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Understanding the impact of technology on firms' business models

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DOI: 10.1108/EJIM-10-2011-0085

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European Journal of Innovation Management (2013) Vol. 16, No. 3, pp. 285-300
Current issue and full text archive available at www.emeraldinsight.com/1460-1060.htm
© Emerald Group Publishing Limited
DOI 10.1108/EJIM-10-2011-0085

Understanding the impact of technology on firms’ business models

Sérgio André Cavalcante

Aarhus School of Business – ASB
Centre for Organizational Renewal and Evolution – CORE
Aarhus University, Aarhus, Denmark

Abstract

Purpose – The purpose of this paper is to identify the impact of a new global
positioning technology on firms’ business models.
Design/methodology/approach – The empirical setting was a consortium of Danish
organizations, established to develop a positioning-based technology platform as a
basis for innovative commercial products and/or services. Three of the consortium
companies were selected for case-study research.
Findings – The main findings were that companies will use the new technology to
extend their existing business models, and that the technology platform potentially
represents the creation of a new business model for the partner companies in the
consortium.
Practical implications – This paper is important in that it will help companies
understand technological impact from a business model perspective, thereby enabling
them to manage innovation better by distinguishing between the creation, extension,
revision or termination of business models.
Originality/value – The main contribution of this study is its use of the business
model perspective to analyse the impact of an emergent technology on companies’
innovation activities. This perspective makes it easier to develop strategic initiatives
while managing innovation, and underlines the importance of purposive human action
in adopting a proactive behaviour, reducing deterministic views on technological
impact.
Keywords: Business model, Technological impact, Innovation management, Change,
Processes, Companies, Denmark
Paper type: Case study

1. Introduction

Companies often analyse the commercial potential of new technologies by means of

such techniques as Scenario and PESTEL analyses (Ho and Chen 2009; Lynch, 2009),
and the Delphi technique (Rowe and Wright, 1999). The aim of most of these
techniques is to acquire an overview of market in terms of overall size and potential
competitors, but they do not specifically analyse how the new technology will affect the
organisation internally. Although many companies have successful business models,
they often stumble when faced with the emergence of new technologies (Christensen,
1997). Scholars have defined the term business model in different ways (Shafer et al.,
2005), and acknowledge that they change over the years (Voelpel et al., 2004;
MacInnes, 2005; Chesbrough et al., 2007; Cavalcante et al., 2011). The aim of this
research, which examines how a number of Danish companies deal with an emergent
new technology, is to analyse technological impact at the internal organisational level,
focusing specifically on the companies’ business models.

1
A Danish consortium was recently established to identify ways of exploiting a new
satellite-based positioning technology, which will be available in 2013/2014. The future
impact of this new technology on the business models of these firms is the focus of this
research. This new positioning technology, known simply as “Galileo technology”, is
being developed in the context of the Galileo Programme – a joint initiative by the
European Commission and the European Space Agency (ESA, 2005). From a layman’s
point of view, Galileo will basically be no different than existing GPS technology.
However, it has the potential to improve on GPS in terms of availability, accuracy, and
reliability of signals. Thus, the expectations are that this new technology will
considerably broaden innovative commercial applications in such diverse industries as
energy, finance, agriculture, banking, and environmental management (ESA, 2005).

The research question guiding this study is: How will the new Galileo technology affect
the companies’ business models? The view here is that much of the impact depends on
the extent to which companies use the technology in new applications (Adner and
Levinthal, 2002). In other words, that technological impact is closely related to
companies’ innovation activities. This study adopts a dynamic view of business models,
i.e. a business model might be changed more incrementally on some occasions and
more radically on others. Cavalcante et al.’s (2011) process-based business-model
change framework, which links business model change to the innovation activities of
companies by distinguishing between four different types of business model change, is
used to guide a qualitative investigation. The theoretical framework helps understand
which kind of business model change will take place in the companies selected for the
study.

