THE ROLE OF THE BUSINESS MODEL IN CAPTURING VALUE FROM INNOVATION

INDE
X

CHAPTER 4: RESEARCH DESIGN AND

METHODOLOGY

4.1. Introduction 82

4.2. Types of research used in the study 83

4.2.1. Reasoning for using qualitative research 83
4.2.2. Incorporating qualitative research within changing
management paradigms 84
4.2.3. Incorporating environmental challenges into the
qualitative research 85
4.2.4. Qualitative versus quantitative research 86
4.2.5. Further arguments for the use of qualitative research 87

4.3. Research design 89

4.3.1. Exploratory research 90

4.3.1.1. Secondary data analysis 91

4.3.1.2. Case Studies 92

4.3.2. Causal research 93

4.4. Conclusion 94
Brad Ross
October 2006 THE ROLE OF THE BUSINESS MODEL IN CAPTURING VALUE FROM INNOVATION

CHAPTER 4

RESEARCH DESIGN AND METHODOLOGY

4.1.
INTRODUCTION

Business research is defined as the systematic and objective process of

gathering, recording, and analysing data for aid in making business decisions.
This definition as suggests that research information is neither intuitive nor
haphazardly gathered (William Zikmund, 2003). Literally, research means to
“search again.” It connotes patient study and scientific investigation wherein the
researcher takes another more careful look at data to discover all that can be
know about a specific subject of study. The definition of business research points
out that that its objective is to facilitate the managerial decision-making process
for all aspects of the business, which, is not restricted to one aspect of the
business. An essential tool for management in its problem-solving and decision
making activities, business research generates and provides the necessary
qualitative and quantitative information upon which to base decisions. By
reducing the uncertainty of decisions, research reduces the risk of making
decisions.

Research is further described as a systematic and organised effort to investigate

a specific problem that needs a solution (Sakran, 1992: 4; McMillan &
Schumacher, 1993: 8). Its aim may be to solve a current existing problem or
contribute to the general body of knowledge in a particular area of interest such
as the role that existing and potential business models may play in capturing
value from latent technological innovation. The main aim of management
research is to help improve the practice of management (Bennet, 1991: 85-103).

The primary reason for undertaking research on business models was to develop
and evaluate concepts and theories by using basic research methods in an

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attempt to expand the limits of knowledge on the role of the business model in
capturing value from innovation.

4.2. TYPES OF RESEARCH USED IN THE

STUDY

The content of the research may suggest that a definition of the different types of
research be analysed and then applied to the problem definition. The research
method that will be used in this study is qualitative research.

4.2.1. Reasoning for using qualitative research

A turbulent and uncertain business environment that is constantly changing,

developing and shifting due to technological innovation together with the
implications of developments in contemporary management thought have led
many organisations to consider ways to approach their business offerings
through the implementation of their business models. The human element which
is undeniable in the modern organisation has given rise to the assumption that
hard, objective, strict and scientific research may have to be enhanced by an
appropriate approach which will link knowledge with creativity, participation and
inductive theory building. This may be increasingly prevalent for businesses who
may possess technology with latent value but who do not have a clear path to the
market with this technology. Bearing this in mind, creativity and inductive
reasoning are imperative tools for creating economic value.

When considering the merits of the qualitative research that has been used in
this paper it is imperative to consider the following phenomenon; contemporary
organisations are challenged to maintain a competitive advantage in an
environment characterized by constant change, surprise, disorder, ambiguities,
chaos, paradox and paradigm shifts. Organisations are accountable for the
bottom line as well as ample returns for the shareholders. Focusing on new
business is crucial but contributing resources to these new businesses in the face

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of uncertainty may be a fatal make or break decision. In this context it is

recognized that contemporary organisations are not driven by structures, but
rather by humans and their interaction with other humans.

