Understanding the Impact of Technology on Firms’ Business Models

This paper identifies the impact of a new global positioning technology on firms’ business models. 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. 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.

Understanding the impact
of technology on firms’
business models
Se´rgio Andre´ Cavalcante
Aarhus Schoolof Business – ASB,
Centre for OrganizationalRenewaland 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 willuse 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 importantin 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 iteasierto develop strategic initiatives while managing innovation,and underlines the
importance ofpurposive 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
Delphitechnique (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, 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.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1460-1060.htm
European Journal of Innovation
Management
Vol.16 No.3,2013
pp.285-300
r Emerald Group Publishing Limited
1460-1060
DOI 10.1108/EJIM-10-2011-008
The author would like to gratefully and sincerely thank Peter Kesting for reading previous versions
of this paper and sharing ideas and suggestions for improvements,and Ana Luiza de Arau´jo
Burchart, who also gave important comments and insights for making the paper better. The author
would also like to express gratitude to John Parm Ulhøi for his ongoing support to the research.
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A Danish consortium was recently established to identify ways of exploiting a n
satellite-based positioning technology, which will be available in 2013/2014. The
impact of this new technology on the business models of these firms is the focus
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 laym
pointof view,Galileo willbasically be no differentthan existing GPS technology.
However, it has the potential to improve on GPS in terms of availability, accuracy
reliability ofsignals.Thus, the expectationsare that this new technology will
considerably broaden innovative commercial applications in such diverse industri
energy,finance,agriculture,banking and environmental management (ESA,2005).
The research question guiding this study is: how will the new Galileo technolog
the companies’ business models? The view here is that much of the impact depen
extent to which companies use the technology in new applications (Adner and Le
2002). In other words, that technological impact is closely related to companies’ i
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 o
Cavalcante et al.’s (2011)process-based business-modelchange framework,which links
business modelchange to the innovation activities ofcompanies by distinguishing
between four different types of business modelchange,is used to guide a qualitative
investigation. The theoretical framework helps understand which kind of business
change will take place in the companies selected for the study.
The main contribution of this research is to use the business model perspective
prospective analysis of the impact of a new technology on the innovation activitie
companies. This allows a more proactive view of how individuals initiate different
of actions while managing innovation, and at the same time gives a more non-de
view of technological impact. The remainder of the paper is organised as follows.
reviews the literature on prospective analyses ofthe impactof new technology,the
difficulty of companies changing in more fundamental ways, and business model
which are the centraltopics ofthis study.This section also discusses basic notions
about the development of technological platforms and collaborative initiatives as
better understanding the joint work of the consortium companies.Section 3 presents the
framework which guides the empiricalstudy,the research setting,data collection and
analysis and the main findings. Section 4 discusses companies’ extension of their
models, the technology platform as a potential new business model and the impo
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 ofapproaches to analyse the potentialimpactof new
technologies.Scenarioand 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
context of uncertainty (Ho and Chen, 2009; Lynch, 2009). PESTEL analysis is a sp
checklist on political,economic,socio-cultural,technological,environmental and legal
aspects. One approach that can be used for a variety of purposes, from the predic
trends in science and technology to decision-making in different situations (Rowe
Wright,1999),is the Delphi technique,which uses questionnaires to collect opinions
from a group ofexperts and derive a consensus.Another analyticalapproach is
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“technology roadmapping”, a time-based layered chart (examples of layers are market,
products,technology and resources)which can be used for differentpurposes,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 etal. (1996)describehow thementalmodels (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 environmentalthreats (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 entrantcompanies which use new technologies to change the
“dominant logic” (Prahalad,2004),which often results in successfulcompanies,with
successfulbusiness models,failing.Thus,it is necessary to carry outprospective
research using an internalanalyticalperspective.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 e.g. Shafer et al., 2005). Many scholars have incorporated various
centralcomponents into theirdefinitions ofwhata business modelis, 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 modelas “an abstraction of the principles supporting the development of a
firm’s core repeated processes”.This process-based view of business models facilitates
the operationalisation 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 conceptualunderstanding is necessary
before an identification of central components of a business model.
