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Sabrina Schneider
Department of Innovation Management & Entrepreneurship,
EBS Business School,
Rheingaustr 1, 65375 Oestrich-Winkel, Germany
Email: sabrina.schneider@ebs.edu
Patrick Spieth*
Department of Innovation Management & Entrepreneurship,
EBS Business School,
Rheingaustr 1, 65375 Oestrich-Winkel, Germany
and
Department of Innovation & Technology Management,
University of Kassel,
Nora-Platiel-Str. 4, 34109 Kassel, Germany
Email: patrick.spieth@ebs.edu
Email: spieth@uni-kassel.de
*Corresponding author
Thomas Clauss
Department of Corporate Management and Innovative Value Creation,
University of Marburg,
Am Plan 1-2, 35032 Marburg, Germany
Email: thomas.clauss@wiwi.uni-marburg.de
1 Introduction
An example in which external changes require firms to change their business models
can be found in the aircraft Maintenance, Repair and Overhaul (MRO) industry. MRO
providers in the aviation industry are characterised by high levels of specialisation within
their products and processes. Furthermore, they largely depend on the developments
among their direct airline customers and the end user of the products and services offered
by the airlines. Ever since the beginning of the aviation industry’s deregulation, this
industry has been coined by high levels of market volatility (Fu et al., 2010; Button et al.,
2011).
In current times, this industry experiences significant changes of the value chain due
to strategic shifts of vertical actors. In congruence with Davies’ (2004) findings in other
industries, two major developments challenge traditional business models of MRO
actors. First, upstream actors are extending their core business functions with additional
services to be able to offer integrated solutions to their customers. Second, customers are
focusing on their core capabilities and thus outsource parts of their traditional business to
dedicated service providers.
Through these developments, traditional business models of MRO providers are
challenged as these are positioned in between these two actor groups. They are facing
pressure by the entry of Original Equipment Manufacturers (OEM) into the after-sales
market but also new opportunities by changing customer needs as airlines increasingly
focus on their core business ‘flying’. To ensure survival, firms such as the MRO
providers are not only required to consider and drive the commercialisation of isolated
product or service innovations, but also to question their underlying core business logic.
While the developments of new airline business models such as low-cost providers
and their impact on traditional network carriers have been discussed in extenso
(e.g. Morris et al., 2005; Chesbrough, 2007; Johnson et al., 2008; Fageda and Fernández-
Villadangos, 2009; Casadesus-Masanell and Ricart, 2010; Engau et al., 2011; Nair et al.,
2011), business models and their innovation among further industry players – in
particular within the Business-to-Business (B2B) context such as the MRO industry –
have not been explored yet. As MRO providers urgently face the need to anticipate and
react to market and industry developments building on the innovation of their established
business models, this constitutes a relevant research gap. Therefore, a deeper
understanding of the drivers and the consequences regarding particular elements
constituting business model innovation of MROs – as B2B-operators in the aviation
industry – need to be further understood.
Based on an in-depth analysis of 12 cases drawn from the German MRO industry,
this paper enhances our understanding of business model innovation in the specific
context of MRO providers in the aviation industry. In particular, three research questions
are addressed: (a) what are the drivers of business model innovation in the B2B context
faced by MRO providers in the aviation industry? (b) Which elements constitute business
model innovation in the particular industry context? (3) Which kinds of business models
evolve under the industry specific conditions?
This paper contributes to achieving a better understanding of business model
innovation within a B2B-context, where traditional market players are exposed to
particularly high levels of industry dynamics. We apply a qualitative research design to
investigate the effects of specific industry dynamics on business model innovation in the
MRO industry. By doing so, we develop a cause and effect framework that explains
current changes in business models of this particular industry. Implications for
practitioners operating in the aviation industry can be deducted. The enhanced
Business model innovation in the aviation industry 289
understanding of business model innovation within the MRO context can be furthermore
transferred to differing B2B situations and thus contributes to our general understanding
of business model innovations in volatile B2B industries.