Brainstorming bus ines s models and ways in which to take the company forwar d
are human by nature to the utmost extent. Contrary to conventional wisdom, it is
therefore argued that an organisations environment is not a set of independently
given facts, but is created by the interaction of its members with individuals
outside the organisation. As such, the individuals inside the organisation create
their own environments rather than adapt to the environment created by others
(Du Toit, 1996). Taking cognisance of theses developments, this research was
compelled to also rethink the business research paradigm adhered to. The
practice of management is determined by the prevailing management paradigm,
which in turn is influenced by changes and developments in the business
environment. It is therefore imperative that business research takes cognisance
of advancements in these fields and that the research approach allows for
incorporation.

4.2.2. Incorporating Qualitative Research within Changing Management

Paradigms

Management practice evolved from the classical viewpoint, characterized by

beurocratic, scientific and administrative management styles to the behavioural
viewpoint which emphasised the influence of managers. This was followed by the
systems viewpoint which focused on how the organisational parts fit together.
The next phase was the contingency approach which indicated how the
aforementioned viewpoints could be combined in the problem solving process.
These management practices have often been measured objectively by and their
causal effects determined statistically by means of quantitative research.

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The management paradigm then moved to the quality v iewpoint which

emphasizes the role of customer demand for quality products and services. This
was followed by the notion of flexible management which requires a move from a
focus on the organisation to a focus on the customer, a participative leadership
style and a culture of openness and trust, within which both quantum scale and
continuous change (Weiss, 1996: 232) have to be guided and directed. Flexible
leadership brings with it the quest for flexible organisational structures, replacing
vertical hierarchies with horizontal networks, linking together traditional functions
through interfunctional teams and forming strategic alliances (Hirschhorn &
Gilmore, 1992: 104). The focus is thus once more on the subjective and
humanistic elements of the organisation. These qualitative findings that affect
both exploratory and causal research has therefore led to the incorporation of
taking a qualitatively focussed method to the structuring of the research.

4.2.3. Incorporating Environmental Challenges into the Qualitative Research

The most recent developments in management thought have probably been

triggered by an accelerating rate of environmental turbulence which is
characterized by change, ambiguities, uncertainties, unpredictability, surprise,
difference, disorder, chaos and instability. The developments in thought seem to
follow the progress in the natural sciences in dealing with chaos and uncertainty.
Complexity scientists came to make sense of the world by taking a new
perspective of dynamic feedback systems. From this point of view, nature is
understood to be driven by laws which do not have straightforward unidirectional
casualty, but take the form of non-linear feedback loops where casualty is circular
(Stacey, 1996: 311). There is thus a relationship between chaos and order – the
one been a mirror image of the other. Wheatley (1992: 7) saw this relationship as
a continuous process where a system can leap into chaos and unpredictability,
yet within that state be held within parameters that are well ordered and
predictable.

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As all organisations constitute part of this universe, the discoveries by natural

scientists have important implications for strategic management and research. It
is thus important that the research approach that has been followed is suited to
effectively dealing with chaos, uncertainty, unpredictability and the like.

4.2.4. Qualitative Versus Quantitative Research

Qualitative research and quantitative research have distinct differences in their

application and use within a holistic research process. This section seeks to
highlight these differences in order for the reader to acquaint themselves with the
rationale behind us ing a qualitative approach for this research. Table 4-1 below
summarises the major differences between qualitative and quantitative research.
These are not seen as discrete categorisations, but rather as different placings
on the research continuum.

Table 4-1: QUALITATIVE VERSUS QUANTITATIVE

RESEARCH
Quantitative Research Qualitative Research
Positivist approach: assumes existing objective
truth which can be revealed through a scientific
method
More highly formalised, more explicitly
controlled, range more exactly defined,
methods relatively close to those of physical
sciences.
Hypothesis stated explicitly, formulated before
embarking on investigation
Statistical, random sampling Sampling decidedly theory-driven, purposive
Key concern that measurement is reliable and
valid with clear predictions of cause and effect
Descriptions in finite numbers Uses in-depth verbal descriptions
Theory deduced as a result of testing
hypotheses
Impersonal, third-person prose, graphs,
mathematical models, statistical tables
Constructivist approach: based on
phenomenological and interpretive paradigms;
no clear-cut objectivity
Procedures not as strictly formalised, scope
often undefined, philosophical mode of
operation
Hypothesis/central thesis stated in form of
general research goal, sometimes described as
a result of investigation
and small, choice made on conceptual not
responsive grounds
Instrument validity depends on skills of the
researcher, less clear-cut objectivity and reality
Inductive theory building, emergent themes
Ethnographic prose, historical narratives, first–
person accounts

