Business model innovation is about finding new ways for firms to create, deliver and capture value. That is, instead of innovating products, processes or technology, business model innovation involves changing the fundamental logic of how the company is doing business. This can be equally important for companies that are profit-seeking or those that aim to incorporate sustainability into their business models. The result of business model innovation is often the same: redefining the “rules of the game” of how business is conducted and hereby revolutionizing entire industries. Even though we know that business model innovation can be a great source of competitive advantage, to date, the majority of business model research is limited to conceptual work, with little guidance for executives on how to successfully initiate, implement and manage the innovation process of their firm's business model. At the Center for Service Innovation, we look at two important research areas within the theme of business model innovation: (1.1) Smart and sustainable business models, and (1.2) Best practices in business models.

Sugested themes:

Smart and sustainable business models

For more information please contact Lars Jacob Tynes Pedersen.

Best practices in business model innovation

Business model innovation means changing the logic of how companies do business. Drivers such as increased globalization, digitalization, advanced in technology, and changing consumer preferences are turning existing business model obsolete and requiring managers to think outside the box. The attractiveness of this research field is that you can approach it from very different research areas. That is, depending on your own personal research interests, you can examine the topic of business models from different perspectives. For example,

• If you are interested in new forms of innovation, such as open innovation, crowd-sourcing  or crowd-funding, you may like to investigate how trends are determining the need for designing new business models
• Relatedely, if you enjoyed our course on service innovation, you perhaps might like to look deeper into the topic of servitization and its impact on business model innovation. That is, how can firms shift from traditional, manufacturing-oriented business models to service-based business models? What are the challenges and critical success factors in doing this transformation?

• If you are interested in a particular industry, you may like to explore how traditional industries, such as the publishing industry, postal industry, telecommunications, or the financial industry are changing (e.g. due new technologies, big data) and what this implies for the need to innovate new business models.

• If you are interested in dynamic capabilities, you can explore the many organizational and managerial challenges in involved in innovating a business model, and identify what kind of important capabilities companies need to develop to become successful business model innovators.
• If you are interested in international strategy, relevant research questions for your thesis could entail investigating new business models for entering emerging or developing countries (e.g., business models for the bottom of the pyramid),  or delve deeper into the core questions of internationalization strategies.
• Relatedly, if you are interested in international entrepreneurship, you may like to explore business models of “born globals” and to determine what types of business models are most conducive for international entrepreneurship
• If you are interested in sustainability and/or social innovation, definitely check out WP 1.1. (with Lars Jacob Pedersen) or work with me towards finding the best business models to promote development and alleviate poverty in emerging markets.

For more information please contact Tina Saebi.

If you are interested in exploring strategic change, and in particular how service providers may transform towards more customer and experience centricity, MOST have access to companies that are interested and willing to share their experiences and challenges to students and researches that can help them understand and address these, and their managerial implications. Therefore, we will elaborate on how service providers can create favorable organizational conditions that stimulates and foster innovation, creativity and customer centricity, and we invite you to contribute to this on the following topics.

Suggested themes:

Innovative and adaptable cultures as sources of competitive advantage

• During the last decades there has been an ongoing debate about how organizational culture influence performance in organizations in different industries. Recently, this question has been highlighted again, as research suggests that adaptable cultures boost performance in industries that are confronted with disruptive changes and turbulence. This approach once again emphasize the importance of organizational culture, and the relationship between organizational culture and innovation.

How to develop change capacity?

• Because organizations need to adapt to turbulent environment, the concepts of organizational “change willingness” and “change capacity” have emerged as vital explanations and capabilities for successful and efficient organizational transformations. However, both research and practical experience implies that “Culture eats strategy for breakfast”, and that organizations often are reluctant to be caught in “the competency trap” after periods of growth and success. We therefore need to explore our understanding of how organization may develop “change willingness” and “change capacity” to adapt to turbulent environments and to facilitate proactive change and innovation in organizations.