The main contribution of this research is to use the business model perspective for a
prospective analysis of the impact of a new technology on the innovation activities of
companies. This allows a more proactive view of how individuals initiate different
courses of actions while managing innovation, and at the same time gives a more non-
deterministic view of technological impact. The remainder of the paper is organised as
follows. Section 2 reviews the literature on prospective analyses of the impact of new
technology, the difficulty of companies changing in more fundamental ways, and
business model change, which are the central topics of this study. This section also
discusses basic notions about the development of technological platforms and
collaborative initiatives as a way of better understanding the joint work of the
consortium companies. Section 3 presents the framework which guides the empirical
study, the research setting, data collection and analysis, and the main findings. Section 4
discusses companies’ extension of their business models, the technology platform as a
potential new business model, and the importance of using the business model
perspective to foresee technological impact. Section 5 presents the conclusion,
limitations of the study, and suggestions for further research.

2. Review of the Literature

Companies use a variety of approaches to analyse the potential impact of new

technologies. Scenario and PESTEL analyses, for example, are two analytical
approaches that companies often use. Scenario analysis is used for a generic analysis of
possible future environments and strategic thinking on possible consequences in a
context of uncertainty (Ho and Chen, 2009; Lynch, 2009). PESTEL analysis is a

2
specific check-list on political, economic, socio-cultural, technological, environmental
and legal aspects. One approach that can be used for a variety of purposes, from the
prediction of trends in science and technology to decision-making in different situations
(Rowe and Wright, 1999), is the Delphi technique, which uses questionnaires to collect
opinions from a group of experts and derive a consensus. Another analytical approach is
“technology roadmapping”, a time-based layered chart (examples of layers are market,
products, technology and resources) which can be used for different purposes, e.g.
product planning, strategic planning and knowledge-asset planning (Abe et al., 2009;
Phaal et al., 2004). Christensen (1997) suggests an analytical approach that takes into
account possible market demand and the technology’s trajectory. Adner and Levinthal
(2002) suggest that disruption is not an intrinsic characteristic of the technology itself –
rather, disruption is dependent on the application of the technology in new domains.

Although companies analyse the potential “threat” of new technologies in the market,
they rarely take this opportunity to renew themselves more fundamentally. Cognitive
aspects are helpful in explaining why companies fail to change (Huff et al., 2001).
Baron and Hannan (2002) and Baron et al. (1996) describe how the mental models (or
“blueprints”) of the founders of new ventures influence how they design their
businesses. According to these authors, initial choices become imprinted in the nascent
companies, shaping their subsequent evolution. Tripsas and Gavetti, (2000) describe
how the strong beliefs of top managers at Polaroid long influenced the way the company
did business. Organisational inertia, i.e. the forces which hamper companies’ ability to
make structural changes in the face of environmental threats (Hannan and Freeman,
1984; Kelly and Amburgey, 1991), and organisational routines (Pentland and Feldman,
2005), which play a significant role in path-dependence, are two other major factors that
help explain why established companies have difficulty in changing when faced by the
emergence of new technologies. Christensen (1997) argues that companies tend to
satisfy the demand of their current customers, i.e. it is difficult for them to explore new
markets. For this reason, it is often entrant companies which use new technologies to
change the “dominant logic” (Prahalad, 2004), which often results in successful
companies, with successful business models, failing. Thus, it is necessary to carry out
prospective research using an internal analytical perspective. In this research, the
analytical perspective is the impact of a new technology on the business models of
firms.

Research on business models has long focused on the identification and definitions of
central components (see, for example, Shafer et al., 2005). Many scholars have
incorporated various central components into their definitions of what a business model
is, leading to numerous concepts of the term (for a sample of definitions of the term
business model, see Morris et al., 2006). Given the lack of consensus, therefore,
Cavalcante et al. (2011) have suggested that the identification of central components
should only take place after a conceptual understanding of what a business model is has
been agreed. They define a business model as “an abstraction of the principles
supporting the development of a firm’s core repeated processes”. This process-based
view of business models facilitates the operationalization of the business model
construct. For example, a central component of the firm’s business model could be
described in terms of the component’s core repeated processes. This is in line with the
idea that a conceptual understanding is necessary before an identification of central
components of a business model.