2 Literature review
retailing markets (Johnson et al., 2008), have forced companies to realise that their
conventional business models were failing. Aiming at achieving new and preferably
sustainable competitive advantages, a firm’s capacity to reinvent its own business model
in anticipation of environmental changes is increasingly regarded as a crucial
organisational competence for firms operating in turbulent markets (Hamel and
Välikangas, 2003; Amit and Zott, 2010). Business model innovation thereby represents a
conscious renewal of a firm’s core business logic. Rather than focusing on particular
characteristics of distinct service or product innovations, business model innovation
emphasises the commercialisation of the innovation applying an integrated perspective of
the firm’s extant business model elements and the value of their offering to the customer.
Business models naturally tend to be stable, in particular in times of success, when
efficient and reliable scaling of well-proven actions appears to be the obvious path to
follow (Doz and Kosonen, 2010). Overcoming barriers such as obstruction and confusion
among employees have been identified as a major challenge of firms pursuing business
model innovation (Amit and Zott, 2001; Chesbrough and Rosenbloom, 2002; Christensen
and Raynor, 2003; Chesbrough, 2010). A second challenge represents the vague
understanding of the business model innovation process. Academic literature
characterises it as an on-going learning process that relies on discovery and trial-and-
error rather than being an analytical approach (Chanal and Caron-Fasan, 2010; McGrath,
2010; Smith et al., 2010; Sosna et al., 2010). Questions such as what drivers of the need
for business model innovation exist, which elements constitute the process and what
formats of business model innovation emerge remain without answer – in particular
within the B2B-context.
Changes to the industry were first triggered by governmental deregulations. Since the
Airline Deregulation Act in the USA in 1978, a constant process of market liberalisation
has characterised global airline business (Button et al., 2011) leading to increasing
competition and pricing pressure within the industry (Swan, 2007; Fu et al., 2010). This
has facilitated the emergence of new market entrants, which introduced new passenger
airline business models, the most prominent being the low-cost carrier concept.
Pioneered by Southwest Airlines in the US market and Ryanair in Western Europe, low
cost carriers focus on reducing production complexity and minimising their cost
structures. This development pushed market competitiveness beyond its already high
levels (Fageda and Fernández-Villadangos, 2009; Barry and Nienhueser, 2010; Forgas
et al., 2010). Additionally, the aviation industry is exposed to a range of particular
characteristics – such as unstable fuel prices, confrontational trade unions, overcapacities,
economic downturn, ineffectual management, insufficient profitability, as well as
unpropitious events like terrorist attacks, outbreaks of disease and natural disasters –
intensifying its turbulent and highly volatile nature (Brunger, 2010; Franke and John,
2011; Malighetti et al., 2011; Morrell, 2011).
In response to the highly competitive environment of the industry, an increasing
tendency amongst airlines to concentrate on their core business ‘flight operations’ can be
noticed. The overall price level decline of air fares (Belobaba and Odoni, 2009) forces
airlines to constantly reconsider their cost structures. While newly founded airlines tend
to make extensive use of external value creation from the beginning of their operations
(Flouris and Oswald, 2006), outsourcing of activities has also become a frequently
applied measure by established full service airlines in order to improve their efficiency
and in consequence reduce costs (Brown and Rutner, 1999; Rieple and Helm, 2008).
Examples for frequently outsourced activities include in particular non-core activities
such as on-board catering, aircraft cleaning, ground handling or MRO services (Schnell,
2003; Carney and Dostaller, 2006; Rieple and Helm, 2008; Berritella et al., 2009). In
sum, opportunities for MRO service providers arise by new service offerings and a better
integration into the value creation process of the customer (Davies, 2004).
A second development in the industry threatens the business model of dedicated
MRO service providers. OEMs have expanded their activities into the after-sales market.
Manufacturers have previously focused on the development and commercialising of
technological innovations as potential source of differentiation and competitive
advantage (Franke, 2007; Bessant, 2009; Goldman and Nagel, 2009). Pressured by
constant shortening of product life cycles and high costs for R&D activities to cope with
the rapidity of technological developments (Goffin, 1998; Homburg et al., 2002),
manufacturers have started to explore additional value sources by providing services
related to their products (Gremyr et al., 2010; Lay et al., 2010). Despite manufacturers’
obvious economic and rising customer demand due to an increasing trend of
concentration on core competencies (Oliva and Kallenberg, 2003), it was not until
recently that manufacturers’ interest in service offerings increased (Jacob and Ulaga,
2008). Within the aviation industry, OEMs, such as General Electric, Rolls Royce, and
Pratt and Whitney provide examples of such activity expansion into the after-sales
market. With the entry of OEMs into this market, MROs have recently experienced the
emergence of a new rival providing a different level of competition to the market.
