Papers in Brief (XXI): Bidmon & Knab (2018): The three roles of business models in societal transitions

[Note: This is the 21st post in our “Papers in Brief” series. This series offers a special service as it explains the core ideas of chosen research papers in a nutshell.]

Papers in Brief (XXI) by Christina Bidmon and Sebastian Knab

Bidmon, C., and Knab, S. (2018), “The three roles of business models in societal transitions: New linkages between business model and transition research”, Journal of Cleaner Production, Vol. 178, pp. 903-916. https://doi.org/10.1016/j.jclepro.2017.12.198

Background and relevance

While it is widely acknowledged that business model innovation holds potential to disrupt prevailing patterns of production and consumption and thereby support systemic changes to society, links to transition studies (Markard et al., 2012) have rarely been used to explain the interrelation between business models and their external environment.

The scarcity of studies combining business model and transition theory seems even more surprising given that both fields regard a link between them as promising:

  • Research on business models for sustainability has argued that “the issue of how firms can contribute significantly to bringing about transitions has received too little attention, especially in relation to business models” (Boons et al., 2013: 4).
  • Research on transitions has traditionally focused on the role of organizations as technology providers, but recently become more interested in the relevance of other forms of organizational change for sustainability transitions (e.g. Garud et al., 2016).

Whereas pioneering studies have provided in-depth insights into the role of specific novel business models within transitions, they also point to the need for further conceptual groundwork that can serve as a theoretical backbone for studies at the intersection between business model and transition research.

Research method

In this paper, we attend to the need for a conceptual link between the concept of a business model and transition studies by asking: (1) What are the roles of business models in societal transitions? and (2) How do business models in their different roles impact transition dynamics? We answer these questions in a three-step approach that integrates business model and transition theory: First, we describe the key concepts by which the well-established MLP multi-level perspective on socio-technical transitions (Geels, 2002) explains transitions dynamics. Second, we identify those functions and characteristics of the business model concept that can contribute to explaining transition dynamics. Third, we translate our findings into the graphical language of the MLP. We use the case of the Big-Four electric utility incumbents, a start-up offering leasing schemes for roof-top solar, and one of the first virtual power plants in Germany to illustrate the relevance of business models within an ongoing transition.

Results

We derive three distinct, but complementary, roles that business models play within societal transitions:

  • As part of the socio-technical regime, existing business models hamper transitions by reinforcing the current system’s stability;
  • as intermediates between the technological niche and the socio-technical regime, business models drive transitions by facilitating the stabilization process of technological innovation and its breakthrough from niche to regime level; and
  • as non-technological niche innovation, novel business models drive transitions by building up a substantial part of a new regime without relying on technological innovation.

We explain each role and its respective impact on transition dynamics in greater depth and discuss whether a role can be seen as a driver or barrier for transition dynamics.

Figure1Figure 1. Three roles of business models for societal transitions

The conceptualization of Role (1) sheds light on the mutually reinforcing stabilization mechanisms and dependencies between organizations’ business models and the wider system, which is a perspective that has not yet received much attention in either transition or business model research. The discussion of Role (2) substantiates the joint system-changing potential of technological innovations and business models by highlighting how the latter can serve as vehicles that facilitate and accelerate the journey of novel technology from niche to regime level. Role (3) offers theoretically grounded explanations for the argument that novel business models have a greater potential to achieve systemic changes than technology, and that novel business models need to be considered as a form of niche innovation in their own right.

Overall, our work underpins the argument that organizations’ business models have a powerful impact on societal transitions – powerful for both driving and hampering them. We hope that the systematic differentiation of the distinct roles in which business models impact transitions can spark further work on the co-evolution of business models and societal systems.

References

Boons, F., Montalvo, C., Quist, J., Wagner, M. (2013), “Sustainable innovation, business models and economic performance: an overview”, Journal of Cleaner Production, Vol. 45, pp. 1–8.

Garud, R., Gehman, J. and Markard, J. (2016), The Role of Organizations in Sustainability Transitions. Call for Papers, EGOS Conference 2017, http://www.egosnet.org/jart/prj3/egos/main.jart?rel=de&reserve-mode=active&content-id=1442567999321&subtheme_id=1442568082292 (accessed 18.09.2016).

Geels, F.W. (2002), “Technological transitions as evolutionary reconfiguration processes: a multi-level perspective and a case-study”, Research Policy, Vol. 31, pp. 1257–1274.

Markard, J., Raven, R. and Truffer, B. (2012), “Sustainability transitions: An emerging field of research and its prospects”, Research Policy, Vol. 41, pp. 955–967.

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