1In the current rapidly changing environment, companies need to reconsider their value creation process and delivery to customers (Chesbrough, 2007; Teece, 2010). Consequently, they are increasingly using inter-organizational relationships to search for new logics of value creation (Börjeson, 2015; Latusek, Vlaar, 2018; Ruiz-Ortega et al.,
2017). Such new logics, along with the original mechanisms of value capture, are a source of business model innovations (BMI). According to Abdelkafi et al. (2013) BMI deals with changes in a value dimension of the company’s business model. It enables sustainable competitive advantage and facilitates responsiveness to change in the environment (Demil et al., 2018; Schneider, Spieth, 2013). 2As early as 2002, Zott and Amit (2002) highlighted that BMI differs from product or service innovations and requires focused studies. Although a well-established stream of research has examined BMI, existing analyses often focus on a single entity, whereas BMI involves transformations of inter-organizational relationships. Indeed, the definition of the business model (BM) as a system
of interdependent activities transcending the focal firm and spanning its boundaries emphasizes interdependencies beyond a firm’s boundaries and the impact of interlinkages between organizations (Zott, Amit, 2010). Consequently, we aim to obtain a better understanding of BMI and of how the new and the existing BM co-exist in complex networks of organizations. More particularly, we focus on the emergence of BMI through inter-organizational relationships and the alignment of that BMI within the
focal company’s network relationships (Foss, Saebi, 2017; Kringelum, Gjerding, 2018; Rydehell, 2019; Spieth et al., 2019a). 3Whereas most studies of BMI consider initiatives that emerge from top management and are deployed throughout the organization, we concentrate on a BMI that emerged from specific local conditions and was developed via a bottom-up
process (Mutka, Aaltonen, 2013). The challenge in this case was to organize and coordinate networks for the innovation with an initial BM and simultaneously to sustain existing relationships. Few research studies have explored how such BMIs emerge and how they co-exist with an existing BM at the network level (Foss, Saebi, 2017). 4This paper brings new insight to the
literature on BM dynamics by highlighting conflicts in resource allocation between the two business models as well as different mechanisms of value capture, which may later create tension if the BMIs interfere with the firm’s BM. Furthermore, we use the literature on inter-organizational relationships in the context of innovative projects to understand the challenges raised by the alignment of a BMI with the firm’s BM and with partner organizations’ BMs. In fact, as a firm’s BM interacts with
other companies’ BMs, a BMI in the focal company may disrupt core elements of other organizations’ revenue models. 5Our research focuses on one of the leading providers of multimodal transportation services and third-party logistics in the US. This organization mostly offers freight transportation and brokerage services. Its worldwide presence is characterized by a
network of more than 280 entities. We study a specific BMI, which involves suppliers and different entities in a network of organizations and customers. This BMI, which at first appears to be successful, can be characterized as an inter-organizational project because it is temporary and several actors with different backgrounds and localizations are involved. However, as the BMI was deployed into the network, major organizational changes occurred, as well as substantial transformations of the
relationships within the network and with suppliers. Consequently, a new organizational form was designed to enable the deployment of organization-wide capabilities, and the existing BM at the firm level had to be amended. We conducted a qualitative and case study analysis based on the process and on content approaches. We extracted and coded data into the network to characterize both the different dimensions of the BM and the changes in relationships among the entities in the network. 6This paper shows that, as a new BMI is deployed, actors specifically focus on mechanisms through which to create value inside the network, whereas one of the main challenges is to capture value from the BMI without destroying existing BMs at the firm level. The integration of different levels of analysis for the BM as well as the focus on a dynamic approach facilitates an
understanding of the tensions that occur as new BMIs are deployed in a network company. 7The paper is structured as follows. First, we build a theoretical framework for the BM concept and its deployment in a network organization, followed by a discussion of how BMs can co-exist at different levels in a network organization. Second, we present our research methodology
design and describe our case study. Finally, we discuss the results compared to those of previous studies. 8Over the last twenty years, we have witnessed a proliferation of academic research on BMs (Demil et al., 2018; Foss,
Saebi, 2017; Massa et al., 2017; Rydehell, 2019). One of the most popular definitions, which focuses on the relationships that a focal firm maintains with others to perform its activities, conceptualizes a BM “as a new unit of analysis, offering a systemic perspective on how to ‘do business,’ encompassing boundary-spanning activities (performed by a focal firm or others), and focusing on value creation as well as value capture” (Zott et al., 2011, p. 1038).