Therefore, besides the opportunities arising through new customer demands, MRO firms
have to respond to competitive pressures.
292 S. Schneider, P. Spieth and T. Clauss
Taking both developments into account, MRO service providers face requirements
and opportunities to change their existing business models in order to sustain their
competitive position.
3 Methodology
Joint workshops were conducted with the identified companies to present our
understanding of business model innovation, the study’s objectives and to identify
interviewees. This allowed to ensure that all interviewees were engaged in business
model innovation as well as to reduce a potential informant bias. Interviewing employees
with a multi-discipline background further helped to reduce a potential informant bias
(Miles and Huberman, 1994; Maxwell, 2005).
Overall, we conducted 12 in-depth semi-structured interviews with managers that had
at least four years of experience with the respective firm. A formal interview guide
avoiding leading questions was used to minimise a potential reactivity bias (Maxwell,
2005). Additional data sources were used when new themes emerged, in order to take
advantage of unique case features, and for the purpose of triangulation (Yin, 2003;
Eisenhardt and Martin, 2000).
Table 1 Overview of companies in the sample
Company Market scope Product and service offering Size Role of interviewee
National Private/
1 MRO (small jets) small Head of Operations
business jets
National Private/
2 MRO (small jets) small CEO
business jets
National Airline
Division manager
3 fleets, Wide range of MROs medium
MRO
private/business jets
International Airline
Full range of MROs, Senior Manager
4 fleets, private/ large
additional service offerings overhaul
business jets
International Airline
5 fleets, Wide range of MROs medium Head of Operations
private/business jets
International, Internal
Full range of MROs,
6 fleet and customer large COO
additional service offerings
airline fleets
National Private/ Local branch
7 MRO (small jets) medium
business jets manager
International Internal
Full range of MROs, Division manager
8 fleet and customer large
additional service offerings MRO
airline fleets
International Airline
Division manager
9 fleets, private/ Wide range of MROs small
MRO
business jets
National Internal
Specialised MRO for one Division manager
10 fleet and customer small
engine type MRO
airline fleets
International Airline
Area manager
11 fleets, private/ Wide range of MROs medium
Germany
business jets
National Private/
12 MRO (small jets) small CEO
business jets
294 S. Schneider, P. Spieth and T. Clauss
During the interviews conducted at on-site company visits, we discussed and analysed
drivers, elements and results of business model innovation of MRO providers. Additional
clarifications were sought through further meetings and email correspondence. The
interview guide was developed with respect to four criteria – non-directionality,
specificity, completeness and comparability – framing a focused interview (Merton and
Kendall, 1946; Flick, 2009).
We asked open questions as well as theory-driven questions referring to existing
theory (Flick, 2009). Open questions accounted for the openness, flexibility and iterative
character of grounded theory methods. Thereby, we were able to emphasise emergent and
unanticipated phenomena within our interviews and so to build a comprehensive
framework of business model innovation in the aviation industry. This data collection
strategy helped to enhance the quality of the discussions and increased the efficiency of
our interviews (Merton and Kendall, 1946; Flick, 2009). Each interview lasted between
35 and 60 min. The interviews were audio taped and transcribed by a professional
transcription service. This led to a total of 184 pages of transcripts and 610 min of
recorded material.
improve construct definitions (Eisenhardt, 1989). For the purpose of triangulation, all
three authors were involved in this process (Eisenhardt, 1989; Holloway, 1997). We
discussed the results during a workshop conducted with the majority of our interviewees.
Thereby, we confirmed the correctness and practicability of our results, even though the
aggregated results do not necessarily reflect each individual opinion.
