Allan Afuah - Business Model Innovation: Concepts, Analysis, and Cases

For a while now Allan Afuah has been a leading thinker in the areas of business model development, innovation management, and strategic analysis. In his most recent book on business model innovations, he takes us to the next important level of strategic thinking for twenty first century enterprisethe nexus of business model development and innovation, where companies both create and capture value by coming up with novel and original business recipes. Professor Afuahs book provides a comprehensive coverage of the topics that are relevant to this subject, and includes both useful analytical tools as well as many concrete illustrations of how these ideas have been applied. Any business leader who is interested in understanding the importance of inventive business models and how they can be designed should read this book.

Ira Ginsberg, Professor, New York University
Stern School of Business, USA

As we move deeper into the 21st century with its environment characterized by accelerating technological change, uncertainty, and complexity, business model innovation has become the hottest topic in strategy. In Business Model Innovation, Allan Afuah delivers a fresh paradigm that allows managers to leverage new ways of conducting business to gain and sustain a competitive advantage. Compelling, insightful, and practical.

Frank T. Rothaermel, The Russell and Nancy McDonough
Chair, Professor & Sloan Industry Studies Fellow,
Georgia Institute of Technology, USA

Allan Afuah unfailingly captures attention with his outstanding work. This time he offers an astonishing new book that explains Business Model Innovation. Exploiting his superior scholarship, he explores recent phenomena and shows how they relate to business models. His discussion of Business Model Innovations highlights not only what happens now (e.g. Long Tail, Social Media, Crowd-sourcing) but also how companies can, with the right capabilities, capture and create value tomorrow. Close to practice, each chapter features case studies and the book closes with implications and helpful applications. This exceptional work deserves your undivided attention.

Patrick Reinmoeller, Professor,
Cranfield University School of Management, UK

Rooted in strategic management research, Business Model Innovation explores the concepts, tools, and techniques that enable organizations to gain and/or maintain a competitive advantage in the face of technological innovation, globalization, and an increasingly knowledge-intensive economy. The book investigates how organizations can use innovations in business models to take advantage of entrepreneurial opportunities from:

Crowdsourcing and open innovation

Long tails

Social media

Disruptive technologies

Less-is-more innovations

Network effects

Scarcity of complementary capabilities

The book also looks at the ways firms can use innovations in business models to exploit or defend against threats. With twelve supplementary cases to help readers apply the concepts and techniques, this book is a must-have for anyone looking to understand the fundamentals of business model innovation.

Allan Afuah obtained his PhD from MIT and is Associate Professor of Strategy at the Ross School of Business at the University of Michigan. Professor Afuahs honors include Academy of Management Review (AMR) winner of Best Article Award for the year 2012 for his paper, Crowdsourcing as a solution to distant search which he co-authored with Christopher Tucci. AMR is No. 1 out of 172 management journals and No. 1 out of 116 business journals in the world.

Business Model Innovation

Concepts, Analysis, and Cases

Allan Afuah

First published 2014
by Routledge
711 Third Avenue, New York, NY 10017

and by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN

Routledge is an imprint of the Taylor & Francis Group, an informa business

2014 Taylor & Francis

The right of Allan Afuah to be identified as author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988.

All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers.

Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe.

Library of Congress Cataloging in Publication Data
Afuah, Allan.

Business model innovation: concepts, analysis, and cases/Allan Afuah.

pages cm

Includes bibliographical references and index.

1. Strategic planningMathematical models. 2. Industrial managementMathematical models. I. Title.

HD30.28.A3467 2014

658.4012dc23

2013035835

ISBN: 978-0-415-81739-4 (hbk)
ISBN: 978-0-415-81740-0 (pbk)
ISBN: 978-0-203-58458-3 (ebk)

Typeset in Minion
by Florence Production, Stoodleigh, Devon, UK

To every family that has been kind enough to welcome a foreign student to its home.

To my grandmother, Veronica Masang-Namang Nkweta, and the Bamboutos highlands which she tilled to feed me.

Good theory enables us to explain, predict, plan, and execute. In the words of Kurt Lewin, nothing is quite so practical as a good theory. The theory of gravity enabled human beings to explain why things fall down, predict what the gravitational pull on the surface of the moon would be, plan how to land a person on the moon, and execute the plans to get to the moon.

Yes, social science theories may not have the precision of the theories of physics. However, strategic management scholars have drawn on social sciences to develop theories that explain why some industries or firms are more profitable than others, predict the impact of technological innovation on industry and firm profitability, explain and predict the impact of a firms capabilities on its performance, suggest what good plans for using or building capabilities should look like, and how to execute strategies or plans. These theories include the competitive positioning or product-market-position view, resource-based view, dynamic capabilities, social network theory, evolutionary economics, agency theory, institutional theory, resource dependence theory, and transaction costs economics.

Business Model Innovation: Concepts, Analysis, and Cases is about drawing on some of these theories to explain and predict the relationships among a business model, its profitability, and the environment in which the model is conceived and executed. These explanations and predictions help managers better create and execute profitable business models. More importantly, the book is about using management theory to explain and predict how and why firms can gain and/or maintain a competitive advantage in the face of technological innovation, globalization, and an increasingly knowledge-intensive economy. In particular, the book is about using business model innovations to exploit the opportunities and threats in phenomenon such as crowdsourcing, social media, the long tail, less-is-more innovations, disruptive technologies, and scarce resources.

Yes, the principles of economics have not changed and may not need to change to be effectively used in exploring the so-called new economy. Yes, some of the phenomenae.g. crowdsourcing, long tail, and social mediahave been around for centuries or more. However, technological innovation, the shift to knowledge economies, and globalization have created an environment in which we can better understand the opportunities and threats in the phenomena and how to better exploit the opportunities and/or defend against the threats.