Source: Fourie (1996: 248), Cassel & Symon (1994b: 7), Neuman (1994: 317)

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It is indicated in Table 4-1 that a qualitative approach is advisable when the

objectives of the research are: to prove rather than to predict; place emphasis on
analytic induction; focus on interpretation; orientate towards process rather than
outcome; and to obtain a holistic, systematic, encompassing, integrated overview
of the context under study. Bearing these above sentiments in mind it is therefore
indicated why qualitative research has been used.

Table 4-1 has identified some of the major differences between qualitative and
quantitative research approaches. The initial difference between the two methods
is that qualitative research uses a constructivist approach based on
phenomenological and interpretative paradigms whereas the quantitative
approach uses a positivist approach which assumes existing, objective truth
which can be revealed through a scientific method. One of the reasons that this
study has used qualitative research is due to the fact that with qualitative
research the procedures are not as strictly formalised, the scope is undefined
and there has being more of a philosophical mode of operation. Quantitative
research, however, addresses research in a more highly formalised and more
explicitly controlled method of research. The methods are more exactly defined
with methods closely related to that of the physical sciences.

4.2.5. Further Arguments for the use of Qualitative Research

Conventially the nature and emphasis in business res earch was placed on the
quantitative approach. A resistance to qualitative research noted in both
academic and disciplinary circles resulted in a longstanding debate between the
advocates of these two schools of thought (Wass & Wells, 1994: 31).

On the one hand, qualitative researches were called journalists, or soft scientists.
Their work was termed unscientific, only exploratory or entirely personal and full
of bias. Qualitative research findings were labelled as criticism and not as theory
(Denzin & Lincoln, 1994b:2). When considering the reasoning then for using

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qualitative research in this paper, it can be attributed to certain reactions that

stemmed from the above statements.

The reactions to these types of allegations was that a rigor of subtly associated
with qualitative research by no means implies a slovenly, undisciplined approach
to research, but that the particular demands of qualitative research makes it a
creative, scientific process that necessitates a great deal of time and critical
thinking, as well as emotional and intellectual energy. Qualitative researchers are
expected to have a true desire to discover meaning, develop understanding and
explain phenomena in the most thorough way possible. The triumph of qualitative
studies is said to be due more to dedication, hard work, sensitivity and writing
skills of the individual researches than to anything intrinsic in the research
approach itself (Neuman, 1994: 317). Mariano (in Leedy, 1993: 140) in fact
describes qualitative research as “. . . creative scholarship at its best”.

Advocates of qualitative research further argue that the limited and often
incorrect use of qualitative methods as well as the exaggerated reliance on
quantitative techniques is due not only to tradition, but also to ignorance within
both the academic and business community. This ignorance concerns the theory
of science as well as the choice and application of research methods and
techniques (Gummeson, 1991: 1).

The politics embedded in this field of discourse is taken even further by the
argument that the criticisms of qualitative research reflect an uneasy awareness
that the traditions of qualitative r esearch commit the researcher to a critique of
the positivist project. The positive sciences are often seen by their followers as
the crowning achievements of Western civilization, and in their practices it is
assumed that “truth” can transcend opinion and personal bias. Qualitative
research is hence seen as an assault on this tradition, whose adherents are said
to often retreat into a “value-free objectivist science” model to defend their
position. These researchers are accused of seldom attempting to make explicit,

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or to critique the “moral and political commitments in their own contingent work”
(Denzin &Lincoln, 1994b: 4).

From the foregoing discussion, some of the characteristics and requirements of

qualitative research can be noted. If these characteristics are contemplated
together with the challenges posed by the changes in the business environment
and in particular the opportunities that technology may present organisations.