4 Findings
The analysis of the interviews and prior literature indicates the influence of two external
driving forces on the innovation of established MRO business models: (a) market
characteristics of aircraft manufacturers and (b) structural characteristics if the airline
industry. MRO service providers show to conduct changes within both dimensions of
their business models: (a) MRO customer value proposition and (b) MRO internal value
generation. In consequence, two forms of business model innovation appear to result
among the MRO service providers: (a) customer benefit-oriented business model
innovation and (b) value co-creation-oriented business model innovation. Each of these
drivers, elements, results as well as their interlinks will be further elaborated within this
chapter. Figure 1 provides an overview of our findings.
competences, an increasing customer demand for MRO services has emphasised the
attractiveness of the after-sales market (2, 4, 9, 11). Consequently, MRO providers face
increasing competition resulting in intense price wars (5, 6, 7, 8, 11) and attempts of
OEMs to establish a protected market position (1, 3, 4, 5, 6, 7, 8, 10, 11, 12). MRO
providers therefore perceive “merciless price wars in particular with manufacturers
bidding for tenders they previously didn’t care about” (8). Additional protective
measures focus on three elements: primarily, OEMs emphasise direct collaboration with
airlines (1, 2, 4, 8, 11, 12). Furthermore, they apply legal restrictions, such as patents and
licences, to hinder their competitors (1, 3, 7, 10, 12). As a third measure, manufacturers
attack MROs’ profitability by increasing the prices of original replacement parts (4, 8).
Taking a market-based view, we focused our analysis on the structural industry
characteristics and the firm’s positioning within the industry as potential sources of
competitive advantage (Caves and Porter, 1977; Porter, 1980; Porter, 1985). According
to this perspective, supply-driven threats and emerging opportunities function as change
drivers. This was confirmed by all interviewees as they emphasised the new level of
competition that has evolved due OEMs’ entry into the after-sales MRO market.
Furthermore, we found evidence for the construction and enforcement of entry barriers
(Porter, 1985) that build a protected positioning of the OEMs. The conducted analysis
thereby reveals insights into the development of competition in the aviation MRO
industry. The particular industry’s focus allows focusing on how these developments
interact and impact on the different market players. It is illustrated how OEMs are forced
to expand their activity fields due to market characteristics and how this threatens the
positioning of the value offering of traditional MRO providers.
The expansion of OEMs into the after-sales market has led to an increase of
competition within the MRO market. Traditional MRO providers need to innovate their
customer value proposition to be able to provide unique selling points to their airline
customers. Therefore, we state:
Finding 1a: An expansion of MRO offerings through OEMs leads to a stronger need for
innovations within the MRO customer value proposition of traditional MRO providers.
The threat of shortening of product life cycles and the need for R&D due to technological
developments have been identified as drivers for manufacturers to increase their service
offerings (Lay et al. 2010; Gemyr et al. 2010). To build barriers and strengthen their
market position, OEMs tend to restrict access to resources that previously were
accessible. Our findings reveal how this forces MROs to find alternative solutions to gain
access to technical manuals which has been raised as an issue by seven out of
12 interviewees. Furthermore, the increasing need for R&D was raised as a critical
challenge for smaller MRO providers by four interviewees. The derived findings indicate
that this leads to the need for changes within the internal value generation of traditional
MRO providers.
The expansion of OEMs into the after-sales market has led to an increase of
competition within the MRO market. Traditional MRO providers need to innovate their
internal value generation to be able to acquire and remain the same technological
knowledge as the OEMs. We state:
298 S. Schneider, P. Spieth and T. Clauss
Finding 1b: An expansion of MRO offerings through OEMs leads to a stronger need for
innovations within the MRO internal value generation of traditional MRO providers.
The interview results show that MRO providers intensively analyse the developments
of their customers’ needs and requirements. The changing demand of airlines concerning
MRO services needs to be anticipated by MRO providers within their customer value
proposition. Consequently, we assert:
Finding 2a: Changes in MRO demand of airlines lead to a stronger need for innovations
within the MRO customer value proposition of traditional MRO providers.