However,it is not enough merely to identify and describe central components of a
firm’s business model.It is also essentialto 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.Voelpelet al. (2004),for example,presenta
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
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overcome, e.g. technical problems (in stage one) and environmental problems (in
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
mostimportantdriversof businessmodelchange,pointing outthat they vary
according to the different stages of a business model. Cavalcante et al.’s (2011) p
based framework for business model change is mainly based on the idea that the
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 impac
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 wi
Galileo technology),and it will be a “new” technology when it becomes available on th
market. The recently established Danish consortium is an example of companies
develop a technology platform to enable them to develop innovative commercial
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 commerc
(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 (Bald
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 inc
demand for its services,and to obtain adequate returns (Cusumano and Gawer,2002;
West,2003).Thus,Teece (2010)argues thatan essentialelementof value capture is
business modeldesign,whereas Miles et al.(2010)say that the newest organisational
form is collaborative based. Marshall (2004) notes that interorganisational collabo
not easy to manage,and that joint initiatives present significant challenges. Gupta et
(2006) emphasise the role of leaders in creating network environments.
3. Method
3.1 Case studies using a theoreticalframework
The research approach used in this study is the qualitative case study approach.
studies investigate a contemporary phenomenon in its own context (Yin, 1981), a
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, under
and identify how the Galileo technology will affect their business models. Thus, on
the initialsteps was to select a business-modelchange framework available in the
literature to guide the empirical investigation.
Although Voelpel et al. (2004), MacInnes (2005), Chesbrough (2007) and Reuve
(2009) offer valuable frameworks and different insights into the dynamics of a firm
business model,Cavalcante etal.’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 ofa firm’s business model.The
operationalisation of business model change is easier when adopting their sugges
of core repeated processes as the boundaries of the firm and their belief that com
innovation activities can affectthese boundaries.In this research,the boundaries
will facilitatea prospectiveanalysisof the impactof technology on thefirms’
business models.In their process-based view ofbusiness models,Cavalcante etal.
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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 fourdifferenttypes ofbusinessmodelchange(businessmodel
creation, extension, revision and termination), e.g. business model extension when core
processes are incrementally affected,and business modelrevision when they are
affected more radically (others might refer to the latter as business model innovation).
The four differenttypes ofbusiness modelchange can be briefly described as
follows: business model creation represents the materialisation of a business idea into a
new venture;business model extension refers to improving the existing business by
adding new core processes;business modelrevision means replacing existing core
processesby new ones;and businessmodeltermination refersto abandoning/
removing core processes.Each type ofbusiness modelchange 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
emergenttechnology into novelapplications.The company is stillanalysing the
commercialpotentialof the technology and determining how to useit 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 novelcommercial
applications. In this situation, the firm’s business model has been affected, in the sense
thatthe 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).
After selecting Cavalcante etal.’s (2011)framework to determine how the new
technology willaffectthe companies’business models (i.e.which type ofbusiness
modelchange willtakeplace),the nextstep of the investigation was to select
companies for the empirical study. The following section presents the empirical setting
and the companies selected for the investigation.
The firm’s
business model Extension
Termination
Creation Revision
Source: Author’s elaboration, based on Cavalcante et al. (2011)
Companies and emergent technologies
(Present situation)
Companies using new technologies
(Future scenario)
Non-fundamental
changes
The emergent
technology
Figure 1.
Framework guiding the
empirical research
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3.2 The consortium and the case companies
An important requirement of Galileo technology is that companies must themselv
ways of incorporating it into innovative products and/or services, since it is not a
solution.This is one important reason for the establishment of the Danish universit
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 t
develop a positioning-based technology platform to support the developmentof 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 s
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 comm
a variety of new positioning-based products and/or services.
The Danish consortium iscomposed ofsix core partners(threefirms, two
universitiesand oneapplied research institute),while anothereightfirms 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),SmartSoftwareand ictConsult(the two firms).DanInstitute
develops research-based technological services for commercial application,and plays
a major role in collaborationsbetween universities and companies in Denmark.
SmartSoftware supplies software solutions for health care management,positioning
and nationalintelligence/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 compa
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
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 expectation
uncertainty surrounding its development. Interviews were the primary source of d
with documents being a supplementary source ofinformation (e.g.an institutional
report by the ESA on the Galileo European Programme for Global Navigation Serv
and a description ofthe 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-structur
interviews (all of them recorded and transcribed) between October 2009 and Octo
2010.The interviews were mainly with middle managers.Otherkey informants
indicated by some of the managers were also included.Totally, seven interviews were
carried out at the applied research institute (with four managers, one senior deve
and one doctoral student; one manager was interviewed twice), four at SmartSoft
(all with managers)and six atictConsult(all with managers;one managerwas
interviewed twice). The number of interviews was not determined a priori. Since,
a few interviews in each of the organisations, informants were basically providing
same information,no more interviews were deemed necessary.