The word qualitative implies an emphasis on processes and meaning that are not
rigorously examined, or measured (if at all), in terms of quantity, amount,
intensity, or frequency. Qualitative researchers stress the socially constructed
nature of reality, the intimate relationship between the researcher and what is
studied, and the situational constraints that shape enquiry. Qualitative
researchers emphasise the value-laden nature of enquiry and seek answers to
questions that stress how social experience is created and given meaning
(Denzin & Lincoln, 1994b: 2). It is for these reasons that after careful
consideration that the qualitative research approach would be used in the
construction of this study.

4.3. RESEARCH
DESIGN

The research design refers to the master plan that specifies the methods and
procedures followed throughout this study. The objectives established during the
early stages of the research (see chapter 1, section 1.4) were included
throughout the design to ensure that the information collected is appropriate for
solving the identified problems. The following section comprises of exploratory
research and causal research.

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4.3.1. Exploratory Research

Usually, exploratory research is conducted with the expectation that subsequent

research will be required to provide conclusive evidence. Exploratory research is
usually conducted during the initial stage of the research process. The
preliminary activities undertaken to refine the problem into a researchable one
need not be formal or precise. William G. Zikmund (1998). Certain exploratory
research has been used in the research methodology of this study. The definition
and concept of the term “business model” is fairly ambiguous in nature and
warrants the necessity for further taxonomical research in this regard. The
exploratory research as used in the study, has, through the use of a literature
review identified and defined the concept of the business model in order to
establish the platform for further research.

Exploratory research is conducted to clarify ambiguous problems. Management

may have discovered general problems, but research is needed to gain better
understanding of the dimensions of the problems. Exploratory studies provide
information to use in analyzing a situation, but, uncovering conclusive evidence
to determine a particular course of action is not the purpose of exploratory
research. This study looks at uncovering certain evidence regarding the role of a
business model in capturing value from innovation but does not necessarily
provide a particular course of action for the reader to follow. It does however
provide a greater degree of clarity to the problem statement and in so doing adds
a greater depth of knowledge to the objectives identified.

The purpose of the exploratory research in the study was to narrow the scope of
the research topic and transform discovered problems into defined ones,
incorporating the specific research objectives. The method of exploratory
research implemented was the case study method and secondary data analysis.
The purpose of the case study method was to obtain information from situations
that were similar to the research problem as identified. This method allowed the

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researcher to investigate the role that latent technology played in making Xerox
and certain spin-off companies the success stories that they are today.
Furthermore, exploratory research has been conducted to evaluate how
Standard Bank has successfully leveraged and implemented Internet based
technology in their Self-Service Banking offering by adapting their business
model to the demands of the financial business environment.

4.3.1.1. Secondary Data Analysis

Secondary data analysis refers to the preliminary review of data collected for
another purpose to clarify issues in the early stages of the research effort. A
thorough literature review on business models, definitions, existing paradigms,
Xerox, Standard Bank and other companies was conducted in order to establish
a set of base data that could be referred to in addressing the problems and
meeting the objectives of the study.

The beginning process for the secondary data analysis was to delve into the
definition of business models and in so doing establish a base on which the
research framework could use as a platform to interrogate the problem definition
and research objectives. A myriad of business model definitions presented
themselves during this stage and some form of a usable definition was needed in
order to work towards the objectives. Business literature and specifically e-
commerce provided the working definition that was used during this study. The
data analysis from e-commerce journals and various websites proved invaluable
as it was biased towards linking a certain degr ee of technology into the
definitions presented.

Thorough research on how certain companies were incorporating innovation into

their working business models also proved to be challenging due to intellectual
property constraints which resulted in a more comprehensive secondary data
analysis been conducted. From an international perspective there were some

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excellent sources of how companies were incorporating innovation into their

business models and how this affected their performance. On the South African
front Standard Bank was used to gauge the same degree of data sought within
the research context.

The way in which the secondary data was gathered was through literature
searches on the World Wide Web using Google as a search engine as well and
library searches on interrelated topics where authors had published their
research and findings. Hard copies of magazines, reviews, published works and
numerous books were used in the process of secondary data analysis. Following
on to this was the use of the case study method which is explained in more detail
in the following section.