3
However, it is not enough merely to identify and describe central components of a
firm’s business model. It is also essential to understand the dynamics of a business
model, i.e. how a business model changes over time. There is increasing research on
how to change a firm’s business model, and some frameworks to guide business model
change can be found in the literature. Voelpel et al. (2004), for example, present a
framework for the development of new business models based on four dimensions
(customer sensing, technology sensing, business infrastructure sensing, and
economic/profitability sensing). MacInnes (2005) has developed a framework for the
specific case of emergent technologies, taking into account different stages and specific
problems to overcome, e.g. technical problems (in stage one) and environmental
problems (in stage two). Chesbrough’s (2007) framework suggests different stages in
the evolution of a business model, each with specific characteristics. Reuver et al.
(2009) investigate the most important drivers of business model change, pointing out
that they vary according to the different stages of a business model. Cavalcante et al.’s
(2011) process-based framework for business model change is mainly based on the idea
that there are four types of business model change (business model creation, extension,
revision or termination), each with different challenges to overcome. It will be
necessary to select one of the existing frameworks to conduct an empirical study on the
future impact of the emergent Galileo technology on the business models of firms.

In this research, an “emergent” technology is simply considered as nascent, i.e. still

under development, with technical characteristics not yet precisely established (as with
Galileo technology), and it will be a “new” technology when it becomes available on
the market. The recently established Danish consortium is an example of companies
trying to develop a technology platform to enable them to develop innovative
commercial products and/or services (when the new technology becomes available, in
2013/2014). There is an increasing tendency for technologies to be developed for more
general commercial use (Gambardella and McGahan, 2010), and for companies to
develop new technologies through platforms, especially in high-tech industries (Gawer,
2009). A technology platform involves a few stable components with a high degree of
reusability (Baldwin and Woodard, 2009) and ‘rules’ such as standards to ensure
compatibility between the components and protocols that govern information exchange
(Eisenmann et al., 2009). After the creation of a new platform, it is necessary to develop
it over time, to increase the demand for its services, and to obtain adequate returns
(Cusumano and Gawer, 2002; West, 2003). Thus, Teece (2010) argues that an essential
element of value capture is business model design, whereas Miles et al. (2010) say that
the newest organisational form is collaborative-based. Marshall (2004), notes that
interorganisational collaboration is not easy to manage, and that joint initiatives present
significant challenges. Gupta et al. (2006) emphasise the role of leaders in creating
network environments.

3. Method

3.1. Case Studies Using a Theoretical Framework

The research approach used in this study is the qualitative case study approach. Case
studies investigate a contemporary phenomenon in its own context (Yin, 1981), and are
appropriate when such phenomena are not yet well-understood. The main idea of this
research was to contact companies and, based on a theoretical framework, understand

4
and identify how the Galileo technology will affect their business models. Thus, one of
the initial steps was to select a business model change framework available in the
literature to guide the empirical investigation.

Although Voelpel et al. (2004), MacInnes (2005), Chesbrough (2007), and Reuver et al.
(2009) offer valuable frameworks and different insights into the dynamics of a firm’s
business model, Cavalcante et al.’s (2011) process-based framework was chosen to
guide this investigation. The main reason for this was the parameter of analysis that
their framework offers to identify the boundaries of a firm’s business model. The
operationalization of business model change is easier when adopting their suggestion of
core repeated processes as the boundaries of the firm and their belief that companies’
innovation activities can affect these boundaries. In this research, the boundaries will
facilitate a prospective analysis of the impact of technology on the firms’ business
models. In their process-based view of business models, Cavalcante et al. argue,
however, that not all change initiatives affect a business model: business model change
takes place only when the firm’s core organisational processes are affected. The authors
identify four different types of business model change (business model creation,
extension, revision and termination), e.g. business model extension when core processes
are incrementally affected, and business model revision when they are affected more
radically (others might refer to the latter as business model innovation).

