Abstract
A business model is an essential part of a company—regardless of whether the company is a small entity or a global enterprise. Interest in business models in research and in practice has grown significantly in the last decade. Strategic initiatives and changes in business models are particularly cost intensive and uncertain. Thus, the analysis and understanding of a business model’s structure and its changes induced by strategic initiatives is crucial. Approaches to business model analysis needs to support strategists and decision-makers, enabling them to evaluate strategic initiatives and alternatives in fluent environments where there is little or no prior experience. However, regrettably, the qualitative approaches currently available fall short of providing sound guidelines especially in uncertain, highly volatile situations that involve rapid technological developments and agile competitors, which middle managers and top-level executives are often faced with. The quantitative approach used in the article concerning business model analysis is founded on a systemic simulation methodology which enables decision makers to obtain insightful experimental designs with a company’s business model. Computational modeling helps to understand business models as complex systems with dynamic interdependencies and thereby it can complement existing tools. This article uses the approach for a case study in the e-commerce business. It discusses advantages and disadvantages of computational modeling as a strategy and management tool.
Similar content being viewed by others
Notes
The term tool is a generic name for frameworks, concepts, approach, or methods (Jarzabkowski and Kaplan 2015).
In the following, we refer to the company as MIFLORA.
In the following, model variables are written in italics.
Zendesk (http://www.zendesk.de) is a customer service provider. It is designed for companies that want to establish and improve their customer relationships.
©Vensim (www.vensim.com) is developed by Ventana Systems.
References
Abdelkafi, N. (2012). Open business models for the greater good. Die Unternehmung, 66(3), 299–317.
Amit, R., & Zott, C. (2001). Value creation in E-business. Strategic Management Journal, 22(6–7), 493–520.
Andersen, D. F., & Richardson, G. P. (1997). Scripts for group model building. System Dynamics Review, 13(2), 107–129.
Andersen, D. L., Luna-Reyes, L. F., et al. (2012). The disconfirmatory interview as a strategy for the assessment of system dynamics models. System Dynamics Review (Wiley), 28(3), 255–275.
Anthony, R. N., & Govindarajan, V. (2007). Management control systems. Boston: McGraw-Hill.
Ashby, R. W. (1956). Introduction to cybernetics. London: Chapman & Hall.
Aspara, J., Lamberg, J.-A., et al. (2013). Corporate business model transformation and inter-organizational cognition: the case of Nokia. Long Range Planning, 46(6), 459–474.
Baden-Fuller, C., Demil, B., et al. (2010). Editorial. Long Range Planning, 43(2–3), 143–145.
Baden-Fuller, C., & Morgan, M. S. (2010). Business models as models. Long Range Planning, 43(2–3), 156–171.
Barlas, Y. (1996). Formal aspects of model validity and validation in system dynamics. System Dynamics Review, 12(3), 183–210.
Bass, F. M. (1969). New product growth for model consumer durables. Management Science, 15(5), 215–227.
Bass, F. M. (2004). Comments on a new product growth for model consumer durables the Bass Model. Management Science 50(12\_supplement), 1833–1840.
Bellman, R., Clark, C. E., et al. (1957). On the construction of a multi-stage, multi-person business game. Operations Research, 5(4), 469–503.
Berry, A. J., Coad, A. F., Harris, E. P. et al. (2009). Emerging themes in management control: a review of recent literature. The British Accounting Review, 41(1), 2–20.
Bianchi, C. (2010). Improving performance and fostering accountability in the public sector through system dynamics modelling: From an ’External’ to an ’Internal’ perspective. Systems Research and Behavioral Science, 27(4), 361–384.
Bianchi, C., & Montemaggiore, G. B. (2008). Enhancing strategy design and planning in public utilities through dynamic balanced scorecards: Insights from a project in a city water company. System Dynamics Review, 24(2), 175–213.
Bieger, T. and Reinhold, S. (2011). Innovative Geschäftsmodelle: Konzeptionelle Grundlagen, Gestaltungsfelder und unternehmerische Praxis. Innovative Geschäftsmodelle, pp. 13–70. T. Bieger, D. zu Knyphausen-Aufseß and C. Krys. Berlin, Springer.
Black, L. J., & Andersen, D. F. (2012). Using visual representations as boundary objects to resolve conflict in collaborative model-building approaches. Systems Research and Behavioral Science, 29(2), 194–208.