Consequently, relationships with customers, suppliers, service providers and other stakeholders influence a firm’s capacity to create and capture value (Casadesus-Masanell, Ricart, 2010). Indeed, BMs do not operate in isolation; they interact with various actors (Chesbrough, Schwartz, 2007). In that respect, the main contributions of the BM as discussed in the strategy literature are threefold. First, BMs show that value creation does not come solely from producers but may also be generated by
customers or other involved actors. Then, a BM derives competitive advantage from both the demand and the supply sides, and that advantage can be resource- or activity-based (Massa et al., 2017). Finally, it comprises the firm and network level, and value creation and capture are conceived beyond the company’s boundaries (Clauss, 2017). The BM then represents a relevant framework to analyse value creation both within the company and externally at the inter-organizational level (Spieth
et al., 2019a). 9To sustain their competitive advantage, companies need to renew their BMs, and it is thus important to regard the BM from a dynamic perspective (Wirtz et al., 2016). Those changes in BM can lead to two different types of BMIs: the re-configuration of the initial BM or the creation of a new BM (Massa, Tucci, 2014; Laasch,
2019). We focus on the creation of a new BM through adjustments involving voluntary and emerging changes in and between BM components (Demil et al., 2018). In established companies, those transformations have to be managed simultaneously with the reinforcement of the traditional BM (Khanagha et al., 2014). 10Despite the interest that
scholars accord to BMI, they agree that much remains to be explored (Demil et al., 2018; Foss, Saebi, 2017; Gassmann et al., 2016; Massa et al., 2017). In particular, BMI allows consideration of both changes within the company and the dynamics in its value network (Spieth et al., 2019a). That network includes the focal firm and its partner organizations, such as customers, suppliers and various stakeholders, and it influences both joint
value creation and distribution (Amit, Zott, 2015; Wirtz et al., 2016). However, we still have little understanding of the implications of BMI on the value network (Kringelum, Gjerding, 2018; Rydehell, 2019). This topic is of particular interest for network companies, which rely on their relationships with partners to innovate (Spieth et al., 2019a; Alcalde, Guerrero, 2016). Furthermore, in such an organizational form, different entities can create value and benefit
from the arrangement. Consequently, “the value created at one level of analysis can be captured at another” (Solaimani et al., 2018, p. 81). The challenge for such a company is to involve partners in the BMI process while simultaneously deploying a BMI that can maintain value creation for the different actors involved in its value network, not only for its clients, in order to remain competitive (Zollo et al., 2018). 11Researchers have already highlighted the challenges related to BMI in network organizations. First, BMI can compete with the initial BM for resources or lead to new processes that may conflict with current practices in the organization. Hence, BMI can be used to explore new paths and may be disruptive to the existing network. Demil et al. (2018) demonstrate that the
focal company needs to negotiate with stakeholders to convince them to interact in the value creation and capture processes under the conditions expected by the focal organization. The failure of complementors, suppliers or distributors to rally around the BMI often leads its implementation to fail. 12Second, BMI can jeopardize the value creation mechanisms of the
existing BMs. Thus, the co-existence of two systems of value generation may increase costs more rapidly than turnover, which would decrease the firm’s profitability (Moingeon, Lehmann-Ortega, 2010); cannibalization can also occur between the BMs (Khanagha et al., 2014); and the value of the existing distribution network can be undermined (Markides, Charitou, 2004). Chesbrough (2010) also notes that organizational processes need to change, and resources must be allocated
differently. 13To overcome these different challenges, researchers have prescribed different organizational arrangements. The first stream of research considers that companies should experiment within temporary structures. The new BM should be developed in separate structures and then reintegrated into existing business units (Markides, 2013). A second perspective
considers that companies should find a balance between an exploitation and an exploration logic in their value network. Thus, BMI can first be orchestrated by leveraging incremental changes within the focal company, and then new opportunities are uncovered at the network level and new mechanisms of value creation are explored with external partners. Those minor transformations could lead to major reconfigurations of the value network and the exploration of co-created new offerings (Kringelum,
Gjerding, 2018). We follow this line of argument and focus on the process of BMI. That process is characterized by a feedback loop between value creation and capture (Rodet-Kroichvili et al., 2014). The RCOV model is particularly appropriate for capturing those gradual transformations of value creation and capture within the value network, as it allows a dynamic perspective (Wirtz et al., 2016). We describe this model in the next section. 14Various generic BMs have been proposed in the literature (Moingeon, Lehmann-Ortega, 2010; Osterwalder, Pigneur, 2010); we focus on the RCOV model, as described by Warnier et al. (2016), because it explicates a multidimensional view of the firm and allows a dynamic perspective (Gassmann et al., 2016; Warnier
et al., 2018). 15As shown in Figure 1, the model is
characterized by three components: resources and competences, value proposition and organization. The resources and competences component encompasses assets as well as individual and collective capabilities, which are valuable and may be unique. Selecting the appropriate capabilities and assets to mobilize defines the offerings for customers. The perceived value that customers attribute to those offerings and the prices that they are willing to pay for them define the value proposition and the
revenue structure. Then, the company must organize its internal value chain and determine which activities to outsource. Such choices impact the cost structure and the value network. The value chain and network define the organizational component. The difference between receipt and payment flows defines the company’s margin and determines its profitability. Details of the four components are described in Table 1.