Three centralthemes guided the questions:main initiatives taken in connection
with the emergent technology,main initiatives for the near future and the expected
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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 willaffectthe 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 effortwas made to ask similar questions across participants to enable further
comparisons and also to validate information from different sources.Table I presents
some of the questions put to interviewees in the three companies.
The data analysis was mostly guided by a search for specific answers in relation to
the three centralthemes (which characterises a more deductive approach).Given the
relatively smallnumber ofinterviews and the factthatmapping details from the
interviewees’answers would notbe 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 “othertopics”(characteristic ofinductive data analysis),e.g.the
interviewees’constantemphasis on the importance ofsatisfying the needs ofthe
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
Main initiatives
taken
How have you selected the collaborating companies for the Galileo project? (DI2)
Can you describe DanInstitute’s collaboration with these companies? (DI5)
What did you do to prepare for Galileo? What activities have you already carried
out to respond to this new opportunity? (Sma1)
How did the idea for the research “case” come about? (ict1)
How did the focus group interviews begin? (ict5)
Initiatives for
the future
Will your business area commercialize some kind of software-based solution for
positioning? (DI2)
What are the plans for the future of the technology platform? (DI2-b)
Do you think that Galileo could help you to explore new markets? (Sma1)
Are you planning to commercialize the product inside the country, or abroad? (ict1)
Will it be possible to change the way you commercialize products? (ict1-b)
Impact of the
technology
Do you think that Galileo technology has in some way changed the way
DanInstitute works? (DI3)
Internally,does it mean that you have to do things you have not done before?
(Sma1)
Do you think that Galileo will have an impact in your business area or in other
areas of the company? (Sma4)
Is this kind of activity you are doing new? (ict1)
Will Galileo change the way you do business? (ict1-b)
Note: Questions were adapted and shortened for purposes of clarity and concision;abbreviations at
the end of questions indicate the company and the interviewee
Table I.
Examples of questions
asked during
the interviews
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data) with information from the institutional report on the Galileo Programme, an
the document prepared by the partner companies about the Galileo platform (sec
data).Table II presents some answers from interviewees in the three companies.
3.4 Main findings
Based on the interviews’answers and the information collected from the documents,
the following importantfindings can be described in relation to the three central
themes.The case companies have taken severalinnovation initiatives,the most
important of which was the setting up of a consortium for the joint development o
positioning technology platform, where each of the case companies were given sp
tasks.DanInstitute,for example,is responsible for the coordination of activities and
the overallprojectmanagement(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 p
in need of rescue from a building on fire), which will result in a commercial applic
Main initiatives
taken
“It is usually DanInstitute which initiates a network contact with partners” (DI5)
“There have been prototypes, demos,small brainstorms in-house to see what the
technology could be used for – but not any structured approach yet” (Sma1)
“The main initiative is in regard to the research area of the consortium”; “It is sti
too early to take further initiatives”(Sma4)
“The plant case,which is low-risk,represents 20% of the investment of the
company”;“The cattle case,which is more high-risk,represents 80% of the
investment” (ict1)
Initiatives for the
future
“It has not yet been decided what to do with Galileo – but it will be with external
partners” (DI2)
“We want to ensure that the results are going to the tool-box, but we also want t
ensure that things that are going to the tool-box will be used by other people
afterwards” (DI2-b)
“We are developing a website and will include a description of the tool-box on it;
we’ll see what sort of interest this creates – we might be attractive to companies
the website is only one part – we have to be more progressive saleswise” (DI2-b)
“The organisation will focus on export markets” (Sma1)
“The company is not quite sure what will happen in the future – it is necessary to
evaluate the market and see” (Sma3)
“We are not planning to commercialize this software abroad” (ict1)
“We are thinking of commercializing this directly to customers” (ict3)
Impact of the
technology
“It is not going to change the businesses of other companies dramatically, at lea
not at first” (DI3)
“The core competence of the company is not going to be changed by Galileo”
(Sma2)
“The impact of Galileo on the company will not be that significant” (Sma4)
“I think that we will do what we are used to doing,but in a better way” (ict3)
“There will be a huge impact,taking into account having to build up a huge
knowledge area like Silicon Valley” (ict4)
Other “I think we should take a look at the market and ask the customers” (DI4)
“We need to get into a close dialogue with customers to figure out what their
needs are” (Sma1)
“We focus on customer needs and we have a close dialogue” (Sma2)
“It is mainly user-driven,yes” (ict1)
Note: Answers were adapted and shortened for purposes of clarity and concision; abbreviations a
end of answers indicate the company and the interviewee
Table II.