Black, L. J., Carlile, P. R., et al. (2004). A dynamic theory of expertise and occupational boundaries in new technology implementation: Building on Barley’s Study of CT scanning. Administrative Science Quarterly, 49(4), 572–607.
Bucherer, E. (2010). Business model innovation: Guidelines for a structured approach. Shaker: Aachen. 2010.
Carlile, P. R. (2002). A pragmatic view of knowledge and boundaries: Boundary objects in new product development. Organization Science, 13(4), 442–455.
Chenhall, R. H. (2003). Management control systems design within its organizational context: Findings from contingency-based research and directions for the future. Accounting, Organizations and Society, 28(2–3), 127–168.
Chesbrough, H. (2010). Business model innovation: Opportunities and barriers. Long Range Planning, 43(2–3), 354–363.
Cusumano, M. (2013). Technology strategy and management—Evaluating a startup venture. Communications of the ACM, 56(10), 26–29.
DaSilva, C. M. and Trkman, P. (2013). Business model: What it is and what it is not. Long range planning.
Davis, J. P., Eisenhardt, K. M., et al. (2007). Developing theory through simulation methods. Academy of Management Review, 32(2), 480–499.
Degraeve, Z., Labro, E., et al. (2000). Total cost of ownership purchasing of a service: The case of airline selection at Alcatel Bell. European Journal of Operational Research, 156(1), 23–40.
Demil, B., & Lecocq, X. (2010). Business model evolution. In search of dynamic consistency. Long Range Planning, 43(2–3), 227–246.
Eden, C., Williams, T., et al. (2000). On the nature of disruption and delay (D&D) in major projects. Journal of the Operational Research Society, 51(4), 291–300.
Eisenhardt, K. M. (1989). Building theories from case-study research. Academy of Management Review, 14(4), 532–550.
Ford, A., & Flynn, H. (2005). Statistical screening of system dynamics models. System Dynamics Review, 21(4), 273–303.
Forrester, J. W. (1961). Industrial dynamics. Cambridge: Productivity Press.
Forrester, J. W. and Senge, P. M. (1980). Tests for building confidence in system dynamics models. System dynamics: TIMS studies in the management sciences, vol. 14. A. A. Legasto, J. W. Forrester and J. M. Lyneis. Amsterdam, North-Holland.
Gage, D. (2012). The venture capital secret: 3 out of 4 startups fail. The wall street journal. New York.
Gassmann, O., Frankenberg, K., et al. (2013). Geschäftsmodelle entwickeln: 55 innovative Konzepte mit dem St. Muenchen, Hanser Verlag: Galler Business Model Navigator.
Gonzalez, C., Vanyukov, P., et al. (2005). The use of microworlds to study dynamic decision making. Computers in Human Behavior, 21(2), 273–286.
Groesser, S. N. (2012). Stichwort: System dynamics. Heidelberg, Gabler: Gabler Wirtschaftslexikon.
Groesser, S. N. (2015a). Lab or Reality: Entwicklung und analyse von Geschäftsmodellen durch das kybernetische Unternehmensmodell Blue Company. Exploring Cybernetics: Kybernetik im interdisziplinären Diskurs, pp. 91–116. S. Jeschke, R. Schmitt and A. Dröge. Berlin, Springer.
Groesser, S. N. (2015b). Stichwort: Dynamische Komplexität. Heidelberg, Gabler: Gabler Wirtschaftslexikon.
Groesser, S. N. and Buergi, M. (2014). Analyse von Geschäftsmodellen und Entwicklung von Maßnahmen durch computergestützte Simulationsexperimente. Modellbasiertes management, pp. 53–66. S. N. Groesser. Berlin, Duncker & Humblot.
Groesser, S. N., & Schwaninger, M. (2012). Contributions to model validation: Hierarchy, process, and cessation. System Dynamics Review, 28(2), 157–181.
Guenther, T. (2013). Conceptualisations of ‘controlling’ in German-speaking countries: analysis and comparison with Anglo-American management control frameworks. Journal of Management Control, 23(4), 269–290.
Hall, R. I., Aitchison, P. W., et al. (1994). Causal policy maps of managers: Formal methods for elicitation and analysis. System Dynamics Review, 10(4), 337–360.
Harrison, J. R., Lin, Z., et al. (2007). Simulation modeling in organizational and management research. Academy of Management Review, 32(4), 1229–1245.