Table 1 – BM components according to the RCOV approach16These three components (resources/competences/organization/value proposition) represent organizational choices. A BMI can then be associated with changes in those components. Thus, Spieth et al. (2019a) decompose BMI in three dimensions: 17
18These different innovations in the BM components not only transform the firm’s BM but also the BMs of its partners (Casadesus-Masanell, Ricart, 2010). Consequently, as proposed by Spieth et al. (2019a), we study BMI from a network perspective. As that perspective is quite new in the literature, we bring complementary insights by leveraging the literature on inter-organizational relationships in innovative projects. In fact, this research stream has demonstrated that companies can regenerate their portfolio of offerings and have dynamic BMs through ideas emerging from inter-organizational partnerships (Leboulanger, Perdrieu-Maudière, 2012). For example, suppliers, in particular, can be sources of new ideas (Jouini, Charue-Duboc, 2018). However, new value creation offerings from external partners may disrupt value capture mechanisms and reshape the organization of the whole network. Consequently, in the next section, we highlight the different dimensions of inter-organizational relationships that may influence the emergence of a new BM or the co-existence of BMs. Characteristics of Inter-Organizational Relationships and BM Co-Existence19We focus our analysis on the networking form of company (a ‘network company’, for short), which has seen renewed interest in recent decades (Clegg et al., 2016; Ricciardi et al., 2018). Numerous companies deploy various forms of networks to enter international markets or externalize their activities. These networks provide resources to the company embedded in them, allowing them to generate profit (Barney, 2018; Ruiz-Ortega et al., 2017). Previous scholars have pointed out that networking also enhances innovation, flexibility and the development and diffusion of new knowledge (Solaimani et al., 2018). Network companies are characterized by particular patterns and relationships among different companies that conduct common activities. As BMIs are deployed in network organizations, companies tend to realign their objectives to create joint value (Demil et al., 2018). Thus, network companies are characterized by a high degree of integration between multiple types of socially important relations across formal boundaries, which determine the success of BMI. 20In network companies, value creation mostly comes from the network of internal and external relationships. Value creation refers to the choice of activities (content), the interlinkage and sequence of those activities (structure) and role repartition for those activities (governance) (Zott, Amit, 2010; Spieth et al., 2019b). In addition, the nature and flow of value transactions and exchanges should be considered (Weerawardena et al., 2019). Similarly, networks can be characterized in terms of content (type of resource flows, which are related to activity choices), structure (densely or loosely connected ties) and governance (coordination within the network). Consequently, we define how inter-organizational relationships can be impacted by BMI. 21Bankvall et al. (2017) differentiate between firm-centric and network-embedded BMs. As far as inter-organizational relationships are concerned, structural embeddedness refers to densely connected groups and companies that maintain ongoing and close relationships with partners (Uzzi, 1996). The BMs of firms that are densely embedded into networks of relationships cannot change independently (Bankvall et al., 2017). The transformation of a single company’s BM impacts the BMs of other firms. Furthermore, companies that are refining their BM may have to extend their set of relationships. Network extension can later lead to more radical BMI (Kringelum, Gjerding, 2018). Consequently, BMI transforms the set of inter-organizational relationships in terms of its structure. 22Different types of content also flow in relationships such as information, equipment, materials and support. Traditionally, research on BMs emphasizes exchanges of tangible resources as well as financial and information flows in networks of relationships. Thus, companies use their inter-organizational network to convert different types of resources into sources of value (Allee, 2008). However, less attention has been paid to social resources such as support, legitimacy or trust, which are also important for innovation (Newell, Swan, 2000). Thus, recent works by Bourcet et al. (2019) demonstrate that trust is needed in specific conditions to reinforce value creation, but it may be impeded by information asymmetries in the network (Bourcet et al., 2019). As companies conjointly develop BMI, social mechanisms within the network will be strengthened. Partners then work iteratively, and certain relationships, which at first were temporary, are reiterated and may become permanent. Thus, staff from different companies will get to know each other better and become more likely to trust each other. Consequently, BMI would change resource flow with the set of inter-organizational relationships. Finally, studies on inter-organizational relationships have highlighted the role of network coordination on value creation and capture. In particular, Dhanaraj and Parkhe (2006), highlight the role of hub firms in orchestrating the network and allowing value extraction, notably by managing innovation appropriability. However, as BMIs are deployed in the network, it may become difficult to align a constellation of companies with diverging interest (Berglund, Sandström, 2013). Thus, the focal firm alone may not be able to manage changes in the network, and BMI deployment may be blocked by members of the value network. 23To synthesize, companies that develop BMI in complex networks face several structural challenges. First, they need to support the BMI as well as to maintain the existing BM. This could be particularly challenging, as the structure of the network and the type of resource flow in the set of ties are transformed with the BMI. As a consequence, those structural conditions that are favourable for BMI may be detrimental for the continuity of the BM. Then, the focal firm may not be able to orchestrate those changes in the network, which may trigger resistance from members of the value chain. These tensions, which have not been studied in the literature, led us to unpack the dynamics of BMI development in network organizations. 