The four different types of business model change can be briefly described as follow:
(1) business model creation represents the materialization of a business idea into a new
venture; (2) business model extension refers to improving the existing business by
adding new core processes; (3) business model revision means replacing existing core
processes by new ones; and (4) business model termination refers to
abandoning/removing core processes. Each type of business model change presents
different challenges. Business model creation presents challenges such as risk and
uncertainty in relation to the new enterprise, whereas business model revision involves
challenges that are more significant than when the company simply extends its business
model.

Figure 1 illustrates the framework guiding the investigation. The left side of the figure
represents the current situation of the firm, which has not yet incorporated the emergent
technology into novel applications. The company is still analysing the commercial
potential of the technology and determining how to use it for the development of
marketable products and/or services. Thus, the technology has not yet affected the
firm’s business model. The right side of the figure represents the company in the future,
where it has incorporated the new technology into novel commercial applications. In
this situation, the firm’s business model has been affected, in the sense that the new
technology was used to create, extend, revise or terminate existing business model(s).
The arrow to the left represents the situation where the company has decided not to use
the new technology; consequently, its business model was not affected (initiatives taken
represent only non-fundamental changes).

5
After selecting Cavalcante et al.’s (2011) framework to determine how the new
technology will affect the companies’ business models (i.e. which type of business
model change will take place), the next step of the investigation was to select companies
for the empirical study. The section below presents the empirical setting and the
companies selected for the investigation.

3.2. The Consortium and the Case Companies

An important requirement of Galileo technology is that companies must themselves find

ways of incorporating it into innovative products and/or services, since it is not a
package solution. This is one important reason for the establishment of the Danish
university-industry consortium in 2008. The idea was to enhance collaboration and
knowledge exchange between the Danish partners in the consortium, the aim of which
was to jointly develop a positioning-based technology platform to support the
development of new applications. The consortium, which is part publicly financed, is
currently at the stage where participants meet regularly to carry out basic research in
connection with some specific research themes (e.g. algorithms, application servers and
protocols). The final result, i.e. the platform, will consist of a “toolbox” containing
software, hardware and methods that will be available to all interested firms wishing to
develop and commercialize a variety of new positioning-based products and/or services.

The Danish consortium is composed of six core partners (three firms, two universities
and one applied research institute), while another eight firms have expressed interest in
future collaboration. Two of the firms and the applied research institute (from the core
partner group) were selected for the study. The three partners are medium-sized
organisations, here called (fictive names): DanInstitute (the applied research institute),
SmartSoftware and ictConsult (the two firms). DanInstitute develops research-based
technological services for commercial application, and plays a major role in
collaborations between universities and companies in Denmark. SmartSoftware supplies
software solutions for health care management, positioning, and national

6
intelligence/security. IctConsult provides specialized advisory services, methods and
products in the agricultural sector.

The next section describes how data were collected in the selected case companies, and
how it was analysed afterwards.

3.3. Data Collection and Analysis

The aim of the empirical investigation in this study was to understand the points of view
of people in the selected companies. The main reason for this focus was the fact that
Galileo is still an emerging technology, and there are still a lot of expectations and
uncertainty surrounding its development. Interviews were the primary source of data,
with documents being a supplementary source of information (e.g. an institutional
report by the European Space Agency - ESA on the Galileo European Programme for
Global Navigation Services, and a description of the technology platform by the partner
companies, including information about the platform’s objectives, content and form, its
structure, and its organisation and form of management).