Homer, J. B. (1996). Why we iterate: Scientific modeling in theory and practice. System Dynamics Review, 12(1), 1–19.
Huelsbeck, D. P., Merchant, K. A., et al. (2011). On testing business models. The Accounting Review, 86(5), 1631–1654.
Jarzabkowski, P., Giulietti, M., et al. (2013). We don’t need no education—or do we? Management education and alumni adoption of strategy tools. Journal of Management Inquiry, 22(1), 4–24.
Jarzabkowski, P., & Kaplan, S. (2015). Strategy tools-in-use: A framework for understanding “technologies of rationality” in practice. Strategic Management Journal, 36(4), 537–558.
Johnson, M. W., Christensen, C. M. et al. (2008). Reinventing your business model. Harvard Business Review 86(12): 50.
Karakul, M. and Quadrat-Ullah, H. (2008). How to improve dynamic decision making? Practice and promise. Complex Decision Making, pp. 3–24. H. Qudrat-Ullah, J. M. Spector and P. Davidsen. Berlin, Springer Publishing.
Kasanen, E., Lukka, K., et al. (1993). The constructive approach in management accounting. Journal of Management Accounting Research, 5(4), 243–264.
Katz, S., & Grösser, S. N. (2013). Explicate the links between external trends, stakeholder objectives, and an organization’s strategy by an augmented balanced scorecard. SEM Radar, 12(2), 29–47.
Kurawarwala, A., & Matsuo, H. (1996). Forecasting and inventory management of short life-cycle products. Operations Research, 44(1), 131–150.
Labro, E. (2015). Using simulation methods in accounting research. Journal of Management Control, 26(2), 99–104.
Labro, E., & Tuomela, T.-S. (2003). On bringing more action into management accounting re-search: Process considerations based on two constructive case studies. European Accounting Review, 12(3), 409–442.
Labro, E., & Vanhoucke, M. (2007). A simulation analysis of interactions among errors in costing systems. The Accounting Review, 82(4), 939–962.
Lane, D. C. (1992). Modelling as learning: A consultancy methodology for enhancing learning in management teams. European Journal of Operational Research, 59(1), 64–84.
Leitner, S., & Wall, F. (2015). Simulation-based research in management accounting and control: an illustrative overview. Journal of Management Control, 26(2–3), 105–129.
Levinthal, D. A. (1997). Adaption on rugged landscapes. Management Science, 43(7), 934–950.
Lindholm, A.-L. (2008). A constructive study on creating core business relevant CREM strategy and performance measures. Facilities, 28(7–8), 343–358.
Little, J. D. C. (1970). Models and managers: The concept of a decision calculus. Management Science 16(8): B-465–B-486.
Lukka, K. (2000). The key issues of applying the constructive approach to field research. Management expertise for the new Millennium: In Commemoration of the 50th anniversary of the Turku school of economics and business administration. Publications of Turku school of economics and business administration, pp. 113–128. T. Reponen.
Luna-Reyes, L. F., & Andersen, D. L. (2003). Collecting and analyzing qualitative data for system dynamics: Methods and models. System Dynamics Review, 19(4), 271–296.
Luna-Reyes, L. F., Diker, V. G., et al. (2003). Interviewing as a strategy for the assessment of system dynamics models. System Dynamics Review, 19(4), 271–296.
Mahadevan, B. (2000). Business models for internet-based E-commerce: An anatomy. California Management Review 42(4), 55.
March, J. G. (1991). Exploration and exploitation in organizational learning. Organization Science, 2(1), 71–87.
Markides, C. C. (1999). A dynamic view of strategy. Sloan Management Review 40(3), 55.
Markides, C. C. (2013). Business model innovation: What can the ambidexterity literature teach us? Academy of Management Perspectives, 27(4), 313–323.
Markóczy, L., & Goldberg, J. (1995). A method for eliciting and comparing causal maps. Journal of Management, 21(2), 305–333.
Merchant, K. A., & Otley, D. T. (2006). A review of the literature on control and accountability. Handbooks of Management Accounting Research. S. Christopher, A. G. H. Chapman and D. S. Michael. London, Elsevier., 2, 785–802.
Merchant, K. A., & Van der Stede, W. A. (2003). Management control systems: performance measurement, evaluation and incentives. Harlow: Prentice Hall.
Miller, G. (1956). The magical number seven, plus or minus two: Some limits on our capacity for processing information. The Psychological Review, 63(1), 81–97.