24In this research, we focus on a case study of a network company that established a new BMI. The BMI challenged the firm and the network’s BM. Consequently, the company went through several trials to attempt to align its different BMs. The following section describes the case studied and the methods. Methods25We conducted a qualitative single-case study of a transportation company that is organized as a network of independent companies. The individual case study approach facilitates gaining insight from a specific case with a unique context and is particularly appropriate for studying transformations of BMs and value creation (Moyon, Lecocq, 2014; Achtenhagen et al., 2013). This case is particularly apt for studying changes in BMs and inter-organizational relationships, as the network of organizations involves both a dense set of internal agencies and looser ties with external providers. We hereafter refer to the entity in which the BMI emerges as the “Agency”. We began by presenting the case. Case Description26CH Robinson Worldwide is the leading provider of multimodal transportation services and third-party logistics. This company was set up in 1905, and its headquarters are in Minnesota, USA. It provides clients with logistics solutions as well as transportation services and technological solutions worldwide. The company draws its competitive advantage from its expertise in logistics processes and from specific technological tools as well as from its worldwide network of agencies. 27CH Robinson Europe BV comprises 43 agencies in 19 European countries. Its agencies are logistics service providers and act as brokers. The agency we are studying is specialized in road transport for all types of goods. The Agency operates in a specific geographical zone that has been allocated to it. All clients domiciled in that zone are referred to the Agency, and no other agency can interfere in the zone. The Agency does not own trucks to transport its customers’ goods, thereby eliminating the costs of acquiring and managing trucks. It charters carriers with different nationalities in all European zones, from the point of loading to the point of delivery, which enables the Agency to offer lower prices than its competitors. Therefore, we can represent the component of the initial BM as follows. 28In 2012, the Agency started to use the same truck and driver to propose round-trip contracts and paid the transporter based on the kilometres travelled instead of per discrete trip. Then, the Agency formed partnerships with certain transport providers. These carriers would commit their trucks to the Agency for periods of time. Carriers were then paid, based on kilometres travelled, with a minimum monthly fee, such that the Agency had total control of the truck. This arrangement between the Agency and their transporter represents a BMI, as it represents a new value proposition for clients and changes in the “organization” dimension of the BM. This BMI was subsequently extended across the Agency’s network and led to transformations in both the firm and its network’s BM. We detail our methods for analysing changes in the BM and inter-organizational relationships; then, we present our results. Table 2 presents the initial BM of the company. Table 2 – The initial BM components of CH Robinson according to the RCOV approach
Table 2 – The initial BM components of CH Robinson according to the RCOV approachLongitudinal Case Study29We carried out a longitudinal analysis to study changes in the BM and inter-organizational relationships based on the earlier prescribed methods (Moyon, Lecocq, 2014). We integrated both process and content approaches. Our data analysis jointly used secondary and primary data representing a seven-year period (from 2010 to 2017); these data were cross-checked with different sources to enhance the study’s validity. The primary data were gathered through semi-structured interviews. Each interview lasted from 30 minutes to 1 hour. These data were collected at two different periods to follow BM evolution. We also went to the site and observed working practices. In terms of secondary data, we had access to internal reports, the organizational chart and general information about the company’s organization. Table 3 synthesizes the different sources of data. Table 3 – Information sources
Table 3 – Information sources30First, we wrote a narrative, which we had validated by an expert, to study the evolutions experienced by the BMs and their contexts. That narration allowed us to identify the key events that shaped the BMI. 31Then, we used a content approach to understand how the BM and the inter-organizational relationships evolved throughout the three phases, similar to the method used by Ziaee Bigdeli et al. (2016). We first performed thematic coding of the BM at different levels according to the three main components used in the RCOV framework (resources and competences, organization and value proposition). Then, we coded inter-organizational relationships according to the different features described in the literature review. 32Next, we described the components of the BM concept as they existed at different periods of time, and we compared them to identify innovations in the BM (Casadesus-Masanell, Ricart, 2010). We also determined the attributes of the inter-organizational relationships, which allowed us to understand the interrelationships between BMI and the inter-organizational relationships. Results33We organize the results section according to the three phases that characterized the BMI. The first phase began as a team in the Agency was setting up the new BMI. The second phase ended as difficulties arose and the new organization was scrutinized; the last phase is characterized by the decision that the new BMI should remain at the Agency level. Figure 1 represents the initial BM. It particularly highlights the competition within the external network and the cooperation inside the internal network, which ensure a high profit for the company. Figure 2 – The initial BM
Figure 2 – The initial BMDescription of the BMI and the Changes in the Firm’s BM34The BMI emerged from changes in the context: specifically, the opening of the European Union triggered new opportunities for change in the freight sector. Hence, the enlargement of the European Union towards the countries of Eastern Europe between 2004 and 2007 opened the market to Polish and Romanian carriers, which became the main actors in the European freight transport market. These carriers seek to work with transportation companies that provide them with orders on a regular basis. In this case, the Agency used to work with Eastern European carriers. The embeddedness of relationships with those carriers opened the way for a BMI. Even though this BMI was highly related to this particular context, it was subsequently adopted by the US headquarters and was developed worldwide. 