26th International Association for Management of Technology Conference - IAMOT 2017

Business model (BM) design is essential to accommodate new technologies to reach full commercial scale. However, BM design is difficult (Teece 2010; Chesbrough 2010). The state of the art literature on business models scrutinized BM design sources of difficulty from an intra-organizational perspective (Sund et al. 2016; Chesbrough 2010; Teece 2010; Osterwalder et al. 2005; Amit & Zott 2001). BM design issues surface when firms try to create a new business model or reconfigure current BM. Introducing new business models often instigate organizational challenges manifested in tensions with current organizational structure (Sund et al. 2016). The choices incurred in BM design significantly affect the business architecture translated to the deeply seated internal functions in the organization. Thus, changing the business model or even refining the current BM components will encounter organizational hurdles (Teece 2010). While designing new BMs, general managers who work on reconfiguration are attached to their old BMs resulting in a cognitive challenge (Zott & Amit 2010). The design challenge is also manifested in a resource competition between new and old business models (Sund et al. 2016; Chesbrough 2010). The major line in the business models literature provided a base to understand the BM design challenges from an intra-organizational perspective. This paper focuses on BM design challenges of incumbent firms while re-designing their BMs in a demonstration project that introduces a new charging technology to a Bus transportation system. thus we extend the understanding of BM design in a technological change setting by exploring specific challenges incurred by incumbents. RQ: What Business Model design challenges incumbents face while adopting a technological change? To achieve the objectives, this study recovers multiple stakeholders’ views with a specific focus on two incumbents, a bus manufacturer and a public transportation operator (PTO). The stakeholders are testing an emerging technology providing stop inductive charging to E-buses. The research design is based on a single case study (Yin, 2009). Our case inspires a new perspective motivated by a case study finding (Siggelkow, 2007). The data has been collected from multiple sources: 20 semi-structured interviews, participant observation, and document analysis. This study has three main findings. While the first one confirms literature review, the last two speak to our contribution: First, while PTO is considering to reconfigure its BM, managers witness operational tension between a potential bus reliant on specific charging infrastructure, and current combustion engine bus that could be rotated around leading to less operational flexibility. This confirms tensions between old and current BMs (Sund et al. 2016; Chesbrough 2010). Second, the Public transportation authority (PTA) sets environmental targets for the PTO. The operators need to deliver the service with a bus solution that abides by the PTA targets. The manufacturer (who supplies the operator with buses) also adapts to PTO needs and by that will have to deliver a value proposition choice that fulfills targets. Third, the terms set by PTA doesn’t allow money to flow to operator directly but it comes in portions by the PTA. Thus the revenue architecture of the operator is heavily affected by the PTA terms. Our study enhances the understanding of emerging technologies management by probing BMs redesign challenge triggered by a technological change. We contribute to BM literature by showing that value proposition and capture choices can’t be made in isolation as they are deeply seated in the context.