Business Model Innovation and Socio-Technical Transitions. a New Prospective Framework with an Application to Bike Sharing
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Journal of Cleaner Production 195 (2018) 1300e1312 Contents lists available at ScienceDirect Journal of Cleaner Production journal homepage: www.elsevier.com/locate/jclepro Business model innovation and socio-technical transitions. A new prospective framework with an application to bike sharing * Arnoud van Waes a, , Jacco Farla a, Koen Frenken a, Jeroen P.J. de Jong b, Rob Raven a, c a Innovation Studies, Copernicus Institute of Sustainable Development, Utrecht University, The Netherlands b Utrecht University School of Economics, The Netherlands c Monash Sustainable Development Institute, Monash University, Melbourne, Australia article info abstract Article history: Most transition studies are historical in nature and fail to arrive at prospective conclusions about future Received 1 December 2017 potential. In this paper we develop a new prospective transition framework, which revolves around the Accepted 26 May 2018 interplay between business models and socio-technical contexts. By looking at the dynamics of Available online 28 May 2018 increasing returns, industry structure and the role of institutions, we analyze the upscaling potential of innovative bike sharing business models as introduced in Dutch cities over the past ten years (two-way Keywords: station-based, one-way station-based, one-way free floating, and peer-to-peer sharing). We find that Business model station-based business models are well institutionalized but harder to scale up, while the recent one-way Socio-technical transitions fl Bike service innovation free- oating model has the greatest scaling potential if institutional adaptations and geo-fencing tech- Bike sharing nologies are successfully implemented. Peer-to-peer sharing is likely to remain a niche with special Technology assessment purpose bikes. © 2018 Elsevier Ltd. All rights reserved. 1. Introduction Exploiting radical innovation opportunities usually requires an organization to deploy new kinds of business models (Johnson Over the past two decades, there have been many empirical and et al., 2008). In the context of the current paper BM innovation conceptual studies on the emergence of sustainable technologies, may help to potentially overcome some of the key barriers to the in particular, in the realm of sustainable energy and transportation upscaling of sustainable technologies (Wustenhagen and Boehnke, (Hekkert and Negro, 2009; Schot and Geels, 2008; Smith and 2008). For instance, sustainable energy technologies such as solar Raven, 2012). These studies analyzed the conditions under which energy often come with new ownership models, value chains, a niche technology succeeded in challenging an existing socio- customer relationships and financial flows, as they do not easily fit technical regime (Geels, 2002) as well as the role of supportive the traditional business models that evolved around large, technological innovation systems in such transition processes centralized energy systems. Another example are digitally-enabled (Hekkert et al., 2007). In contrast to the abundance of historical sharing economy platforms, which come with new business studies on transitions, only few studies have adopted a prospective models that make privately owned assets available for rental ser- lens regarding the future upscaling potential of niche innovations. vices. Despite this potential relevance of business models in the Prospective studies so far focused on the upscaling prospects of scaling of sustainable technologies, one can also expect that in the technologies and infrastructures (Hofman et al., 2004; Markard absence of deeper political, regulatory and market reforms, it is et al., 2009; Naber et al., 2017; Truffer et al., 2017). Our study also unlikely that business model innovation in itself will be sufficient to deploys a prospective analysis, but focuses on business models enact system wide changes, as argued by Bolton and Hannon (BM) (Jolly et al., 2012; Vasileiadou et al., 2016). Doing so, we follow (2016). This makes an analysis of the relations between business the growing interest in sustainable BMs in recent years (Bocken models and socio-technical transitions an interesting and topical et al., 2014; Bohnsack et al., 2014; Lüdeke-Freund and Dembek, avenue for research. 