Shifting towards smart, connected products : a business model innovation perspective

Abstract

Our everyday products become more and more digitally connected. From home appliances to toys to paper notebooks, products become embedded with sensory devices that allow them to provide more value than their predecessors. For firms, this often means to venture into activities that lie outside their core competencies. The re-orientation of some elements such as value proposition, key activities or key partnerships can instigate business model innovation. Thus, in this master thesis, we aim to give advice to managers who are challenged with the complexities that arise from the integration of smart, connected products (SCP) into their offering. Hereby, we address two pressing gaps in extant business model literature. Firstly, we investigate the opportunities and challenges that firms face when commercializing smart, connected products (SCP) and develop propositions regarding the effects of SCP on BMI. Secondly, based on three in-depth case studies of SCP sellers, we find that external partnerships, complex value chains, and new marketing strategies are common characteristics of BMI under the SCP commercialization. Further, our results indicate the necessity for firms to leverage on dynamic capabilities in order to bridge organizational challenges brought about by the integration of SCP. Finally, we find that firms seem to undergo a more radical BMI when the SCP represents a thorough change with respect to the overall product offering, and the firm does not yet have an established ecosystem of competencies to develop this new product. We suggest that an increase of radicalness of the BMI has to be supported by more agility and adaptability of the firms’ processes. Based on these findings we propose a framework, which explains SCP-driven BMI along the dimensions of agility and adaptability as capabilities of the specific firm. Finally, we offer managerial recommendations on how firms can effectively deal with the sourcing of digital know how in different way: an outsourcing, a full cooperation and an ecosystem approach.