Representative data from
the interviewees’answers
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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 ofmany of its current customers),and willresult in a
commercial 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 toolboxwill be availablecommerciallyto other companies.Managersat
SmartSoftware said that Galileo technology can be used in many of the company’s
products in the future.SmartSoftware wants to focus on exportmarkets,and the
company will analyse how they can best fit Galileo technology into this international
strategy.Managersat ictConsultsaid that the company willestablish anew
“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 improvementon previous versions ofsimilarprojects.Managers atictConsult
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 willhave a significant impact on the new
“knowledge area”,where positioning/tracking will be of fundamental importance.
Table III presents a summary of the main findings, organised by central themes and
company,thus enabling cross-firm comparison.
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 impactof 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 callthis “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 ofthe importance ofthe 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 commercialisation
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Company Initiatives taken Initiatives for the future Expected impact
DanInstitute Some initiatives include contacting
companies about joining the consortium to
develop the positioning technology
platform and applying for funding at
national level for the implementation of
the platform.DanInstitute is responsible
for the overall project management, and is
also carrying out basic research with its
partners in the consortium
Galileo is one among other positioning
technologies,and it is also about being a
supporting system.Even if the indoor
function does not work precisely as expected,
DanInstitute will use it in combination with
other technologies for more precise indoor
positioning,in different activities within the
research institute.DanInstitute wants to
ensure that the “toolbox” will be of
commercial interest to other companies
DanInstitute collaborates closely with
universities and companies, and its role in
project management gives its managers a
good overview of the innovation activities
of companies involved in the consortium.
Managers said that companies are
interested in using Galileo for incremental
improvements of their products/services –
this is mainly because they are small and
medium-sized enterprises,with a short-
term commercial perspective
SmartSoftware The company selected the “case” of indoor
positioning of people in emergency
situations.There have been
“brainstorming” sessions about possible
commercial situations (customers and
markets in connection with Galileo),but
this did not follow a structured approach
and no final decision has been made yet
There are many perspectives in using Galileo
in the company’s products.It would be very
important if Galileo could be used for indoor
positioning.SmartSoftware will focus on
export markets,and the company will
analyse how to fit the emergent Galileo
technology into this international strategy
Managers at SmartSoftware said that the
impact of the technology will not be that
significant for the company.The research
“case” will merely by an improvement on
previous versions of similar projects.The
emergent technology will not change the
core competence of the firm,and will not
change its current way of doing business
ictConsult After conducting a focus group study and
interviews with customers to understand
their needs,the company selected the
“case” of indoor positioning of animals for
research.The company recently
developed a commercial application for
outdoor positioning in arable farming
based on GPS – this initiative was
inspired by the Galileo project
The company regards Galileo as a long-term
research project,and thinks that indoor
positioning will mean new ways of observing
and tracking.The company will establish a
new “knowledge area” in collaboration with
other companies, where positioning will be of
central importance
Managers expressed two different views.
One is that Galileo will just be one more
commercial software application,similar
to the commercial application for outdoor
position in arable farming. 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 III.
Main findings from the
empirical research
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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 therewill be few challengesto overcome.Basically,the new
applications will represent just one more commercial software in their line of products
(as one manager atictConsultput it). This means an extension oftheir business
models,in accordance with Cavalcante etal.’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 commercialisation of
the applications into their current way of doing business.They willnot 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 ofprojects as a supportive technology in combination with other
technologies. Galileo is not regarded as a “disruptive” technology that will dominate all
othersand enableradicalnew approaches.At SmartSoftware,even though the
company willtry to adopta more internationalapproach,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
contextof 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 thecompany’sexisting businessmodel.When Galileo
becomes available,it will be incorporated into this new product,i.e.it will just be an
incrementalimprovementof the product.All this reinforces the assertion thatthe
companies will extend their business models.
Innovation research projects often use “cases” as pilot projects,in the sense that
theirsuccess subsequently leads to the developmentof a variety ofapplications.