How do transformational leadership and innovation?

• To develop strong brands at the corporate level, it has been argued that organizations needs to create alignment between three essential “strategic stars”; vision, culture and reputation. However, in many cases these seems to fall out of line, as organization aim at building strong and favorable corporate brands. The process of aligning vision, culture and reputation, and this way a strategically relevant culture has major managerial implications, and therefore needs to be explored.  

For more information please contact Tore Hillestad.

Service design is the cornerstone of service innovation, covering not only the process of developing a new service, but the whole way of approaching a firm’s delivery of customer value added.  Competitive advantage can be enhanced through service, i.e. the application of specialized competences (knowledge and skills), through processes, and performances for the benefit of customer experience. Therefore, design for service, is increasingly important going forward for service firms, and demands new questions and opportunities for empirical work and theory development in terms of the role, application and impact of service design.

Suggested themes:

• "Thinking like a designer can transform the way you develop products, services, processes – and even strategy"- Tim Brown. If you are interested in dynamic capabilities, you can explore the organizational and managerial challenges when an organization introduce service design and design thinking, and identify what kind of important capabilities companies need to develop to successfully use service design as a strategic instrument for innovation.
• If you are interested in service-dominated logic of marketing, you can explore how service design thinking is an instruments for a firm’s change towards a more service business logic. That is, how can firms shift from traditional, product-oriented business logic to service-oriented business logic? What are the challenges and critical success factors in doing this transformation?
• "Ideas are the easy part. Actually producing the idea as successful product is what is hard" – Donald Normann. If you are interested in innovation processes, you can explore how design thinking is used as means throughout the processes from ideation to implementation of impressive services. That is, what are the challenges and critical success factors in these processes?
• If you are interested in new forms of innovation, such as open innovation, crowd-sourcing or employee-driven innovation, you perhaps might like to look deeper into this topic though the perspective of added customer value in market place.
• If you are interested in service concepts, you can explore how a service concept is managerial instruments for strategic planning and decisions, and further for preparing the organization for stepwise changes toward a service-logic.  A service concept is a detailed description or prototype of what is to be done for the customer and how this is to be achieved.
• If you are interested in crowdsourcing for picking and retrieving groceries, or simplification ofthe checkout in the grocery stores related to payment and self-service, you perhaps might like to look deeper into servitization and its impact on  design of new services.
• If you are interested in behavioral economics applied to service design, then you can explore how to maximise business impact by applying principles from behavioral psychology in the design of services, or you can define how to use prototyping to rapidly validate business propositions.
• If you are interested in bridging the gap between design thinking and business thinking, you may like to “translate” between the modes of thinking to achieve impact. Businesses are used to solving problems though deductive thinking, while designers uses inductive thinking to understand problems. This fundamental difference in approaches prevents organizations from unleashing the full impact of creativity in multidisciplinary teams.
• If you are interested in looking at the business through the customer’s eyes, you perhaps might like to look deeper into questions like: How can we device constructive approaches to counter the standard operating model of developing products and services from the outside in and create powerful means of communicating the outside-in view with managers? Looking at a business through customers eyes can change the way businesses look at their organization, their systems and processes as well as products and services.

Contact person: Annita.fjuk@telenor.com.

The direct effects of service innovation are linked to cash flow resulting from customer
decisions (adoption and repurchase) and changes in customer behavior (change of patronage and adoption). Other effects include firm valuation and firm attractiveness on the talent and labor market. Estimating these effects will be building on research within the field of return on quality (Rust, Zahorik and Keiningham 1995) and later works pertaining to customer equity (see for example Hogan, Lemon and Rust, 2002; Rust, Lemon and Zeithaml, 2004). The indirect effects are related to any effects from service innovations that impacts productivity or organizational culture. For example will efforts to improve customer experiences through service design have an impact on how the firm is organized. Any transitional changes may have a short-term negative impact on performance before any positive impacts (for example increased efficiency and effectiveness or boost in moral) take place.