35The BMI involved both a new value proposition for the client and a new organization. The Agency guaranteed carriers a certain number of kilometres per month. In exchange, carriers provisioned their trucks to the Agency for periods ranging from 2 to 4 months. Hence, the Agency then became responsible for loading, tracking deliveries in time and place, and sending trucks to other loading locations, whereas traditionally, it had only been in charge of finding a transporter at the best price to do these tasks. Henceforth, it assumed total control of the trucks and came to handle them as if it owned them. Value Proposition36The introduction of dedicated trucks allowed the Agency to make a new proposition to its customers because it now controlled the truck’s itinerary. Previously, the Agency had chartered trucks on the spot. However, for various reasons, transporters preferred certain destinations to others. In addition, in certain periods of the year there was greater demand than available means of transport; transporters became less available, and transport prices soared. Furthermore, it became difficult to contractually set the conditions of the trucks prior to loading, which could adversely affect the quality of service and customer satisfaction. Finally, for certain trips, customers had to pay a very high price because the Agency could not find any load for the return trip, and the customers had to pay for the empty truck to return to its initial location. Consequently, the Agency could not guarantee its offering to its regular customers. The new value proposition provided a certain level of quality to customers by monitoring the trucks, which could be sent to the loading point, as described by the following verbatim transcript outlining the new value proposition: “Customers want to pay less, so we look for the cheapest… and when it’s cheaper, the quality is not always excellent, and it’s really difficult to manage everything, so now with the trucks that circulate, it is ours, so we can guarantee a certain quality, and it can stabilize our prices.” (Account Representative) 37This BMI also prices to be anticipated and assurances provided for a given offering for certain destinations. Finally, it enables lower prices by loading trucks for round-trip travel, and it aims to address customers’ needs with greater flexibility and customization, as described below: “For example, I was talking about loads to Bretagne that are very difficult to get out; the trucks belong to us, so we can move it to Bretagne because we already have internal knowledge to provide the re-out, so we can meet the specific and complicated needs of customers.” (Dedicated Truck Account Manager). Resources and Competences38The Agency’s BM relies on one main resource to manage all its activities: a technological platform called the “Navisphere”. This platform was developed by CH Robinson Worldwide and connects all its agencies throughout the world. It comprises a database where CH Robinson agencies share their information and knowledge of their customers and carriers to optimize process and transportation flows. In addition, the Agency mobilizes two types of logistical and transportation skills: skills that are developed individually by the Agency’s staff (such as bargaining skills and expertise in the geographical zone) and skills developed collectively within the CH Robinson Europe network (such as coordination among zones). These skills principally concern transportation in terms of price, transporter profiles, and region specificities, as described in the following verbatim transcript: “If we take the case of UK imports to go to France, the Agency is not [a] specialist, but the agency of Manchester and London know very well how to do that. So, if we want to have a chance to better position our offer in terms of price, it is better to ask the agency of Manchester or London.” (Client Manager) 39The resources and competences component has also undergone several changes. The main transformation is that the Agency has trucks available (thus, a new tangible asset). The team in charge of the BMI also acquired new skills insofar as its members now have deep knowledge of the driver and truck with which they are working. Moreover, they have to carry out new duties, such as finding loads for a truck and optimizing the truck’s itinerary, and develop new skills, such as knowledge of Europe’s zones, because the “dedicated trucks” cover all Europe. Thus, they have developed new competences. Internal Organization40The value chain of the existing BM is organized around two services: customer service, whose primary mission is to find new loads, and the mission of the carrier service, which is to find transporters for these loads. Responsibility for the transport of goods may be assigned directly to the Agency’s carrier service or may be entrusted to a carrier service belonging to another agency of CH Robinson Europe network that proposes transporters. This structure characterizes all CH Robinson Europe agencies: “Each agency works in the same way [with regard to its] customer and carrier service. Customer service creates an order, for example from Paris to Madrid, [and] there are two choices that are offered to Paris customer service; either they choose the carrier service of [the] Paris Agency, which assigns the truck, or it can choose another agency of the group that assigns this truck.” (General Manager) 41The BMI completely changes this organization. The Agency has added a new service in its organizational chart. This service supports a new process by which to circulate and guide dedicated trucks throughout Europe. Its objective is no longer to find trucks for customers but instead to search for loading opportunities (hence customers) for dedicated trucks from potential customers in its zones or from the CH Robinson Europe network in other zones: “Most of the people who work here are looking for trucks for loading, and dedicated trucks are looking for loading for their trucks…” (General Manager) External Organization42In terms of the value network, the relationships with transporters were disrupted. The task allocation between the Agency and its transporters was altered, and the Agency now provides more value for the transporters. Thus, these carriers have entrusted their trucks to the Agency for a short period. The Agency then covers round trips with the same truck and the same driver and provides a minimum fee to the carrier for a given period. Hence, the relationship between the Agency and those transporters has evolved from an on-the-spot market transaction to long-term cooperation, as described in this verbatim transcript: “Those transporters are interested in transport companies that provide them regularly with loads; for them, it is another way to run their trucks, with very little investment, because we make everything for them, and we choose the loading from point A to a point B, and from point B to a point C, and so on.” (General Manager) Transformation of Inter-organizational Relationships43The BMI was triggered both by new demands from customers and new opportunities from carriers. Thus, the mutual