Opportunity recognition process in different archetypes of business model innovations: evidence from European and American web-based startup companies

Abstract

The purpose of the study is to provide a better understanding of how entrepreneurs come up with ideas for significant modification of typical industry business models within each business model innovation (BMI) archetype. To accomplish this goal, three research objectives addressing the problem, are defined and specified below: 1. To identify archetypes of business model innovations implemented by startups. 2. To transfer knowledge about opportunity recognition process from entrepreneurship field into BMI domain. 3. To describe the process of opportunity recognition behind BMIs in startups and determine factors influencing it based on the empirical research. The thorough literature review has revealed that among existing classifications of BMIs, the one of Giesen et al. (2007) embodying industry, revenue and enterprise model innovations is superior to others as it properly incorporates BMIs in appropriate archetypes. Also, certain similarities were revealed between entrepreneurial and BMI processes so the preliminary framework for studying BMI process was developed in the master theses. Further, it was filled with the content relevant based on the empirical study of six case companies that implemented different archetypes of BMIs. The detailed analysis of primary (interviews with companies’ founders) and secondary (articles, published interviews) data has delivered the following results: • At the idea discovery phase of opportunity recognition stage of the BMI process the case companies used different discovery strategies according to their BMI archetype. While industry and revenue model innovators were looking for inspiration analyzing unmet customer needs, enterprise model ones were building on successful exemplars from other industries. • At the idea formation phase of opportunity recognition stage the case companies did not have a specific pattern building their BMI – the process was specific in each case. Also, innovators did not use any tool or frameworks while developing their BMIs. However, it was revealed that in each case there were two important milestones that in most cases were considered initially by innovators – value proposition and revenue sources. This corresponds to the theory of BMI process introduced by Johnson et al. (2009, p.54) who stated that initially firms should specify the value proposition, then revenue sources and after key activities and resources. • The empirical research has identified the factors influenced the opportunity recognition stage of BMI process. Some of them were already mentioned by other scholars such as changing market, e.g. shift in customer tastes, customers ability to pay (Linger and Cantrell 2000, p.10; Giesen et al. 2010, p.24; Sorescu et al. 2011, p. S12), focus on innovations (Sorescu et al. 2011, p. S12), product by itself (Giesen et al. 2010, p.24). However, none mentioned the importance of innovators’ background, team effort and creativity in BMI domain. Most interviews underlined that these factors were also important while recognizing their BMI idea. These results were incorporated into the preliminary framework, and may be helpful for companies intending to implement BMIs as the extended framework describes the process of opportunity recognition in the considered startups. However, there are certain limitations of the study and these revealed findings need to be tested on a larger, more heterogenic sample in further studies.