Taking advantage of the extant customer knowledge acquired through previous
collaborations with airlines was emphasised by ten out of 12 interviewees. The
integration of customers into the internal value generation has been suggested to enhance
a firm’s capability of capturing customer’s needs and building valuable customised
solutions (Baron and Warnaby, 2011). The analysis indicates how traditional MRO
providers take advantage of their previous collaborations with airlines and how they are
aware that the intense knowledge of airline operations acquired represents a crucial
resource to further develop their product and service offering. The changing demand of
airlines concerning MRO services needs to be anticipated by MRO providers within their
internal value generation. Consequently, we summarise:
Finding 2b: Changes in MRO demand of airlines lead to a stronger need for innovations
within the MRO internal value generation of traditional MRO providers.
Table 2
Finding 1a Finding 1b
Expansion of MRO offering through OEMs MRO Value Offering Expansion of MRO offering though OEMs MRO Value Creation
Our understanding The expansion of OEMs into the after sales market has led to an The expansion of OEMs into the after sales market has led to an
based on interview results increase of competition within the MRO market. Traditional MRO increase of competition within the MRO market. Traditional MRO
and literature analysis providers need to innovate their value offering to be able to provide providers need to innovate their value creation to be able to provide
unique selling points to their airline customers. unique selling points.
Proof Quotations ‘OEMs have reshaped our industry. They represent a real threat for ‘We cannot build on 100% in-house developments – costs for
for our propositions and us’. (Senior manager overhaul, company 4) internal R&D are too high’. (Division manager MRO, company 3)
the framework presented in ‘They use their existing airline contacts – these ties are getting much, ‘Access to technical manuals is restricted. We rely on license
Figure 1 (random much stronger’. (Division manager MRO, company 8) agreements or joint ventures with OEMs’. (Head of operations,
selection) ‘OEMs started a new battle – they have aggressively entered the company 1)
after-sales market’. (Local branch manager, company 7) ‘Manufacturers increasingly deny access to their manuals’. (CEO,
company 12)
Cross-relation-analysis and All interviewees confirmed the new level of competition that has Restricted access to technical manuals was raised by seven out of
and differences to existing literature
variable-oriented content evolved within the MRO market due to the increasing service 12 interviewees. Furthermore, the increasing need for R&D was
S. Schneider, P. Spieth and T. Clauss
analysis orientation of OEMs and their entry into the after sales MRO market. raised as a critical challenge for smaller MRO providers by four
In particular, OEMs’ strong customer relationships with airlines (5), interviewees.
and their aggressive pricing (8) were emphasised.
Link to extant literature Structural industry characteristics and the firm’s positioning within The threat of shortened product life cycles and the need for R&D
the industry have been identified as potential source of competitive due to technological developments have been identified as drivers
advantage (Caves and Porter, 1977; Porter, 1980; Porter, 1985). In for manufacturers to increase their service orientation (Gemyr et
addition, supply-driven threats and opportunities have been al., 2010; Lay et al., 2010).
previously identified as potential drivers of the need to innovate
established business models (e.g. Teece, 2010).
Relevance and The conducted analysis reveals insights into the specific The findings indicate that in consequence to the identification of a
differentiation of our developments of competition within one particular industry. This change in market competition through the entry of OEMs into the
results from existing industry focus reveals further insides into the process of how these after sales market, the value creation of traditional MRO providers
literature developments interact with each other. It is illustrated how OEMs are is affected. To build barriers and strengthen their market position,
forced to expand their activity fields due to market characteristics OEMs tend to restrict access to resources that previously were
and how this threatens the value offering of traditional MRO accessible forcing MROs to find alternative solutions within their
providers. value creation.
Our understanding, proof quotations, cross-relation-analysis, link to extant literature
Table 3
Finding 2a Finding 2b
Changes in MRO demand of airlines MRO Value Offering Changes in MRO demand of airlines MRO Value Creation
Our understanding The changing demands of airlines concerning MRO services The changing demands of airlines concerning MRO services
based on interview results (outsourcing, demand for all-inclusive packages) needs to be (outsourcing, demand for all-inclusive packages) needs to be
and literature analysis anticipated by MRO providers within their value offering. anticipated by MRO providers within their value creation.
