HURDLES TO BUSINESS MODEL INNOVATION: LESSONS LEARNED
FROM THE DANISH NEWSPAPER INDUSTRY
Dr Anna B. Holm
Business and Social Sciences, Aarhus University
Bartholins Allé 10, 8000 Aarhus C
Denmark
Tel: +45 87165116
E-mail: annah@asb.dk
Keywords: business model, business model innovation, newspaper industry.
Biographical notes: Dr Anna B. Holm is Assistant Professor at the Department of Business
Administration, Business and Social Sciences, Aarhus University in Denmark. She holds a PhD
(2010) in organization and management theory from Aarhus University and a master’s degree in
business administration (1995) from Bradford University School of Management, UK.
Dr Holm’s research area is about new ways of organizing business activities based on information
and communication technologies (ICTs) and the Internet. She has presented and published a number
of conference papers and articles on the subjects of virtual organizing, business model innovation,
electronic human resource management (e-HRM), and institutional theory. Prior to her academic
career, Dr Holm had worked for over a decade as a business development consultant and in various
managerial positions in industry.
Acknowledgement: This research has been funded by the Danish Council for Strategic Research,
09-063245, (Digital Urban Living).
EXTENDED ABSTRACT
Business model innovation has developed into being a prime subject of innovation management
research, and often perceived as complementing other forms of innovation (Raphael Amit & Zott,
2001). New innovative business models are often considered as a source of competitive advantage
as competitors might find it more difficult to imitate or replicate the entire novel activity system
than an innovative product or service (Rafael Amit & Zott, 2012). A common perception of
business model innovation is associated with experimentation. Magretta (2002), for example, points
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to the need for hypotheses, tests and revisions. Chesbrough (2006) argues that companies must
experiment with their business models, knowing that some will fail; yet even failure will provide
learning opportunities that can be applied in the future. Amit and Zott (2012) focus on activities
and distinguish between three different forms of business model innovation: (i) adding new
activities to the existing business model, (ii) linking activities in novel ways, and (iii) changing one
or more parties that perform activities. Cavalcante et al (2011) in contrast, focus on the degree of
innovativeness and/or radicalness of change and identify four archetypes of business model
innovations: (i) creation, (ii) extension, (iii) revision and (iv) termination. But besides these rather
general observations and suggestions there is little evidence on how in fact companies experiment
with their business models, and which hurdles they encounter in the process. The aim of this
research is to fill in some of this void.
For this purpose, I studied the newspaper industry in Denmark as it can provide content-rich data
for theory generation. Both before and during the present global economic crisis influential
observers were forecasting a continued decline in the newspaper industry (Young, 2010) and have
characterized it as a mature industry in decline (Kurpius, Metzgar, & Rowley, 2009). As a result,
newspaper publishers have begun looking for, and trying out, new business models, choosing
different business model configurations on their way to either profitability or failure (Chyi &
Sylvie, 2000). Media management researchers have been long studying the industry’s
transformations and suggest that the sector is undergoing a cycle of evolution from older
unsatisfactory business models to the development and diffusion of new ones (Stöber, 2004).
The following research question guided the research: “What are the main obstacles to business
model innovation, and which lessons can be learned from the newspaper industry”?
The business model framework
Every company has a business model, whether they articulate it or not, and that at its heart, a
business model describes four important business functions: value proposition, value creation, value
delivery and value capture (Kaplan, 2012). (The business model building blocks are summarized in
Figure 1). In practice, a business model helps to capture, visualize, understand, communicate and
share business logic (Nadler, Tushman, & Nadler, 1997; Osterwalder, Pigneur, & Tucci, 2005).
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Figure 1 The business model framework
Component
Value Proposition
Value Creation
Business model
building block
Factors related to the
offering
Description
Value configuration
Arrangements of activities and resources, i.e.
key resources and processes, such as people,
technology, equipment, etc.
Competencies necessary to execute the
company’s business models
Network of cooperative agreements with other
companies necessary to efficiently offer and
commercialize value
Segments of customers the company offers
value to
Various means of the company to reach its
customers
Relationships the company establishes between
itself and its different customer segments
Core Competency
Partner Network
Value Delivery
Target Customer
Distribution Channel
Customer Relationship
Value Capture
Value offering - company’s bundle of products
and their characteristics (e.g. product or service,
level of standardisation, differentiation, brand,
etc.)