However,this does not necessarily imply thatcompanies willcreate new business
models based on the success ofpilot 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 willbe business modelrevision.However,none ofthe managers in the case
companies said they were planning to do this – on the contrary,one of the managers
clearly stated that the technology willbe 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, 2000; Baron and Hannan, 2002; Baron et al., 1996; Huff et
al.,2001);inertia forces (Hannan and Freeman,1984;Kelly and Amburgey,1991);
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 theirbusiness models
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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
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 pot
be a new business model (i.e. business model creation according to the framewor
Creation in Figure 1) for the partner companies. According to Cavalcante et al. (2
businesses face differentchallenges,such as the need forcustomers to acceptthe
company’sproductsand/orservices,the importanceof developing thenecessary
commercialcompetencies and uncertainty about the success of initiatives.One of the
managers at DanInstitute said that the platform will also face similar challenges i
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 modelwill require a systematic and structured way ofworking.
Design is essential for capturing value from innovation (Teece, 2010), and carefu
model design is necessary for generating and evaluating commercial alternatives
The partners in the consortium have not yet fully realised the potential of this p
as a new business model for the partner companies, however. During the intervie
managers described how their own companies will explore the commercial oppor
of the platform when the technology becomes available,which means that they are not
thinking offurther collaboration in terms ofdevelopmentand commercialisation of
positioning applications. One manager at DanInstitute said that the worst scenari
the end of the project is that the partners discontinue their collaborative work. Ac
to DanInstitute’s managers, even if the new positioning technology does not reali
its expected potential,it is notlikely to “completely fallto the ground”,so further
collaboration would be important. One of the objectives of the Danish consortium
enhance collaboration and the exchange of knowledge between the partners, wh
line with the tendency for companies to enter into joint initiatives when searching
business opportunities.
One possibility is that the partners’ companies will not only continue the collab
work for maintaining and improving the technology platform, but also take a step
in terms of involving other companies in a network around the platform.This would
represent a new collaborative-based business model around the positioning techn
platform. One of the companies from the empirical research (ictConsult) expresse
of establishing a network of companies where positioning technology will be of ce
importance. And since DanInstitute already collaborates with other partners, the
a collaborative-based community (Miles et al.,2010) around the positioning technology
platform is already in place. This platform might represent a unique opportunity f
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
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 technologicaimpact
When a new technology emerges,companies often manage innovation by,first,
analysing its potentialimpact – the goalis to better understand the “threat” of the
technology to the company, and the commercial opportunities that it might offer.
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of the available techniques aim atproviding an overallperspective oftechnological
tendencies outside the organisation (this is the case with the Scenario and PESTEL
analyses and the Delphitechnique,for example).After a preliminary analysis of the
strategic importance of the technology,companies concentrate on the development and
commercialisation of novel applications that incorporate it.Currently,companies use a
more internalorganisational 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
commercialopportunities.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” thatwill subsequently lead to commercialproducts.However,
managers at the companies have not analysed the impact of the Galileo technology on
their firms’business models.
The adoption ofa business modelperspective 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 ofnew technologies (Christensen,1997).Established
companies are often unable to successfully explore a new way of doing business as a
resultof new technologies.However,this is not to say thatmostcompanies are
unresponsive to the emergence of new technologies.They do develop novelproducts
and/or services using new technologies, but are just unable to use them to develop new
business models.The empiricalstudy 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 commercialisation 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 theoreticalframework to analyse the future impactof a new
technology on thebusinessmodelsof firms.Existing techniquesfor foreseeing
technologicalimpactmostoften focus on the externalenvironmentof 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 ofbusiness models – was usefulto
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Firms’business
models

understanding the dynamic nature of the firms’ business models and the importa
individuals in taking actions which move their companies in new directions when
developing new commercial products/services. Although established companies h
change at all in more fundamental ways, this is important when creating new bus
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
or thinking of initiatives using this or other emergent technologies. Research base
a larger number ofcompanies would probably give a better understanding ofthe
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 theemergenceof new technologies,will predominantly extend their
business model.Another limitation is that the selected framework for business mode
change used in this research merely provides general guidance.
The impactof innovation activities on the business models offirms is stilla
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 impac
initiatives on firms’ business models. However, it is necessary to analyse how a ch
initiative affects a firm’s business model more precisely, i.e. in accordance with e
its central components. Therefore, a more detailed guide is needed, based on a p
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
i.e. it should not be limited to a context where companies take initiatives in react
emergent new technologies.
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Corresponding author
Se´rgio Andre´ Cavalcante can be contacted at:[e-mail]
About the author
Se´rgio Andre´Cavalcante is a PhD student at Aarhus Business School, Aarhus University, Den
and a member of the Centre for Organizational Renewal and Evolution (CORE). His resear
interest include business model dynamics,organizational change,and innovation management.
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