Proof Quotations ‘Airlines just want to fly. They don’t want to worry about the ‘Speed and high-quality are a given. We need to manage to tribute
for our propositions and technical details and they don’t have the competence to do so to the airline. We need to work closer with the airlines to
the framework presented anymore’. (Division manager MRO, company 8) understand their needs’ (Head of operations, company 5)
in Figure 1 (random ‘We can learn a lot from the airlines. Over the years, we have built
selection) ‘Airlines need to fly. Every minute counts. All they are looking for
are reliable solutions’. (CEO, company 2) a deep understanding of their needs’. (Head of operations,
company 1)
‘Our customers are highly concerned about the price.’ (Area
manager Germany, company 11) ‘We need to take advantage of our experience. Thus, we can
identify additional services that match the needs of our customers’.
‘And of course, price always matters. We can feel the pressure (Division manager MRO, company 9)
lasting on the airlines’. (CEO, company 2)
and differences to existing literature
Cross-relation-analysis Rising levels of price-sensitivity (8), decreasing in-house knowledge Taking advantage of the extant customer knowledge acquired
and variable-oriented of airlines (7) and an airline’s increasing concentration on its core through the previous collaboration with the airlines was pointed out
content analysis business ‘flying’ (6) have been emphasised as the most relevant by ten out of 12 interviewees as relevant.
developments characterising airline’s MRO demand.
Link to extant literature Airlines have been identified to increasingly concentrate on their MRO services are among the more frequently outsourced activities
core business (Fouris and Oswald, 2006; Rieple and Helm, 2008). on airlines (Rieple and Helm, 2008; Berritella et al., 2009). In order
Business model innovation in the aviation industry
The need for increasing customer-centricity and benefit-orientation to capture customers’ needs and to be capable of building
has previously been identified as potential response to changes in customised solutions, the integration of customers into the value
customer demand (Priem, 2007; Chatain, 2010; Teece, 2010). creation process has been suggested (Baron and Warnaby, 2011).
Relevance and The analysis shows how MRO providers perceive changes in the The analysis supports the previously suggested concentration of
differentiation of our demand behaviour of their airline customers. Furthermore, the airlines on their core business flying. Furthermore, it indicates how
results from existing findings support previous findings by illustrating how MRO firms traditional MRO providers take advantage of their previous
literature have identified a stronger customer orientation as their chance of collaborations with airlines and are aware that the intense
differentiation. The interview results show that MRO providers knowledge of airline operations acquired represents a resource they
intensively analyse the developments in their customer needs and need to use to further develop their value creation process. In
requirements. particular, they argue that they need to continue and intensify the
collaboration with their customers.
303
Table 4
Finding 3 Finding 4
MRO Value Offering Customer benefit-oriented business model MRO Value Creation Value co-creation-oriented business
innovation model innovation
Our understanding Innovations within the value offering of MRO providers in response Innovations within the value creation of MRO providers in
based on interview results to market and industry drivers result in customer benefit-oriented response to market and industry drivers result in value co-creation-
and literature analysis business model innovation. oriented business model innovation, in particular emphasising the
integration of customers.
Proof Quotations ‘Speed and high-quality are a given. We need to find something else ‘What we already do is not enough. Only if we manage to integrate
for our propositions and that distinguishes us from the OEMs’. (COO, company 6) the airlines into the value creation process, we can manage to offer
the framework presented ‘OEMs always want to sell new parts. Many times, that is not in the them the service they really need’. (Senior manager overhaul,
in Figure 1 (random interest of the airline. We can repair these parts much cheaper’. company 4)
selection) (Division manager MRO, company 3) ‘Co-operations with other MRO providers are promising’.
‘Problem-solving competencies make the difference. For example, if (Division manager MRO, company 3)
we help airlines to save fuel or early detect errors, they can benefit’. ‘Joint ventures with OEM’s are only a timely limited approach. But
(Division manager MRO, company 10) we need to collaborate to gain access to the technical manuals’.
and differences to existing literature
Cross-relation-analysis Ten out of 12 interviewees emphasised the potential of MRO Joint ventures and other forms of collaboration were rated as
and variable-oriented providers to customise the value offering in ways that allow their necessary but not sustainable measure by 82% of the sample. A
content analysis customers to receive additional benefits. Repairing techniques (6), majority of 64% of the interviewees suggested closer cooperation
tailored solutions (4), and additional services such as fuel saving between the MROs and their airline customers. Co-operations
methods (2) were among the mentioned value offerings. among MRO providers were suggested by only two out of 12
interviewees.