Data were collected from the three organisations by means of 17 semi-structured

interviews (all of them recorded and transcribed) between October 2009 and October
2010. The interviews were mainly with middle managers. Other key informants
indicated by some of the managers were also included. Seven interviews were carried
out at the applied research institute (with four managers, one senior developer and one
doctoral student; one manager was interviewed twice), four at SmartSoftware (all with
managers), and six at ictConsult (all with managers; one manager was interviewed
twice). The number of interviews was not determined a priori. Since, after a few
interviews in each of the organisations, informants were basically providing the same
information, no more interviews were deemed necessary.

Three central themes guided the questions: main initiatives taken in connection with the
emergent technology, main initiatives for the near future, and the expected change
impact of the emergent technology on the firm’s activities. These three main themes are
linked to the theoretical framework, and help understand the extent to which the new
technology will affect the firms’ business models. Understanding the main initiatives
that companies have taken and are planning to take in the near future (two of the central
themes), for example, was useful for an overview of how companies prepare themselves
to incorporate a new technology into their activities. This, in turn, was important to
understanding the type of business model change that their initiatives will lead to (i.e.
business model creation, extension, revision or termination). The expected impact of the
technology on the activities of the companies (the other central theme) was essential to
comparing their points of view with the conclusions of this research.

Since the interviews did not follow a strict sequence of themes, and the questions were
not pre-elaborated, they can be considered semi-structured. While the approach of
asking questions related to the central themes varied from interviewee to interviewee, an
effort was made to ask similar questions across participants to enable further
comparisons and also to validate information from different sources. Table 1 presents
some of the questions put to interviewees in the three companies.

7
 Table 1. Examples of questions asked during the interviews

The data analysis was mostly guided by a search for specific answers in relation to the
three central themes (which characterizes a more deductive approach). Given the
relatively small number of interviews and the fact that mapping details from the
interviewees’ answers would not be necessary, there was no need to use a specific
software tool for the data analysis. Unexpected comments were also taken into account
and grouped as “other topics” (characteristic of inductive data analysis), e.g. the
interviewees’ constant emphasis on the importance of satisfying the needs of the
company’s customers. Thus, the interviews were carefully read to search for both
specific answers that could be grouped into one of the three central themes mentioned
previously (deductive analysis) and other answers (inductive analysis). Triangulation of
data mainly consisted in comparing information collected from interviewees (primary
data) with information from the institutional report on the Galileo Programme, and from
the document prepared by the partner companies about the Galileo platform (secondary
data). Table 2 presents some answers from interviewees in the three companies.

8
 Table 2. Representative data from the interviewees’ answers

3.4. Main Findings

Based on the interviews’ answers and the information collected from the documents, the
following important findings can be described in relation to the three central themes.
The case companies have taken several innovation initiatives, the most important of
which was the setting up of a consortium for the joint development of a positioning
technology platform, where each of the case companies were given specific tasks.
DanInstitute, for example, is responsible for the coordination of activities and the
overall project management (and is also conducting research with the other partners in
the consortium). SmartSoftware is responsible for basic research on the specific “case”
of indoor positioning of people in emergency situations (such as people in need of
rescue from a building on fire), which will result in a commercial application, and has
also carried out “brainstorming” sessions on other commercial possibilities for Galileo.
ictConsult is responsible for research on the “case” of indoor positioning of animals (an
identified need of many of its current customers), and will result in a commercial

9
application for preventing production losses and the death of animals by locating
animals with abnormal behaviour.

In terms of initiatives for the future, DanInstitute’s managers said Galileo will be used
in different activities within the institute, in combination with other technologies – they
regard Galileo as just one more positioning technology (there are others on the market,
albeit not satellite-based). However, they have not yet decided more precisely what to
do with Galileo . When the consortium ends, DanInstitute will try to ensure that the
toolbox will be available commercially to other companies. Managers at SmartSoftware
said that Galileo technology can be used in many of the company’s products in the
future. SmartSoftware wants to focus on export markets, and the company will analyse
how they can best fit Galileo technology into this international strategy. Managers at
ictConsult said that the company will establish a new “knowledge area” in collaboration
with other companies, where positioning will be of central importance, and,
consequently, Galileo technology. However, they also pointed out that long-term
research on Galileo technology will be necessary.

