Toward a resilient complex adaptive system view of business models

Abstract

This paper employs the theory of resilient complex adaptive systems (RCAS) to offer a versatile and universal foundation for the concept of a business model that facilitates connections between prior works while enabling future exploration with a common language. The proposed business model construct is developed by first exploring the field of systems to highlight how the concept of an RCAS can be employed to provide a more robust conceptualization of a business model than previous constructs. A thematic analysis of the literature is then conducted to translate the fundamental requirements of an RCAS into the business model context. This system view is inherently abstraction tolerant and provides a foundation for both academic research and practical applications. Specifically, it addresses two key gaps in the business model literature. First, the comprehensive nature of the system model naturally calls out important aspects of business models that have been largely ignored in the literature. Second, the construct provides a comprehensive means to connect the work of business model scholars and practitioners outlined in more than 150 studied articles, highlighting how each earlier research effort has employed a construct that is actually part of a grander whole.

Introduction

The concept of a “business model” took root in the mid-1990's, and continues to draw increasing interest among scholars and practitioners alike. Multiple scholarly reviews of related works have revealed broad and varying characterizations of the business model concept (See for example, Hedman and Kalling, 2003; Zott et al., 2010; Amit and Massa, 2011; George and Bock, 2011; Lambert and Davidson, 2013; Bocken et al., 2014; Gassman et al., 2016; Foss and Saebi, 2017; and Massa et al., 2017). Most journal papers on the subject now contain lengthy overviews of the historical development of the business model literature, often to conclude that there are widely varying views on the conceptualization or use of the construct. This continued ambiguity drives inefficiencies in research and practice on multiple fronts. It is increasingly difficult for scholars to put their work in context and to highlight where their contributions add to the body of knowledge. And, it is challenging for both practitioners and researchers to find information that is relevant to their particular problem and context. As stated by Zott et al. (2011), business scholars “have yet to develop a common and widely accepted language that would allow researchers who examine the business model construct through different lenses to draw effectively on the work of others.”

This has led several scholars to construct schema to define the way business models have been explored. Most recently, Gassmann et al. (2016) framed existing perspectives on the business model, highlighting seven primary schools of thought and approximately 50 theories that have been historically employed or are emerging in business model research. In addition, Tucci and Massa (2013) highlighted the importance played by the level of abstraction inherent in any business model conceptualization, calling attention to the differences between activity systems, meta-models, specified graphical frameworks, ontologies, archetypes, and narratives as descriptive tools. Despite these advances, taken holistically, the body of work on business models remains difficult to navigate, and as a result, potentially difficult to build upon to advance the collective understanding of what business models are and how the business model construct, in whatever form, can advance thinking on issues relevant to business leaders, scholars, and broader populations of practitioners.

It is proposed herein that at the core of these expressions of misalignment are fundamentally issues that relate to the lack of a “complete” model to characterize a business that is both versatile to facilitate exploration of varying dilemmas and abstractable for differing levels of problem solving. This challenge likely stems from the variety of management theories noted above that have been employed across different conceptualizations of the business model. Each has been pursued to fulfill a specific purpose and tends to be additive to our collective understanding of business models. However, each variation also tends to examine the business model construct from a unique perspective that captures only a subset of the vast array of business model attributes discussed in the extant literature. Thus, any one of these views, taken individually, fails to provide a holistic picture of what composes a business model. The incomplete scope of existing models calls for a more comprehensive theoretical construct that can unify various schools of thought. This is the focus and primary contribution of the model put forward in this paper.

This challenge is not unique to business model exploration. It is a problem that has been encountered in nearly every developed field of knowledge and, as evident in an array of disciplines such as engineering, computer science, and ecology, is a problem that we suggest can be addressed through advanced systems thinking. Although several scholars have framed the collection of elements that compose a business model as a “system” (e.g., Afuah and Tucci, 2000; Anderssen et al., 2009) and reference has been made to related theory, it has typically been either: 1) building on the frame of General System Theory (GST) (Gassman, 2014) that puts forward aspects of systems thinking from its origins as seeded by Boulding (1956) and Von Bertalanffy (1969), or 2) employing concepts of System Dynamics to capture the non-static nature of business (Halecker and Hartmann, 2013). Unfortunately, general system theory and system dynamics are not capable of modeling the true complexity of businesses and thus related constructs inevitably lack attributes required to account for this complexity and dynamism.

