Managers are regularly using the term “business model” to describe the logic of a firm, the way it operates and creates value for its stakeholders (e.g., product/service users, value network partners, shareholders). Academic research, in turn, refers to business models particularly when dealing with the formation of novel mechanisms and architectures through which business is done, possibly with newly-defined resource bases and customers as well as novel revenue-cost structures

Some of the academic research has examined the formation of novel mechanisms at industry level, entailing the questioning of existing industry architectures and emergence of new ones. Some of the research has focused more on the firm level, on the formation of mechanisms that are at least new-to-company, questioning its ‘business as usual’ (yet being sometimes also new-to-market/world).

Strategic emphases and investments in business model evolution

In GloStra, the business model evolution research pays particular attention to the following strategic dimensions for a firm: to what extent a firm emphasizes strategically

1. the creation of fundamentally new business model(s), relative to the existing business models of the firms in the market or industry (~first-mover, novel end-user value, novel value delivery network)
2. the replication/imitation of components of other firms’ business (~benchmarking, within-industry imitation, between-industry hybridization)
3. the replication/extension of components of the firm’s own business (geographic, brand, other)

The degree of strategic emphases on these dimensions compares to (X) the degree to which the firm retains the workings and components of its current business model (without alterations).

While the dimensions are not mutually exclusive, an individual firm faces increasing risk (financial risk, survival risk) when it increases strategic emphasis on the dimensions 3, 2, and 1 vis-à-vis X. This is because strategic emphasis on dimensions 3, 2, and 1 generally require increasing investments in explorative activities of knowledge and capability development – as opposed to exploitation of the firm’s current knowledge and capabilities (X). Most risky exploration is associated with dimension 1, followed by dimensions 2 and 3. Nevertheless, the potential rewards (profits) for the firm may also be higher, the more risk it assumes on dimensions 3, 2, and 1.

Specifically, current research in GloStra attempts to examine the feasibility and outcomes of different combinations of strategic emphases on the mentioned dimensions (1, 2, 3, X), by focusing on firm-industry dynamics. There is also a focus on the levels and logics of (monetary) investments made by firms on the different dimensions, and the financial and other outcomes of the investments

Managerial cognition and corporate control in business model evolution

In addition to the above perspectives to strategic emphases and investments concerning business model evolution, GloStra research focuses on the role of managerial cognition in business model evolution as well as on the location of corporate control of an individual firm.

Even if one commonly associates the word logic (e.g., earnings/economic/business logic) with the term business model, the role of managerial sense-making and cognitions has actually not been paid much attention business model research. This is one additional area on which GloStra research focuses. We acknowledge that corporate managers make decisions about elements of the corporate business model essentially based on their cognitions – such as beliefs about the competitive, institutional, and financial environment of the firm and beliefs about the firm’s own capabilities and competitive advantages.

Managers make decisions and direct corporate actions based on their cognitions and their cognitions are shaped by feedback from the outcomes of the corporate actions and by other signals coming from the firm’s external and internal environments. This makes the evolution of a corporation’s business model contingent on the evolution of the cognitions of corporate managers – giving rise to coevolution patterns and person-organization path dependencies, which GloStra is interested in.

Another underresearch area in the context of business model evolution is the location and dynamics of corporate control. Most research on business models has ignored the link of business model evolution of a firm to corporate governance in general. Even the most basic issue of whether business model is a concept pertaining to corporate level or business unit level is ill-defined in many accounts. Accordingly, also the relationships of the business model concept to the board and shareholders of a corporation have been mostly ignored, as has its relationship to corporate-level business phenomena such as diversified or focused structure.

These are important issues also from the perspective of managerial cognitions: whose cognitions is it that matter the most? Is it the corporate executives’, business unit leaders’, board members’, key shareholders’, or someone else’s, and what are the dynamics between the cognitions of the key actors? Who (if anyone) actually directs the evolution of a corporation’s business model? These are highly relevant questions for GloStra.