.
Keywords Business model, Business model innovation, Social media, Big data, Digitalization
Paper type Research paper
1. Introduction
Attention to business model innovation (BMI) is increasing in both entrepreneurial
practice and research (Zott and Amit, 2010). In this paper, the concept of BM is
defined as the business logic to create and capture value for both consumers and
businesses. In other words, it refers to the way a single organization or a network of
firms collaborates at strategic and operational levels to bring products and/or
services (bundles) to the market. A single organization or a network of firms makes
use of technical platforms and architectures to create and capture value for both
(networked) organization and the customer (Bouwman et al., 2008). BMI is defined as
a change in a company’s BM that is new to the firm and results in observable changes
in its practices toward customers and partners. The focus of our research, however, is
how companies and specifically small- to medium-sized enterprises (SME)
experiment with BMs as a result of digital transformation, specifically with regard to
social media and big data. BM experimentation is defined as activities related to
discussing and trying out changes in BMs carried out by a manager or a team with a
budget specifically allocated for BM experimentation. In this paper, we focus on BM
practices, defined as the way the team in charge of the experimenting process makes
Harry Bouwman is Professor at
the Delft University of
Technology, ICT, TBM, Delft,
The Netherlands and Faculty of
Social Sciences, Business and
Economics, Abo Akademi,
Turku, Finland.
Shahrokh Nikou is a Senior
Researcher at the Faculty of
Social Sciences, Business and
Economics, A
˚bo Akademi
University, Turku, Finland.
Francisco J. Molina-Castillo is
Marketing Professor at the
Department of Marketing,
University of Murcia, Murcia, Spain.
Mark de Reuver is Associate
Professor at the Faculty of
Technology, Policy and
Management, Delft University
of Technology, Delft, The
Netherlands.
Received 15 July 2017
Revised 5 November 2017
Accepted 16 November 2017
The work leading to these
results has received funding
from the European
Community’s Horizon 2020
Program (2014-2020) under
grant agreement 645791. The
content herein reflects only the
authors’ view. The European
Commission is not responsible
for any use that may be made
of the information it contains.
© Harry Bouwman, Shahrokh
Nikou, Francisco J. Molina-
Castillo and Mark de Reuver.
Published by Emerald
Publishing Limited. This article is
published under the Creative
Commons Attribution (CC BY
4.0) licence. Anyone may
reproduce, distribute, translate
and create derivative works of
this article (for both commercial
and non-commercial purposes),
subject to full attribution to the
original publication and
authors. The full terms of
this licence may be seen at:
http://creativecommons.org/
licences/by/4.0/legalcode
DOI 10.1108/DPRG-07-2017-0039 VOL. 20 NO. 2 2018, pp. 105-124, Emerald Publishing Limited, ISSN 2398-5038 jDIGITAL POLICY, REGULATION AND GOVERNANCE jPAGE 105
the transition from strategy to BMs in practice through digital transformation. It is
about how strategy is actually implemented while experimenting with social media-
and big data-driven BMs.
Much research attention has been devoted to SMEs, which are considered to be the driving
force in most economies. Research has had very diverse foci, such as industry, size, phase
of maturity and ownership. It is often emphasized that SMEs are responsible for much of the
employment, innovation and growth in national economies, as indicated by the Organization
of Economic Cooperation and Development (OECD), European Union and national
governments. Therefore, study of SMEs and changes in their BMs is important. From the
perspective of telecommunications, information technology (IT) and information systems
(IS), innovations such as social media and big data are important topics of study. Social
media can offer an extra channel to communicate with customers, but it can also be
developed as a service in itself. Similarly, big data can affect SMEs’ BMs, with regard to not
only marketing but also business processes. For instance, in the industry 4.0 domain,
monitoring production and production quality affect many SMEs’ BMs. BMI is not about
optimizing internal processes or incorporating and implementing new technologies in an
organization; innovation has to affect the core business logic of SMEs and be observable to
others.
Advanced technologies such as social media and big data are considered to play a
core role in BMI in most firms and therefore also in SMEs. However, what drives BM
innovations based on digital technology and how experiments with BMI affect
performance is, to our knowledge, not yet researched. Therefore, in this paper, the
main questions are as follows:
Q1. How digital technologies, specifically social media and big data, have forced SMEs
to reconsider their BM? How BMI mediates the impact of digital technologies on
innovativeness and performance?
In the context of the H2020 Envision Project, quantitative data were collected and case
studies of BMI as executed by SMEs were carried out. Based on a mixed-method
approach, a data set of 338 European SMEs engaged in BMI related to social media and
big data were analysed, and a number of in-depth case studies were performed. The
quantitative data set is a subset of a larger sample of companies engaged in BMI (N = 586).
Data were collected in 2016. The conceptual model under investigation relates to BM
incentives and experimentation with (subjective) performance indicators. Several sample
cases in which social media and big data (analytics) affect BMs were conducted to deepen
the insights obtained from the quantitative data.
In the next section, mainstream BM factors from extant literature are drawn to build our
research model. In Section 3, based on the discussion laid out in Section 2, the research
hypotheses are developed. Section 4 discusses the research methodology, data collection
process and the measurement development, followed by research results in Section 5.
Section 6 presents the discussion of findings. Section 7 outlines the research’s theoretical
contributions, conclusions, limitations and considerations for future work.
2. Theoretical background
Here, we briefly discuss some main concepts from the BM innovation literature.
Conventionally, research on BMs can be categorized into three main areas:
1. the use of internet, mobile and IT on an infrastructure and its application level
(Bouwman et al., 2008);
2. strategic issues concerned with firm performance and value creation (Casadesus-
Masanell and Ricart, 2010; Hedman and Kalling, 2003; Methlie and Pedersen, 2007;
Teece, 2010; Zott and Amit, 2008, 2010); and
PAGE 106 jDIGITAL POLICY, REGULATION AND GOVERNANCE jVOL. 20 NO. 2 2018

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