Morecroft, J. D. W. (1984). Strategy support models. Strategic Management Journal, 5(3), 215–229.
Morecroft, J. D. W. (2007). Strategic modelling and business dynamics: A feedback systems approach. Chichester, John Wiley & Sons.
Morecroft, J. D. W., & Sterman, J. D. (Eds.). (1994). Modeling for learning organizations. OR, Productivity Press: System Dynamics Series. Portland.
Norton, J. A., & Bass, F. M. (1987). A diffusion theory model of adoption and substitution for successive generations of high-technology products. Management Science, 33(9), 1069–1086.
O’Sullivan, A., & Sheffrin, S. M. (2003). Economics: Principles in action. N.J.: Pearson Prentice Hall, Upper Saddle River.
Osterwalder, A., & Pigneur, Y. (2010). Business model generation: A handbook for visionaries, game changers, and challengers. New Jersey: Wiley.
Otley, D. T. (1999). Performance management: A framework for management control systems research. Management Accounting Research, 10(4), 363–382.
Paich, M., & Sterman, J. D. (1993). Boom, bust, and failures to learn in experimental markets. Management Science, 39(12), 1439–1458.
Porter, M. E. (1996). What is strategy? Harvard Business Review, 74(6), 61–78.
Porter, M. E., & Siggelkow, N. (2008). Contextuality within activity systems and sustainability of competitive advantage. Academy of Management Perspectives, 22(2), 34–56.
Qudrat-Ullah, H. (2014). Yes we can: improving performance in dynamic tasks. Decision Support Systems, 61(1), 23–33.
Rahmandad, H., & Repenning, N. (2015). Capability erosion dynamics. Strategic Management Journal. doi:10.1002/smj.2354.
Repenning, N. P. (2002). A simulation-based approach to understanding the dynamics of innovation implementation. Organization Science, 13(2), 109–127.
Richardson, G. P. (2009). The basic elements of system dynamics. Encyclopedia of complexity and systems science, pp. 8967–8974. R. A. Meyers. New York, NY, Springer Publishing.
Richardson, G. P. (2013). Concept models in group model building. System Dynamics Review (Wiley), 29(1), 42–55.
Rieg, R., & Esslinger, S. (2012). Die Wirksamkeit der balanced scorecard. Controlling. In: Zeitschrift für erfolgsorientierte Unternehmenssteuerung
Rigby, D. (2001). Management tools and techniques: A survey. California Management Review, 43(2), 139–160.
Rigby, D., & Gillies, C. (2000). Making the most of management tools and techniques: A survey from Bain and Company. Strategic Change, 9(5), 269–274.
Rodrigues, A., & Bowers, J. (1996). The role of system dynamics in project management. International Journal of Project Management, 14(4), 213–220.
Rudolph, J. W., Morrison, B., et al. (2009). The dynamics of action-oriented problem solving: Linking interpretation and choice. Academy of Management Review, 34(4), 733–756.
Sargut, G., & McGrath, R. G. (2011). Learning to Live with Complexity. Harvard Business Review, 144(8), 4–14.
Schöneborn, F. (2003). Strategisches controlling mit system dynamics. Heidelberg: Physica-Verlag.
Schwaninger, M. (2009). Intelligent organizations: Powerful models for systemic management. Berlin: Springer.
Schwaninger, M. (2010). Complex versus complicated: The how of coping with complexity. Kybernetes, 38(1/2), 83–92.
Schwaninger, M., & Groesser, S. N. (2008). Model-based theory-building with system dynamics. Systems Research and Behavioral Science, 25(4), 447–465.
Schwaninger, M., & Groesser, S. N. (2009). System dynamics modeling: Validation for quality assurance. Encyclopedia of complexity and system science. Berlin, Springer.
Schwenke, M. and Grösser, S. N. (2014). Modellbasiertes management für dynamische problemstellungen zur Erweiterung statischer managementwerkzeuge. Modellbasiertes management. S. N. Groesser, M. Schwaninger, M. Tilebein, T. Fischer and S. Jeschke. Berlin, Duncker und Humblot.
Senge, P. M. (1990). The fifth discipline: The art and practice of the learning organization. New York, Currency & Doubleday.
Shah, D., Kumar, V., et al. (2014). Managing customer profits: The power of habits. Journal of Marketing Research, 51(6), 726–741.