trust between certain carriers and the Agency allowed mobilization of a new resource: dedicated trucks without formalizing a contract, as described in the following verbatim transcript: “We do not make a contract; we are really flexible for the moment. There are things signed in some cases, but it is never signed for duration.” (General Manager) 44The embeddedness of the Agency with those transporters allows progressive validation of the BMI. This new BM also contributes to a strengthening of relationships with specific carriers, as they regularly work with the Agency. Thus, in terms of inter-organizational relationships, the BMI implies multiplex relationships with external partners who share both tangible resources (trucks) and intangible resources (knowledge). The intensity of exchange is high, as organizations frequently work together. The network structure is embedded because ties must be set up among partners to ensure maximum loading for each truck. This structure is based on informal governance mechanisms, such as trust and reciprocity. 45The BMI has also impacted relationships among agencies. Hence, traditionally, the revenue allocation among CH Robinson Europe agencies has led to uncivil competition between carrier services. At present, each agency is in charge of a specific zone, and it can only serve customers from within this zone. However, the carrier service of each agency can propose transporters from all Europe not only to its customer service but also to the customer services of other agencies. The revenue component of the firms’ BM is based on the margin that its customer services and carrier services can earn, as described in the following verbatim transcript: “If we make 1 euro of margin, 50% goes to the customer service because it had prospected the customer, and 50% goes to the carrier side, which had dealt with the transportation, so if I take a load from another agency, 50% goes to the carrier service of my agency, and 50% remains for the customer service of this other agency. It is then interesting for us to get the loads from other agencies.” (Account Representative). 46They compete to obtain loadings from customer service entities, while at the same time, they aim to access resources at the best price (by competing in bids for transporters). Our results therefore show that the firm existing’s BM aims at capitalizing on its CH Robinson Europe network agencies to obtain synergistic effects in terms of resources and competences. However, relationships between the Agency and its CH Robinson Europe network are characterized by a low level of embeddedness because they only work together when they need to or when they can maximize their economic profitability, but they do not maintain strong social relationships. The BMI involves a transformation of those relationships. Because each CH Robinson agency has an assigned geographical zone and cannot surpass it, sending trucks to other loading zones (knowing that the trucks will not circulate and cannot return empty to the Agency) therefore requires accepting loadings from the other CH Robinson Europe agencies responsible for those zones. Its performance depends on cooperation and complementarity between the different CH Robinson Europe agencies. Otherwise, the dedicated truck returns empty to Paris, and the Paris agency pays the carriers for these kilometres despite the truck’s being empty: “It’s about having the trucks available from the other agencies, loadings available from the other agencies, because it really works only if we have the loading of the other agencies because it is the network finally…” (General Manager) 47Because the BMI was successful at the Agency level, it was subsequently integrated by the CH Robinson Europe network, as each agency of this network operated in the same way and was looking for solutions. That led not only to an evolution in the firm’s BM but also in the external network’s BM. We discuss in the following section the path of this evolution in detail. The Experimentation Phase at the Firm and Network Level48BMI was progressively deployed in the other agencies as described below: “It began when I started working at CH Robinson: at the beginning, we made back and forth trips with the trucks; then, we decided to really handle trucks and roll them all over Europe…. So, using our network, we managed the trucks…” (Dedicated Truck Account Manager) 49While the new value proposition was simply extended to all European customers of CH Robinson, the organization and the resources and competences components of the network’s BM were amended, as described below. Resources and Competences50Once all CH Robinson Europe agencies had integrated the BMI, certain coordination mechanisms were deployed: the “dedicated truck” became a focal priority in the Navisphere platform, with each agency being responsible for exchanging information regularly and sharing its loadings with dedicated trucks within its zone. Furthermore, CH Robinson agencies in Europe were no longer competing for trucks and instead could focus on commercial activities: “I have four dedicated trucks, and I’m going to circulate them in Europe…We often found loads for the dedicated truck because we have the platform and have access to all CH Robinson loads throughout Europe, and we have the priority if we have a dedicated truck…” (Account Representative) 51The truck fleet also expanded to include different European carriers, which relates to the acquisition of new tangible resources. Thereafter, employees developed a better understanding of the conditions related to specific trips in Europe to determine where dedicated trucks should be allocated. They also developed their coordination skills with specific drivers. These skills mainly concern transportation with regard to price, transporter profiles, the specificities of certain regions, etc. 52