Suggested themes:

Development and scoping of a conceptual ROI model

• There are several areas where research is needed in order to create hypotheses and ultimately a conceptual ROI model. Five identified areas are described below. All of them could be subject to either literature studies and/or more empirical studies with analysis of data from companies:

1. Service profit chains and the return on quality investments

• • This research area is about the use of service profit chains to link service quality investments with financial effects. ROI is estimated/predicted using a chain of cause and effect relationships.
  • The two key articles are Putting the service profit chain to work (Heskett et al, 1994) and Return on quality  (Rust et al, 1995), whereof the latter is most relevant (due to both conceptual thinking and approach).
  • The main cause and effect relationships in the ROQ profit chain are: Investment à Improvement à Perceived service quality (PSQ) à Retention à Revenues/Market share à Profitability.
  • Cost reductions and customer acquisitions due to Word of mouth are also introduced as additional drivers for profit.

1. Customer-based valuation, CLV and customer equity

• • This research area is about strategic customer-base valuation as a tool to evaluate the attractiveness and profitability of customers (and companies), including RFM, data extrapolation and LTV/CLV. Chapter 3 of the 2006-book Customer relationship management contains a useful method overview.
  • A key concept to explore is Customer Lifecycle Value (CLV) and customer equity (the latter is an extension of the first). These are customer-based metrics for estimation of future sales/ profitability using NPV-thinking. The first CLV-article was written in 1998 (Berger & Nasr) and was followed by many more.
  • The use of CLV requires estimation of retention/customer-count, which can be very complex to predict (especially for non-contractual customer relationships). This has lead to a large number of mathematical articles on this subject, most of which are considered too complex for practical use.
  • There are also a set of articles about practical application of CLV and customer equity for investment evaluation/optimization. Key articles are Return on Marketing (Rust et al, 2004 - builds on ROQ thinking) and Marketing when equity matters (Hanssens et al, HBR 2008). Both of these articles introduce CLV and customer based-thinking in a service profit chain context.

1. Impact of servicification, technology and relationship intensity

• • This research area is about exploring the concept of servicification and the implications this has for customer thinking, innovation and ultimately financial benefits. The general SI literature forms a good basis for this (Vargo, Normann etc.). 
  • Another key article to explore is The service revolution and the impact of Marketing science (Rust et al 2014) where the importance of additional sales in a customer relationship (largely due to servicification) is emphasized.
  • In this article relationship intensity and impact of technology are presented as key drivers for sales. Each of these topics need further exploration to detail what this means in practice.   

1. Financial effects of customer experience and perceived value

• • This research area is about exploring the relationship between customer experience and a customer’s perceived value (of a service) and the corresponding effects on financial parameters.
  • One concept to explore is Customer Value Added (Sexton, 2009) Customer Value Added is a practical tool that can be used to evaluate marketing expenditures in terms of their expected financial results. CVA  is defined as the net value that an organization provides society as perceived by customers.
  • Another concept to explore is The wallet allocation rule (Keiningham et al, 2015) as an alternative to the alleged relationship between traditionalcustomer metrics (NPS, CSAT) and growth/ financial benefits.

1. Productivity, cost and organizational adoption

• • This research area is about exploring the cost aspects of service innovation, with special emphasis on the relationship to service quality.   
  • The pure cost aspects includes both investment costs, running/margin cost associated with a service or a customer relationship (retention costs etc.) and cost/productivity improvements.
  • Another key concept is service productivity optimization in (in light of servicification and technology development ref area 4), which challenges the classical (goods related) relationship between cost and quality.  A relevant article is Optimizing Service Productivity (Rust et al 2012).
  • Another (and related) concept to explore is the organizational/customer adoption rate and the effect that has on the realization of financial benefits in an organization. 

For more information please contact Harald Krogh.