Cost Structure
Monetary consequences of the means employed
in the business model
Revenue Model
The way the company makes money through a
variety of revenue flows
Profitability and the way potential profits are
used and shared
Profit allocation
Source: Adapted and elaborated from Osterwalder et al. (2005), Shafer et al. (2005), Johnson et.al (2008),
and Kaplan (2012).
Business model innovation
There are two generally separated but interrelated streams of business model innovation literature:
business models to capture value from technology innovation and business models as innovation
forms (Teece, 2010). The first perspective frames business models within an innovation context that
take technological characteristics and potentials as inputs and converts them through customers and
markets into economic outputs. The second research stream argues that business model innovation
does not rely on breakthrough technologies or product launches (Santos, Spector, & Van der
Heyden, 2009). Here, a business model is a component of innovation commercialization separate
from product and process innovation. The business model may serve not only to exploit an
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opportunity for wealth creation, but its design may be part of the opportunity development process
in and of itself.
Research design
To fulfil the purpose of the study, I have analysed emerging business models in the newspaper
industry at large, including the role of the ongoing technological developments, such as the move
from paper-based towards digital platforms for content delivery, and the key activities which the
newspapers undertake in redefining their core business logic.
I proceeded with identifying and collecting relevant industry reports, participated in relevant
industry fairs and events, recorded professional presentations, as well as filed newsletters and press
releases of professional newspaper organizations and associations. Furthermore, I focused our
efforts on the two largest media groups in Denmark, and performed a dozen in-depth, semistructured interviews with a number of their top managers, e.g. CEOs, editors-in-chief, directors.
Findings
The newspaper industry in Denmark has been experimenting with business models for the last six
years. It has introduced new value propositions, attracted new customer groups, shifted focus from
production and distribution of printed products to digital ones, deployed new delivery channels for
content, revised its key partnerships and cost structure. However, the industry is just slowly
beginning to recover financially, after a number of years with big losses. It appears that it is just
learning how to capture value from renewed, changed or novel business models.
The newspapers have experimented to a large extend with technological and social innovations such
as the World Wide Web, Web 2.0 and various mobile platforms as well as other new forms of
reader involvement in the last years. As a reaction to the increasing decline in circulation and
readership, newspapers in Denmark have launched websites and designed apps for smartphones and
tablets - most often providing professional journalistic content free of charge. Despite the usefulness
of such measures to attract online users in great numbers, newspapers found it hard to adopt new
technologies and use them to monetize content, which in turn led to loss of a share of the
advertising market and, consequently, the revenues. Differently put, this initial openness towards
technological and social innovations in the newspaper industry has led to an erosion of the
industry’s dominant and until recently widely embraced business model.
Discussion and conclusions
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Newspapers have made the same mistake as many technology companies before – they have
assumed that (adaptation to) technological innovation would automatically guarantee business and
economic success. The challenges and the complexity of the markets that newspapers are facing to
stay afloat and to generate profit, require a mix of revenue models. To secure the success of bundled
business models, newspapers need to ensure that they continue to deliver value to readers,
advertisers and marketers.
For the last five years newspapers have been continuously innovating their business model. But the
many changes in their business model business blocks were of disruptive nature, and undermined
the value capture flow. Clearly, changes to single elements, but not on the model linking them, can
even be harmful, since they can disrupt the business model logic. The feedback loops that are so
crucial to learning and development (Casadesus-Masanell & Ricart, 2010) are still not always in
place. This observation strongly favours the process view of business model innovation but also sets
its boundaries. The process of business model innovation always needs to be coupled with business
model logic thinking to ensure the value of each innovation step.
Introducing changes to various parts of a business model may not bring the desired outcomes if it
simply adds complexity and heterogeneity, and may even disrupt and harm the existing business
logic. Therefore, innovation in business models should go hand in hand with the testing and
experimentation, and if it disrupts the business logic and does not secure the feedback loops,
companies should focus their efforts on either restoration or innovation of the flow of the business
model logic.
Implications
The research has a direct contribution to the research on business model innovation through
continuous experimentation. It also contributes to the on-going research and a debate on alternative
scenarios and business model configurations for the newspaper industry.
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