Internal Organization53In terms of the value chain, the Agency has added a new service in its organizational chart. This service facilitates the circulation and guidance of dedicated trucks throughout Europe. It finds loads either from potential customers in its zones or from the CH Robinson Europe network in other zones, as described in the following verbatim transcript: “[Traditionally,] most of the people who work here are looking for trucks for loading, whereas the department in charge of the dedicated trucks are looking for loading for their trucks, but there is place for both organizations.” (General Manager) 54This verbatim transcript describes the co-existence of the two BMs set up in different organizations. This co-existence also impacts the cost structure, as the network now needs to cover higher fixed costs (fees need to be paid to carriers regardless of the contracts generated by customers), whereas previously, it mostly sought to manage marginal costs. External Organization55In terms of the value network, the BMI leads to closer relationships with carriers’ services within the CH Robinson network, who no longer compete for trucks. Instead, they focus on commercial activities and negotiate to obtain the loads of other agencies. This is described in the following quote: “…You just have to respect, because when you come out of your zone and you take loads of other agencies, this is where a little negotiation [occurs] for the price. So, you have to negotiate with the other agencies to have their loads, but in my opinion, it’s easier in this way…” (Account Representative Carrier North) The Challenging Co-Existence of BMs and Conflicts in Inter-Organizational Relationships56However, the agencies refrained from cooperating as expected, since agencies tend not to share all information on the platform and do not allocate loadings to dedicated trucks. In fact, cooperation between CH Robinson Europe agencies tends to depend on fluctuations in the market price of transport. European agencies compare the prices of the dedicated truck relative to spot prices. When spot prices surpass the costs borne by an Agency when chartering a dedicated truck, the Agency does not share information with the other agencies and mobilizes the dedicated truck for its own shipments. Conversely, as spot prices sink below the prices paid by the Agency for a committed truck’s shipment, the other agencies from the network prefer to work with the transporter at a spot price to earn a higher margin. Those opportunistic behaviours not only affect the performance of the BMI but also generate tension among CH Robinson Europe agencies. 57
58In fact, the two BMs involve different content flows and governance mechanisms inside relationships. Whereas BMI fosters cooperative and reciprocal relationships as well as a formal mode of governance, the firm’s BM, which is based on spot transportation, fosters one-shot relationships based on a sharing of profit. 59
60Moreover, challenges also occur in terms of relationships with external partners. Thus, the BMI involves embedded and reciprocal relationships between representatives from the transportation service within the CH Robinson Europe network and with transporters. Consequently, it became difficult to maintain the benefit from those same transporters of dedicated trucks. Thus, relationship embeddedness lowers brokerage benefits, and the following verbatim transcript illustrates this conflict: 61
62Once more, the transformation of inter-organizational relationships in terms of structure and content alters the set of relationships that are needed to conduct the traditional BM, and it was decided that the new project BM should be deployed in a separate entity. Figure 3 synthesizes all the changes that have been triggered in the network due to the deployment of the BMI. The Disconnection Phase63In April 2016, a meeting among CH Robinson agency general managers was conducted to find a solution. Their reflection led them to consider reshaping the network. The management of the dedicated truck would be entrusted to a new agency independent of the other CH Robinson European agencies. This new agency would be in charge of negotiating with the carriers and supplying the entire CH Robinson Europe truck network with shipments, which could resolve the conflict of interest between the agencies based on obtaining and mobilizing the means of transport: “If we want to this to really work, dedicated trucks organization must not be as it is now. It should be in a completely separate unit and not dependent on agencies. Today, the dedicated truck depends on a profit centre that has to make money. Dedicated trucks today must make money, but it must not be associated with the agencies revenues within agencies because there are conflicts of interest.” (General Manager) 64The solution that was envisioned seems to sustain the claim that BMI and a firm’s BM should be deployed as separate entities with little connection. The need for separation could be justified by the fact that different governance modes and structures, in terms of relationships, are needed for the two BMs. 65However, in the end, the general managers decided not to set up this new agency as of yet because they had not determined how the agency could be managed in the future, particularly because of the unstable environment of road transportation in Europe. To avoid conflicts of interest relative to the BMI, the Agency has resumed going back and forth with the same truck and the same driver instead of spreading that truck throughout Europe. However, those trips are restricted to the Agency’s geographical zone and that of other agencies with which the Agency has embedded relationships. This solution can be qualified as a disconnection between the BMI and the firm’s initial BM. Figure 3 – Inter-organizational relationship dynamics and the evolution of BMs
Figure 3 – Inter-organizational relationship dynamics and the evolution of BMsDiscussion and Conclusion66Although the concept of the BM has attracted renewed interest from both academic and professional communities, BMI has been given less emphasis (Foss, Saebi 2017; Gassmann et al., 2016), whereas BM evolution is often a powerful trigger to deploy change in organizations. Indeed, changing the BM is central to creating sustainable values for business leaders and responding to changes in their environment (Demil, Lecocq, 2010; Schneider, Spieth, 2013). 67We bring new insights to the literature on BMI by using concepts from the literature on innovation in inter-organizational networks. Current studies focus on changes within the firm and mostly do not consider the transformations of external networks (Berglund, Sandström, 2013). The literature on inter-organizational networks allows us to take into account modifications of the structure, content and governance of the value networks, which may conflict with the logic of the existing BM. Thus, an increase in the level of embeddedness inside the network may be detrimental for the focal firm’s value capture mechanisms, while changes in the flow of resources may hamper value creation within the network. Furthermore, we highlighted governance challenges, as BMI often requires specific structures of cooperation. 