In terms of the expected impact, managers at DanInstitute said that, based on their
overall view of the Galileo project, companies will be interested in using the technology
for incremental improvements of their products/services mainly because they are small
or medium-sized enterprises with a short-term commercial perspective. This is in line
with what managers at SmartSoftware said: according to them, the emergent technology
will not change the competencies of the firm, and their research “case” merely
represents an improvement on previous versions of similar projects. Managers at
ictConsult expressed two different views. One is that the company has long developed
software, and Galileo will be just one more commercial software application, similar to
the GPS-based application for outdoor positioning in arable farming that they have
recently developed. The other view is that Galileo technology will have a significant
impact on the new “knowledge area”, where positioning/tracking will be of fundamental
importance.

Table 3 presents a summary of the main findings, organised by central themes and
company, thus enabling cross-firm comparison.

10
Table III. Main findings from the empirical research

11
4. The technological impact of Galileo on firms’ business models

The next step in this research was to use the selected theoretical framework to analyse
the future impact of Galileo technology on firms’ business models. As previously
mentioned, Cavalcante et al. (2011) consider core repeated processes as the essence of
firms’ business models, and argue that there are four different types of business model
change, depending on how the core repeated processes are affected. Each type of
business model change presents specific challenges; if the core repeated processes of a
firm are not affected, they call this “non-fundamental” change. The data were
interpreted based on these ideas, which constitute the theoretical framework guiding the
research. This section discusses how Galileo technology will affect firms’ business
models, and concludes with an analysis of the importance of the business model
perspective in foreseeing technological impact.

4.1. Extension of Firms’ Business Models

In this initial stage of development of the technology, managers are mainly concerned
with improvements to products and/or services to existing customers. The
commercialization of the two companies’ positioning-based applications (indoor
positioning of people in emergency situations and indoor positioning of animals) will
take place in the context of their current business models. Consequently, their business
models will not change significantly, and there will be few challenges to overcome.
Basically, the new applications will represent just one more commercial software in
their line of products (as one manager at ictConsult put it). This means an extension of
their business models, in accordance with Cavalcante et al.’s (2011) framework (see
Extension, in Figure 1). Business model extension is related to improving the existing
business, and is similar to “incremental” innovation. The companies will fit the
commercialization of the applications into their current way of doing business. They
will not revise their business models (i.e. replace existing core processes with new
ones), nor discontinue current core processes (business model termination) (see Figure
1).

There is evidence from the interviews that business model extension will take place. For
example, the three organisations in the empirical study work closely with existing
customers in order to satisfy their needs. During the interviews, managers never once
indicated that their companies would explore new markets; rather, they constantly said
that they will try to satisfy their customers’ needs. DanInstitute will also use Galileo for
the development of projects as a supportive technology in combination with other
technologies. Galileo is not regarded as a “disruptive” technology that will dominate all
others and enable radical new approaches. At SmartSoftware, even though the company
will try to adopt a more international approach, which could lead to a revision in the
way it does business, their main intention is to fit the new positioning technology into
the company’s new strategy. The company will make choices in the context of this
internationalisation process (in connection with new customers and suppliers, for
example), but they will not change the overall logic of its business model. At ictConsult,
the company recently developed a commercial application for outdoor positioning in
arable farming, based on GPS. In essence, this application is just one more software
application that the company regularly develops for its customers, and it was
incorporated into the company’s existing business model. When Galileo becomes
available, it will be incorporated into this new product, i.e. it will just be an incremental

12
improvement of the product. All this reinforces the assertion that the companies will
extend their business models.