Link to extant literature A benefit-oriented service offering (Priem, 2007; Chatain, 2010) has Inter-firm relations with both corporate partners as well as a
been suggested as a potential source of competitive advantage. stronger integration of its customers have been argued to
potentially provide joint resources that allow a firm to generate a
competitive advantage (e.g. Dyer and Singh, 1998; Baron and
Warnaby, 2011).
Relevance and In alignment with previous suggestions, a positive effect of Our findings indicate that by entering collaborations with their
differentiation of our customer-benefit-orientation on a firm’s competitive advantage can customers, MRO providers assume to create a potential competitive
results from existing be identified. Precise measures applied in the aviation MRO industry advantage. These findings underline previous theory arguing in
literature are outlined. In addition, further potentials are identified. support of customer value co-creation. In the meantime,
collaborations with OEMs are not regarded as sustainable.
Our understanding, proof quotations, cross-relation-analysis, link to extant literature,
Business model innovation in the aviation industry 305
5.1 Contribution
Objective of this paper was to enhance our understanding of drivers, elements and forms
of business model innovation in a B2B-context. To do so, we qualitatively analysed these
relationships in the specific context of MRO providers in the aviation industry deriving a
context-specific framework of business model innovation. We were able to identify
aircraft manufacturer market characteristics and structural airline industry characteristics
as key drivers for the innovation of MRO’s business models. Technological
developments, increasing product life cycles and changing aircraft demand were
recognised as aircraft manufacturer market characteristics driving OEM’s expansion into
the after-sales market. As structural airline industry characteristics impacting on airline
demand, deregulation, overcapacities, rising fuel prices, economic downturn as well as
unpropitious events were identified. Both dimensions of business models, MRO
customer value proposition and MRO internal value generation, confirmed to be affected
by these drivers. Firms showed to emphasise repairing methods, tailored solutions and
additional services to increase customer benefits. Value co-creation involving partners,
competitors and in particular customers was applied to innovate the MRO internal value
generation. In consequence, two distinct forms of business model innovation – customer
benefit-oriented and value co-creation-oriented business model innovation – resulted.
This paper particularly contributes to achieving a better understanding of business
model innovation within a B2B-context, a setting that previously has been neglected
within research on the phenomenon. Our findings indicate that in addition to considering
their direct suppliers and customers as relevant stakeholders driving the need and joint
potential for business model innovation, B2B-operators further need to emphasise
developments among the end consumers of their direct customers as drivers and stimuli
for innovating their established business models.
A further contribution of this paper is to provide an example of how a firm’s business
model and its distinct dimensions serve as a highly useful unit of analysis in the context
of a firm’s response to environmental volatility. Our findings indicate that the identified
volatility drivers simultaneously impact on a firm’s customer value proposition and
internal value generation. Firms showed to separately respond to these drivers within
each of their business model dimensions resulting in different forms of business model
innovation. Both forms – customer benefit-oriented and value co-creation oriented
business model innovation – appeared as complementary approaches, which allowed to
be conducted individually as well as in a combined manner.
stakeholders involved in the industry’s value generation process and potentially beyond
these boundaries. Second, practitioners need to emphasise how their resources and
capabilities can enable them to innovate their customer value proposition meanwhile
increasing benefits of their customers. Our analysis shows that, in the MRO aviation
context, factors such as a high degree of new repairing methods, tailored solutions and
new additional services account for such customer benefit-orientation meanwhile
building on distinct resources and capabilities uniquely owned by the MRO providers.
Third, practitioners should not limit their search for opportunities on their own resource
and capability base. Collaborations with partners and the integration of customers within
the internal value generation potentially provide insights and joint competencies that can
lead to previously unachievable competitive advantages.
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