Herein, instead, one of the most evolved forms of systems theory – that of the “resilient complex adaptive system” (RCAS) – is proactively employed to a) prescribe key considerations that should be addressed in a business model to develop a comprehensive view of the construct in a manner that is additive to prior efforts, and b) highlight gaps in the way business models have been described to date. The introduction of complexity, resilience, and adaptation enables an RCAS to represent a business model more accurately than general system theory, with strong alignment between an RCAS characterization and the characteristics of a business environment.

In this paper, it is proposed that a resilient complex adaptive system (RCAS) can provide a comprehensive view of the key attributes of a business model at a point in time, while also encompassing the mechanisms that can facilitate its adaptation and/or transformation over time in a complex business environment. This system construct builds upon the value-based view of strategy, and thus the value-centric view of business, and draws on RCAS theory to prescribe the properties and functional elements of a business model. The value-centric perspective reinforces value exchange as the core of a business model, and RCAS theory suggests that the exchange takes the structure of a feedback loop in a functional system to enable self-protection and adaptation, which is guided by a goal (as developed in detail below). Development of this RCAS view of the business model is carried out through a combination of prescriptive use of RCAS theory and thematic analysis of the extant business model literature to translate RCAS requirements to the business model context.

This work also exploits a critical aspect of the effective use of systems theory that has been underutilized in business model studies to date. That is, the fundamental principle that a robust system model facilitates, rather than impedes, abstraction. Thus, a system model does not exist at any one level of abstraction, and is not a view in and of itself; rather, it encompasses all views and enables more systematic and comprehensive organization of the understanding of the concept it describes. This is in line with Velu's (2017) assertion that business models have been, and can be, viewed from different perspectives, but also adds to this idea, as abstraction of a robust system construct provides the opportunity to explore different perspectives using the same shared model. This inherent characteristic of RCAS provides a foundation for abstraction of the business model concept across a range of management challenges.

The resulting abstraction-tolerant, RCAS system view of the business model is important in that it provides a foundation for both academic research and practical applications. Specifically, the proposition to use an RCAS as the foundational construct addresses two key gaps in the business model literature. First, the comprehensive nature of an RCAS system model naturally calls out important aspects of business models, such as the properties of resilience and adaptation, that accommodate the complex and evolving business environment and have largely been ignored in the literature, reaching a level of completeness that has not been achieved by constructs published previously. While aspects of the RCAS model are present in models developed under other schools of thought, and could be perceived to be assembled from prior constructs, the need to integrate across theories to attain a representation would raise questions of consistency among them. In contrast, the theory of RCAS provides a single foundational construct to guide a holistic conceptualization of business models, which ensures that the resulting construct is comprehensive and self-consistent. Second, the RCAS construct provides a means to connect the work of business model scholars and practitioners outlined in more than 150 studied articles, highlighting how each prior research effort employs a construct that is actually part of a grander RCAS whole. This work thus unifies previous important but disparate and partial views of business models under other schools of thought into one coherent model.

The above systems concepts, drawn largely from engineering and computer science, offer the potential to overcome many of the limitations of prior business model constructs noted by scholars. In particular, we believe an RCAS business model provides a foundation for research that addresses the need to “show [that] firms adapt their business models to an evolving ecosystem” as called for by Zott and Amit (2013), and to facilitate the multiple tiers of abstraction typically needed to link conceptual strategy to tactics at an activity level. As a first step to achieve these types of outcomes, we herein develop the business model concept in a comprehensive form as an RCAS and explore the underlying rationale and supportive arguments for this view.