15 June 2017

A Systems Perspective on Business Model Evolution

The Case of an Agricultural Information Service Provider in India

By Chander Velu

Business models are complex activity systems that summarise the architecture and logic of a business, and defines the organisation’s value proposition and its approach to value creation and capture. The role of the business model is to act as a mechanism to enable the core value proposition to be transferred as benefits to the customer. This is especially so when new technologies provide the basis for new customer value propositions. However, often new business models need to be altered from the initial version in order to create the design that might be sustainable and profitable. We present a longitudinal and in-depth single case study of a unique, mobile-phone-based information service for farmers in India. The firm was formed by a major global blue-chip company. In particular, the case study examines how the new firm evolved its initial business model from a mobile-phone-based information service for farmers to a transactions platform for agricultural crops between buyers and sellers, and subsequently incorporating an engagement-based solutions provider business model for banks and other agricultural-related businesses.

The study builds on three themes emerging from the systems thinking literature in order to highlight the organisational capabilities that enables business model evolution. The three themes are:
  1. Balanced redundancy refers to the ability of the firm to stretch and create additional overlapping resources in order to perform experiments while running the existing business model.
  2. Requisite variety refers to the extent to which components of the system obtain a variety of information to understand the environment better.
  3. Cognitive discretion refers to the freedom to perceive and construct an idiosyncratic meaning.
We explain how these three constituent organisational capabilities enabled the new firm to innovate its business model in order to explore and develop an appropriate customer value proposition to create and capture value. The lessons from the paper would be helpful for managers as they create new business models and need to evolve them from their original design.

Read our papers:

Velu, C. (2017) A Systems Perspective on Business Model Evolution: The Case of an Agricultural Informational Service Provider in India, Long Range Planning, forthcoming.

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