Sillanpää, A., & Laamanen, T. (2009). Positive and negative feedback effects in competition for dominance of network business systems. Research Policy, 38(5), 871–884.
Simons, R. L. (1995). Levers of control: how managers use innovative control systems to drive strategic renewal. Boston: Harvard Business School Press.
Simons, R. L. (2000). Performance measurement and control systems for implementing strategy. Pearson: Upper Saddle River.
Smith, W. K., Binns, A., et al. (2010). Complex business models: Managing strategic paradoxes simultaneously. Long Range Planning, 43(2–3), 448–461.
Sosna, M., Trevinyo-Rodríguez, R. N., et al. (2010). Business model innovation through trial-and-error learning: The Naturhouse Case. Long Range Planning, 43(2–3), 383–407.
Spee, A. P., & Jarzabkowski, P. (2009). Strategy tools as boundary objects. Strategic Organization, 7(2), 223–232.
Stake, R. E. (1996). The art of case study research. Thousand Oaks, CA: Sage Publications.
Sterman, J. (2000). Learning in and about complex systems. Reflections, 1(3), 24–51.
Sterman, J., Oliva, R., et al. (2015). System dynamics perspectives and modeling opportunities for research in operations management. Journal of Operations Management. doi:10.1016/j.jom.2015.07.001.
Sterman, J. D. (2000). Business dynamics: Systems thinking and modeling for a complex world. Boston, MA: McGraw-Hill.
Sterman, J. D. (2001). System dynamics modeling: Tools for learning in a complex world. California Management Review, 43(4), 8–24.
Sterman, J. D. (2010). Does formal system dynamics training improve people’s understanding of accumulation? System Dynamics Review, 26(4), 316–334.
Sterman, J. D., Henderson, R., et al. (2007). Getting big too fast: Strategic dynamics with increasing returns and bounded rationality. Management Science, 53(4), 683–696.
Strauß, E., & Zecher, C. (2013). Management control systems: a review. Journal of Management Control, 23(4), 233–268.
Teece, D. J. (2007). Explicating dynamic capabilities: The nature and microfoundations of (sustainable) enterprise performance. Strategic Management Journal, 28(13), 1319–1350.
Teece, D. J. (2010). Business models, business strategy and innovation. Long Range Planning, 43(2–3), 172–194.
Van den Belt, M. (Ed.). (2004). Mediated modeling : A system dynamics approach to environmental consensus building. Washington, D.C, Island Press.
van Nistelrooij, L. P. J., Rouwette, E. A. J. A., et al. (2015). The eye of the beholder: A case example of changing clients’ perspectives through involvement in the model validation process. Systems Research and Behavioral Science, 32(4), 437–449.
Vennix, J. A. M. (1995). Building consensus in strategic decision-making—System dynamics as a group support system. Group Decision and Negotiation, 4(4), 335–355.
Vennix, J. A. M. (1996). Group model building: Facilitating team learning using system dynamics. Chichester: Wiley.
Warren, K. (2005). Improving strategic management with the fundamental principles of system dynamics. System Dynamics Review, 21(4), 329–350.
Warren, K. (2008). Strategic management dynamics Chichester. England, Wiley: West Sussex.
Willemstein, L., van der Valk, T., et al. (2007). Dynamics in business models: An empirical analysis of medical biotechnology firms in the Netherlands. Technovation, 27(4), 221–232.
Wirtz, B. W. (2011). Business model management: Design-instrumente-Erfolgsfaktoren von Geschäftsmodellen. Wiesbaden: Gabler.
Yin, R. K. (2013). Case study research. Beverly Hills, CA: Sage Publications.
Zott, C., Amit, R., et al. (2011). The business model: Recent developments and future research. Journal of Management, 37(4), 1019–1042.
Acknowledgments
This research was supported by the EU-Seventh Framework Program Grant No. 609027.
Author information
Authors and Affiliations
Corresponding author
Electronic supplementary material
Below is the link to the electronic supplementary material.
Rights and permissions
About this article
Cite this article
Groesser, S.N., Jovy, N. Business model analysis using computational modeling: a strategy tool for exploration and decision-making. J Manag Control 27, 61–88 (2016). https://doi.org/10.1007/s00187-015-0222-1
Published:
Issue Date:
DOI: https://doi.org/10.1007/s00187-015-0222-1
Keywords
- Business model analysis
- Simulation-based experiments
- Strategy tool
- Management tool
- Business model innovation
- System dynamics