4.3.1.2. Case Studies

The purpose of the case study method is to obtain information from one or more
situations that are similar to the problem situation. The case study method refers
to an exploratory research technique that intensely investigates the problem
situation at hand. The case study of how Xerox implemented a flexible business
model in order to obtain economic value from the 914 photocopying machine that
was conducted by Henry Chesbrough and Steven Rosenbloom illustrated how
Xerox succ essfully implemented a risky yet sustainable business model and in
so doing created immense economic value and a competitive advantage for the
company.

Through exploratory research by using the case study method, Chesbrough and
Rosenbloom identified 35 spin-off companies that commercialized technology
emanating from Xerox’s initial technology. Rosenbloom and Chesbrough argue
that since the business m odels subsequent performance, it was therefore useful
to select cases where the primary elements of the model wer e not changed
appreciably. For the purposes of this study, six specific spin off companies were

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chosen to represent a variance in the successes of these companies. Four of the

selected ventures discussed in chapter 3 (section 3.1) went on to create
significant economic value while the other two companies did not ; this will
illuminate salient aspects of the role of the business model in economic value
creation. Ultimately, these cases will illustrate a range of different approaches to
the definition of the business model as well in variation in the commercial
outcomes that resulted.

Therefore a clustered sample of a total of six spin-off companies will be drawn

from the total amount of companies that Xerox technologically led to their
inception. This represents a total of 17% of the spin-offs complement that used
innovative business models to achieve their objectives. The sample selection
was not done by means of a probability test; rather an objective approach where
the cases selected would illustrate a range of different approaches to the
definition of a business model as well as commercial outcomes each
experienced. These spin-off companies and the resulting outcomes are
thoroughly interrogated in chapter 3, section 3.1.

4.3.2. Causal Research

Causal research is c onducted to identify cause-and-effect relationships among

variables when the research problem has already been narrowly defined (The
exploratory research preceded this section).

The causal research undertaken will be to attempt to establish that through

implementing a flexible business model (when we do one thing) the value of
latent technological innovation can be more fully expr essed (another thing will
follow). A causal relationship may be impossible to prove, however, this research
may help in understanding and predicting relations hips associated with the
identified research problem.

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Further, there is some evidence of concomitant variation in that as certain

technology possesses latent value it can only be realised if the business model
that implements this technology is flexible enough to commit resources to
realising this value. Concomitant variation refers to the occurrence of two
phenomena or events that vary together. As the criterion of concomitant
variation is met, that is, there is an association between variables; reason
suggests that a causal relationship exists.

This causal relationship has been identified as how the correct or incorrect
business model employed by a company may result in different outcomes based
on the business model that is chosen by the company. The illus tration of how
Xerox actually planned for success by following through on their ground breaking
technology of the 914 photo copy machine illustrates how a cause and effect
relationship existed within the Xerox situation. Stemming from the problem
statement as identified in section 1.3 of c hapter 1, Xerox prov ided a perfect case
scenario on how causal research was conducted. The problem had been
identified through the exploratory research conducted and further causal
research on other companies was therefore required to identify if there was a
certain degree of causal relationships among the business model and the
successful implementation of innovation thereof.

4.4.
CONCLUSION

This chapter has taken a look at the research methodology and design that has
been incorporated in this paper. The chapter begins by looking at the types of
research and by tabulating the differences between qualitative and quantitative
research approaches. This chapter further looks at the research design and the
use of structured questionnaires in obtaining primary data. In conclusion the
chapter looks at the importance of qualitative research and the reasoning behind
the choice of this research in this paper. The qualitative method that was chosen
was a more appropriate method for this study than using that of a quantitative

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approach. Due to the fact that a hypothesis was not explicitly stated and
formulated before embarking on the research, meant that the qualitative research
approach allowed for a central thesis stated in form of a general research goal to
be undertaken.

Chapter five will interrogate the qualitative research presented throughout this
paper and present findings and conclusions with an emphasis on addressing the
problem statement and research objectives identified in chapter one of this study.
The chapter will begin with an overview to the theory presented. It will then
interpret and analyse the primary and secondary objectives and make
conclusions based on these. The last section of the chapter will tie up the
conclusions and present findings of the research. Chapter five will conclude the
cope of this study.

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