2017). To date, BM innovation has rarely been studied in the context of socio-technical transitions (Boons and Lüdeke-Freund, 2013; Boons et al., 2013; Huijben and Verbong, 2013; Wells, 2013). To analyze * Corresponding author. the upscaling prospects of competing BMs, we develop a new E-mail address: [email protected] (A. van Waes). https://doi.org/10.1016/j.jclepro.2018.05.223 0959-6526/© 2018 Elsevier Ltd. All rights reserved. A. van Waes et al. / Journal of Cleaner Production 195 (2018) 1300e1312 1301 prospective framework by going back to Nelson (1994) co- industry structure and institutions (Frenken, 2015; Nelson, 1994). evolutionary perspective on industry emergence as the interplay We apply the prospective transition framework to BM innovations of technology, industry structure and supporting institutions. Co- rather than technologies or infrastructures. Our framework dis- evolutionary thinking has been foundational in many of the tinguishes between innovation dynamics (in particular increasing widely used transition frameworks today such as the multi-level returns to adoption), industry structure (in particular the size, perspective (Geels, 2002) and technological innovation systems experience and embeddedness of firms) and institutional dynamics (Hekkert et al., 2007). We believe therefore that our new frame- (in particular changes in regulations, norms and beliefs). Analyzing work provides a fruitful starting point for our analysis. By means of niche innovations along these three dimensions, as well as their the framework, one can identify mechanisms supporting and hin- interplay between the dimensions, allows us to assess the drivers, dering upscaling. In doing so, one can provide a qualitative pre- barriers and future upscaling potential of innovative BMs, and diction regarding the future potential of each BM, that is, to assess accordingly, the odds of socio-technical transition. an innovation in terms of its likelihood to diffuse at a small or larger scale. 2.1. Business models We use our framework to analyze the prospects of four alter- native bike sharing schemes as introduced in Dutch cities over the BMs of different four bike sharing schemes are central to our past ten years, where bike sharing is broadly defined as services analysis. Attention for business models in the academic community that provide temporary access to a bike. The emergence of bike goes back as far as the late 1950s, but the concept only started to sharing, and cycling innovations more generally, can be understood receive substantial academic attention in the late 1990s during the as being part of a currently unfolding urban mobility transition. The rapid growth in internet-enabled businesses. Basically, a BM ex- research question is as follows: What is the potential of current plains “the rationale of how an organization creates, delivers, and business models for bike service innovations to scale up? To under- captures value” (Osterwalder and Pigneur, 2010, p.14). In various stand the prospects of bike sharing in the context of a transition perspectives on business models researchers typically distinguish process, we will pay attention to incumbent elements in the socio- between the fundamental building blocks of a business (e.g., technical mobility system, including actors (individuals, firms, or- Johnson et al., 2008; Osterwalder and Pigneur, 2010; Zott and Amit, ganizations), institutions (regulations, norms, beliefs) as well as 2012). Following Johnson et al. (2008) we here break down inno- material artefacts and infrastructure (Geels, 2004; Markard et al., vative bike sharing business models into four building blocks. 2012). In studying this phenomenon, we have the possibility to First, the customer value proposition relates to how the business study a potential mobility transition “in the making”. model fulfils a particular customer need. Examples of different propositions of bike sharing services are a ‘last-mile’ solution, 2. Theoretical framework tourist mobility or local urban transport. Second, the profit formula defines how the company generates financial value for itself, for We propose a prospective transition framework that serves as a example, through a subscription, pay-per-use model, or adver- heuristic device to assess the upscaling potential of niche in- tisements. Third, key processes refer to those processes that enable novations, such as new BMs, and their potential to reconfigure an the delivery of the proposition. Examples are processes such as existing regime or to evolve into a new regime. Our framework, maintenance and redistribution of bikes. Fourth, resources refer to visually depicted in Fig. 1, is a generic one as to allow for a those resources to deliver the proposition. For instance, besides comparative analysis across alternative BMs. The analysis is meant bikes, some systems are based on physical parking infrastructure to identify the endogenous (i.e. internal to the BM) and exogenous such as docking-stations.1 Finally, we adopt the view that according factors that may stimulate and hinder diffusion and further to Zott and Amit (2012), BM innovation can occur by adding new upscaling, as well as their mutual (mis)alignment through activities, by linking activities in novel ways or by changing one or increasing