Innovation research projects often use “cases” as pilot projects, in the sense that their
success subsequently leads to the development of a variety of applications. However,
this does not necessarily imply that companies will create new business models based
on the success of pilot projects. It can be argued that, if the new positioning technology
allows the case companies to basically sell the same product, but with a different
revenue sharing scheme, a different cost structure, in a radically different value
network, or according to a substantially different value proposition, then there will be
business model revision. However, none of the managers in the case companies said
they were planning to do this – on the contrary, one of the managers clearly stated that
the technology will be incorporated into the company’s existing business model. There
is wide evidence in the literature that companies tend not to change fundamentally, for
different reasons, including: cognitive aspects, or mental models (Tripsas and Gavetti,
2002; Baron and Hanna, 2002; Baron et al., 1996; Huff et al., 2001); inertia forces
(Hannan and Freeman, 1984; Kelly and Amburgey, 199?); routines (Pentland and
Feldman, 2005); the tendency to satisfy the requirements of current customers
(Christensen, 1997). Established companies tend to keep their way of doing business
and to continuously try to adjust/refine their business models over time. It is both time–
consuming, costly, and risky to explore new markets, and companies also have
commitments to existing customers. The tendency to keep on doing business the same
way was clear from the empirical findings. Based on this, the impact of the emergent
global satellite navigation system on the companies’ business models will not be that
significant.

4.2. The Creation of a New Business Model

It became clear during the data analysis that the technology platform has the potential to
be a new business model (i.e. business model creation according to the framework – see
Creation in Figure 1) for the partner companies. According to Cavalcante et al. (2011),
new businesses face different challenges, such as the need for customers to accept the
company’s products and/or services, the importance of developing the necessary
commercial competencies, and uncertainty about the success of initiatives. One of the
managers at DanInstitute said that the platform will also face similar challenges in the
near future. It will be necessary to determine precisely how to provide services, how to
manage relations with customers, and which new resources and skills will be needed.
This new business model will require a systematic and structured way of working.
Design is essential for capturing value from innovation (Teece, 2010), and careful
business model design is necessary for generating and evaluating commercial
alternatives.

The partners in the consortium have not yet fully realised the potential of this platform
as a new business model for the partner companies, however. During the interviews, all
managers described how their own companies will explore the commercial opportunities
of the platform when the technology becomes available, which means that they are not
thinking of further collaboration in terms of development and commercialization of
positioning applications. One manager at DanInstitute said that the worst scenario after
the end of the project is that the partners discontinue their collaborative work.
According to DanInstitute’s managers, even if the new positioning technology does not

13
realise all of its expected potential, it is not likely to ‘completely fall to the ground’, so
further collaboration would be important. One of the objectives of the Danish
consortium was to enhance collaboration and the exchange of knowledge between the
partners, which is in line with the tendency for companies to enter into joint initiatives
when searching for business opportunities.

One possibility is that the partners’ companies will not only continue the collaborative
work for maintaining and improving the technology platform, but also take a step
further in terms of involving other companies in a network around the platform. This
would represent a new collaborative-based business model around the positioning
technology platform. One of the companies from the empirical research (ictConsult)
expressed the aim of establishing a network of companies where positioning technology
will be of central importance. And since DanInstitute already collaborates with other
partners, the basis for a collaborative-based community (Miles et al., 2010) around the
positioning technology platform is already in place. This platform might represent a
unique opportunity for the partner companies to not only collectively become more
innovative, but also to change the “dominant logic” (Prahalad, 2004) in the positioning
commercial field. In this context, the role of leaders in guiding this new business will be
of central importance.

4.3. The Importance of the Business Model Perspective in Foreseeing Technological

Impact

When a new technology emerges, companies often manage innovation by, first,
analysing its potential impact – the goal is to better understand the “threat” of the
technology to the company, and the commercial opportunities that it might offer. Most
of the available techniques aim at providing an overall perspective of technological
tendencies outside the organisation (this is the case with the Scenario and PESTEL
analyses and the Delphi technique, for example). After a preliminary analysis of the
strategic importance of the technology, companies concentrate on the development and
commercialization of novel applications that incorporate it. Currently, companies use a
more internal organisational perspective, such as “technology roadmapping”, the aim of
which is to facilitate product planning and knowledge-asset planning (Abe et al., 2009;
Phaal et al., 2004). To conclude, managing innovation in the context of emergent
technologies has overlooked how the new technology will affect a firm’s business
model.

