Tensions in Business Model Innovation and Sensemaking Strategies

Søren Post Larsen

Student thesis: Diploma thesis

Abstract

This thesis concerns the tensions arising when companies introduce new business models and explores ways in which these tensions can be managed using Weick’s concepts of Sensemaking
(Weick, 1995; Weick and Quinn, 1999; Weick, 2000). The business model is a core component in how an organization creates, delivers and captures value. It defines how an organization’s resources work together in achieving its goals and is therefore an underlying element of importance for leaders as well as employees (Osterwalder, Clark and Pigneur, 2010). According to Osterwalder et al.(2010), it is no longer sufficient to only focus on product or process innovation and companies need to adjust or innovate their business models in order to keep a competitive advantage in the market. Business Model Innovation (BMI) can be defined in several ways. Several scholars describe how the BMI involves the design of novel key elements to a firm’s business model or the architectural linking of these elements (Chesbrough and Rosenbloom, 2002; Amit and Zott, 2012; Foss and Saebi, 2017). Other perspectives are offered by Massa and Tucci (2014), who divide BMI into two different processes; A BMI can either be a Business Model Design or a Business Model Reconfiguration. The Business Model Design refers to the first time a company defines its Business Model and is often linked to entrepreneurial activity (Massa and Tucci, 2014). The Business Model Reconfiguration, on the other hand, assumes the existence of a business model and thus deals with aspects of how the model can be changed in order to maintain or increase competitive advantage (Massa and Tucci, 2014). In this paper, when I use the term BMI I refer to the aspects of Business Model Reconfiguration, because this thesis concerns the tensions arising when established companies introduce new business models.
Even though the ultimate goal for a company is to strengthen its competitive advantage, the process of reconfiguring and implementing a new Business Model entails both opportunities as well as barriers. In order for a BMI to be successful, the company has to acknowledge the potential barriers and tensions linked to these processes of change (Chesbrough, 2010). One of the challenges associated with BMI is the emergence of tensions or conflicts within the company, as the organization changes to adopt the new model.
Tensions in BMI is well described in the literature (Chesbrough, 2010; Christensen, Bartman and van Bever, 2016; Broekhuizen, Bakker and Postma, 2018), and by Sund et al.(2016), who show how a new business model and its implications for the organizational structure leads to tensions between managers and employees, when they ought to navigate a new organization not yet fully eveloped or settled. Finally, the same authors argue that when a new business model is implemented it can create a struggle for resources with other business units. One example of this is when the new and old business model coexist and managers compete over the same resources (Sund et al., 2016). The task of managing different coexisting business models and the tensions arising from this, is also described by Amit and Zott (2012). They identify important elements in BMI and how these elements can conflict with the existing company setup for example when managers protect their own assets and resist experiments. Chesbrough divides these different kinds of into either structural or cognitive and these tensions are relevant to study as these can act as barriers for the development and implementation of a new business model (Chesbrough, 2010). The literature on how to manage such tensions is sparse and leaves several questions open
(Chesbrough, 2010; Massa and Tucci, 2014; Christensen, Bartman and van Bever, 2016; Broekhuizen, Bakker and Postma, 2018). For instance, according to Chesbrough (2010), to manage he tensions in BMI it requires internal leaders who can manage these processes and support the company’s culture when embracing the new model. However, Chesbrough does not explain how these leaders can manage the tensions occurring when the organization changes.
Karl Weick’s sense-making framework provides an interesting perspective on the management of tensions in organisational change (Weick, 1995, 2000, 2009). Weick has described several cases where Sensemaking techniques and methods have been applied to changes and how managers can act to support Sensemaking for their employees. Weick describes seven aspects in the process of Sensemaking as: 1) Grounded in identity construction, 2) Retrospective, 3) Enactive of sensible environment, 4) Social, 5) Ongoing, 6) Focused on and by extracted cues and 7) driven by plausibility rather than accuracy (Weick, 1995).
This means that the process of Sensemaking is happening retrospective in all levels of the organization at all times, as both managers and employees are trying to shape a meaning of the situation, in which they take part (Weick, 1995). Sensemaking occurs from single events (cues) but takes place as a dynamic social process, where identities are (re)constructed and affected by the actions each person makes (enactment) (Weick, 1995). Thus, as a BMI is initiated and implemented, employees and managers continuously try to make sense of the occurring events in order to identify themselves in the process and, along the way, establish new ways of interacting in the altered social dynamics and the new organizational structure (Chesbrough, 2010; Sund et al., 2016). Sensemaking strategies in this context is defined as managerial tools to affect tensions, informants are sampled to include only managers at different levels.
Very few others have studied the direct link between BMI and Sensemaking. Malhotra argues that when the new business environment faces changes and new social dynamics, a sense-making model should be proposed to facilitate the implementation of a new sustainable business model (2000). Even though Malhotra (2000) describes a model, where sense-making could be applied, he does not define exactly what elements the sense-making model provides or how it can affect the changing organization. Another study of Brenk et al. (2019) argues that Sensemaking can reveal the need to change, when a new business model conflicts with the dominant business model. Thus, Brenk argues that the mindset should shift from managerial causation to intrapreneurial effectuation. Hence, Brenk et al. (2019) state that Sensemaking occurs during BMI, but do not go into details with how this happens or how. In fact, he notes that further studies should be made to gain knowledge on how specific interventions can affect tensions and when these interventions should be applied (Brenk et al., 2019). Through a literature review and qualitative interviews, this project aims to explore what kind of tensions arise from BMI and how Sensemaking Strategies can affect these tensions. In the following, the theoretical framework used to explore tensions in BMI and how to manage these, is unfolded. This leads to a gap in the literature as very few have studied the potentials of Sensemaking in managing tensions in BMI. Through qualitative interviews with stakeholders in Leo Pharma (a midsize Pharma business), these potentials are subsequently explored. The thesis ends with a discussion of tensions arising from BMI and how Sensemaking strategies can affect these tensions.

EducationsGraduate Diploma in Innovation Management, (Diploma Programme) Final Thesis
LanguageEnglish
Publication date2020
Number of pages71
SupervisorsMarion Poetz