Value Creation and Value Capture Alignment in Business Model Innovation: A Process View on Outcome-based Business Models

David Sjödin*, Vinit Parida, Marin Jovanovic, Ivanka Visnjic

*Corresponding author for this work

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Industrial manufacturers are innovating their business models by shifting from selling products to selling outcome‐based services, where the provider (manufacturer) guarantees to deliver the performance outcomes of the products and services. This form of business model innovation requires a profound yet little understood shift in how value is created, delivered, and captured. To address this research gap, our study examines two successful and four unsuccessful cases of this shift. We find that effectiveness in business model innovation hinges on the three process phases that unfold in collaboration with the customers: value proposition definition, value provision design, and value‐in‐use delivery. We also find that that success is determined by the alignment of specific value creation and value capture activities in each phase: identifying value creation opportunities <> agreeing on value distribution in value proposition definition, designing the value offering <> deciding on the profit formula in the value provision design, and finally refining value creation processes <> regulating incentive structures in the value‐in‐use delivery. Our process model contributes to the literature and practice on business model innovation by providing a thorough understanding of how alignment of value creation and value capture processes is ensured, whilst paying special attention to their interdependence and the interactions between provider and customer.
Original languageEnglish
JournalJournal of Product Innovation Management
Issue number2
Pages (from-to)158-183
Number of pages26
Publication statusPublished - Mar 2020

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