The case companies’ analysis of the Galileo technology has concluded that it is of
strategic importance for their commercial activities because it will offer valuable new
commercial opportunities. Although none of the interviewees in the case companies
mentioned using specific techniques (such as Scenario and PESTEL analyses) in their
analysis, their decision to join the university-industry consortium demonstrates the
importance of the Galileo technology to them. During the interviews, managers often
mentioned that they consider Galileo of fundamental importance for the activities of
their companies in the near future. Since this technology is not yet available, companies
are concentrating their efforts on basic research and on developing novel applications
that can incorporate it in the future. Two of the case companies are carrying out basic
research on “cases” that will subsequently lead to commercial products. However,
managers at the companies have not analysed the impact of the Galileo technology on
their firms’ business models.

14
The adoption of a business model perspective when managing innovation is of
fundamental importance. Innovation is not only about the development of novel
products and/or services – it is also about rethinking the company’s working
mechanism. In many cases, a new technology enables companies to change the current
commercial logic of the market, and it is usually new entrant companies which grasp
more radical commercial opportunities. It is well-known that many leading companies,
with successful business models, have failed in the face of new technologies
(Christensen, 1997). Established companies are often unable to successfully explore a
new way of doing business as a result of new technologies. However, this is not to say
that most companies are unresponsive to the emergence of new technologies. They do
develop novel products and/or services using new technologies, but are just unable to
use them to develop new business models. The empirical study revealed that, while
managers in the case companies develop innovative products/services using Galileo
technology, they do not use the business model perspective to analyse the type of
business model change that the development and future commercialization of these
products and/or services will entail. Using the business model perspective to foresee
technological impact allows a more non-deterministic view of new technologies, and, at
the same time, more conscious choices, in terms of strategic directions, to follow.

5. Conclusion, Limitations and Further Research

This research uses a theoretical framework to analyse the future impact of a new
technology on the business models of firms. Existing techniques for foreseeing
technological impact most often focus on the external environment of companies,
whereas the focus here is internal – more specifically, on firms’ business models.
Moreover, this study underlines the link between the innovation activities of companies
and the impact of such initiatives on their business models. The theoretical framework
guiding this research – a process-based view of business models – was useful to
understanding the dynamic nature of the firms’ business models and the importance of
individuals in taking actions which move their companies in new directions when
developing new commercial products/services. Although established companies hardly
change at all in more fundamental ways, this is important when creating new business
models (as with the technology platform described in this study).

One limitation of this research is the context of the case companies, i.e. a Danish
university-industry consortium. There are certainly far more companies adopting and/or
thinking of initiatives using this or other emergent technologies. Research based on a
larger number of companies would probably give a better understanding of the impact
of emergent technologies on the business models of firms. Based on such a small
number of firms, it is not possible to determine whether established companies, faced
with the emergence of new technologies, will predominantly extend their business
model. Another limitation is that the selected framework for business model change
used in this research merely provides general guidance.

The impact of innovation activities on the business models of firms is still a research
field in progress. The process-based concept of the business model and the typology of
business model change were useful constructs in analysing the impact of initiatives on
firms’ business models. However, it is necessary to analyse how a change initiative
affects a firm’s business model more precisely, i.e. in accordance with each of its

15
central components. Therefore, a more detailed guide is needed, based on a process-
based view of business models, to identify the effect of a change initiative on each of
the core repeated processes of a firm’s business model. This should be a general guide
i.e. it should not be limited to a context where companies take initiatives in reaction to
emergent new technologies.

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