68More particularly, we focus on the structure, content flow and coordination mechanisms inside networks. BMI requires changes to organizational structure, coordination and control mechanisms, but these dimensions are less explored (Foss, Saebi, 2017). BMI is often considered based on changes in a single or more components. However, this literature is particularly suitable for analysing BMIs because such an innovation requires the transformation of exchanges among companies in the value network to generate new revenue streams. It allows us to better understand the interdependencies and complementarities that exist between the BM of different organizations. On the one hand, complementarities with external partners’ BMs trigger a new value proposition and allow a new allocation of tasks and resources between the firm and its suppliers. Thus, the BMI emerges from specific relationships with partners and, ultimately, allows value creation and capture for both the focal firm and its partners. Consequently, the BMI was rapidly adopted and could be deployed at a local level without formal agreement. On the other hand, the interdependencies of the different firms’ BMs fell inside the network organization constraint of BMI deployment. Hence, whereas value was created for customers through new offerings and better quality, the mechanisms for value capture inside the network were not clear. Eventually, the BMI brought into question the revenue generation structure of the existing BM, and firms inside the network had to choose either to cooperate to enhance the network’s overall profitability or to benefit from both BMs to increase their own profit. This particular example demonstrates that the BMI and the firms’ BMs were not aligned. Thus, enhancing revenue generation for individual firms in the network do not always lead to the optimization of value creation inside the network, as in our example; this would lead to a certain potential for a truck’s loadings not to be shared across the network. Consequently, it shows that a company set up under a BMI should assess the interdependencies of that BM with other organizations’ BMs both at the firm and the network levels. 69Consequently, our article develops new insights into the literature on BMI in a network organization by demonstrating that the new project can differentially affect a local entity’s and the network firm’s BMs. The literature has already highlighted the complexity of new BM implementations in a networked organization and, in particular, depicted several factors that may hamper said implementation, such as the uncertainty of operational processes, a lack of availability of resources, the lack of clarity among the stakeholders’ strategic intent or their lack of consensus on operational aspects (Solaimani et al., 2018). Our work reveals other factors that may also impede the deployment of a BMI. In particular, it demonstrates that the lack of formal governance mechanisms at the level of the network to organize resource sharing (such as the availability of trucks) also plays a role at the network level. Consequently, specific governance mechanisms may have to be set up in a network organization to manage the allocation of new resources as BMIs are deployed. Thus, our work allows a better understanding of interactions among actors in a BMI, which have previously been overlooked (Wirtz et al., 2016). 70We also contribute to the debate on whether BMIs should be carried out in a separate unit or connected to the main BM. Our findings indicate that a BMI may be aligned with the agency’s BM but may also be disconnected from its network’s BM. Our results are consistent with Khanagha et al.’s (2014) work, which recognizes recursive iterations between different modes of separated and integrated structures. We found that, at first, it seems that this situation could lead to the creation of new structures supporting inter-organizational BMIs, which would be in line with the literature on structural ambidexterity (Raisch et al., 2009). Instead, we discovered that the deployment of the BMI was suspended, and the exploratory BM was then disconnected from the network’s BM. Thus, studies on ambidexterity in networks or the management of different types of ties to deploy exploratory and exploitative activities in a network provide a better lens through which to understand the performance of the BMI than do studies on structural ambidexterity. 71Naturally, a single-case study cannot lead to definitive conclusions; however, our research indicates that the concept of network ambidexterity could be an interesting notion by which to study BMI and answer challenges relative to the co-existence of BMs in networks. Indeed, building on the literature reviewed in this paper, our conclusion is that the literature on inter-organizational relationships in innovation helps to understand the challenges relative to the co-existence of BMs. 72Our work presents one main limit, which deals with the network’s boundaries. Thus, recent works point out that network company managers are adopting an ecosystemic representation of their inter-organizational relationships (Chatterjee, Matzler, 2019; Demil et al., 2018; Warnier et al., 2018). According to this representation, a focal company regroups different actors, which represent groups or individuals who create and capture value in the value network around a product, a resource or a technology, and coordinate its relationships with those actors through platforms (Garcia-Castro, Aguilera, 2015). Thus, ecosystems offer different opportunities to create and capture value by establishing closer relationships and interacting with different actors at the inter-organizational level (Chatterjee, Matzler, 2019; Demil et al., 2018). It could then be interesting to consider the Navisphere system as a broader platform for orchestrating the ecosystem and to carry out a detailed study of the alignment of interests around that platform in line with Adner’s (2017) work.
References
When two firms agree to integrate their operations on a relatively Co equal basis?A merger is a strategy through which two firms agree to integrate their operations on a relatively coequal basis.
What makes up the competitive structure of an industry?Customers, suppliers, substitutes and potential entrants—collectively referred to as an extended rivalry—are competitors to companies within an industry. The five competitive forces jointly determine the strength of industry competition and profitability.
What is a set of firms emphasizing similar strategic dimensions and using a similar strategy?A set of firms emphasizing similar strategic dimensions and using a similar strategy is called a strategic group. The competition between firms within a strategic group is greater than the competition between a member of a strategic group and companies outside that strategic group.
What is the set of factors that directly influences a firm and its competitive actions and responses within the industry?Terms in this set (32)
the set of factors that directly influences a firm and its competitive actions and competitive responses: the threat of new entrants, the power of suppliers, the power of buyers, the threat of product substitutes, and the intensity of rivalry among competitors.
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Are companies or networks of companies that complementary goods or services that are compatible with the focal firms good and service?
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