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Business Model Innovation in a Network Company

Amina Hamani, Fanny Simon


Dans Journal of Innovation Economics & Management 2020/3 (n° 33) , pages 105 à 134
Éditions De Boeck Supérieur
DOI 10.3917/jie.033.0105
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VARIA

Business Model Innovation


in a Network Company
Amina HAMANI
Universty of Normandie Caen
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Nimec (France)
Amina.hamani@unicaen.fr

Fanny SIMON
University of Normandie Rouen
Nimec (France)
fanny.simon-lee@univ-rouen.fr

ABSTRACT
Currently, many organizations deploy business model innovation (BMI) to
respond to changes in their environments. Most studies have focused on
understanding BMI only at the organization level and have not explained
how it can emerge from a bottom-up process and be diffused at the network
level. Consequently, challenges related to the co-existence of BMs in a net-
work company have not been explained, potentially leading to the failure
of the new BMI. The aim of this paper is to fill this void through a single-
case study of CH Robinson Europe, a transportation and logistics services
company. We study a particular BMI that disrupts existing behaviours and
resource flows as it was deployed at the organizational and network levels.
This case study demonstrates the coordination and collaboration challenges
stemming from the complex relationships between actors, due to their inter-
dependence and the complementarity of business models at different levels.
Therefore, our findings extend our understanding of the emergence and dif-
fusion of a BMI in network organizations and of the role played by inter-
organizational relationships in value capture from BMI.
KEYWORDS: Inter-organizational Relationships, Business Model, Network, Value
Creation.
JEL CODES: O3

n° 33 – Journal of Innovation Economics & Management 2020/3 105


DOI: 10.3917/jie.033.0105
Amina Hamani, Fanny Simon

In the current rapidly changing environment, companies need to reconsider


their value creation process and delivery to customers (Chesbrough, 2007;
Teece, 2010). Consequently, they are increasingly using inter-organizational
relationships to search for new logics of value creation (Börjeson, 2015;
Latusek, Vlaar, 2018; Ruiz-Ortega et al., 2017). Such new logics, along with
the original mechanisms of value capture, are a source of business model
innovations (BMI). According to Abdelkafi et al. (2013) BMI deals with
changes in a value dimension of the company’s business model. It enables
sustainable competitive advantage and facilitates responsiveness to change in
the environment (Demil et al., 2018; Schneider, Spieth, 2013).
As early as 2002, Zott and Amit (2002) highlighted that BMI differs from
product or service innovations and requires focused studies. Although a well-
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established stream of research has examined BMI, existing analyses often
focus on a single entity, whereas BMI involves transformations of inter-orga-
nizational relationships. Indeed, the definition of the business model (BM) as
a system of interdependent activities transcending the focal firm and span-
ning its boundaries emphasizes interdependencies beyond a firm’s boundaries
and the impact of interlinkages between organizations (Zott, Amit, 2010).
Consequently, we aim to obtain a better understanding of BMI and of how
the new and the existing BM co-exist in complex networks of organizations.
More particularly, we focus on the emergence of BMI through inter-organi-
zational relationships and the alignment of that BMI within the focal com-
pany’s network relationships (Foss, Saebi, 2017; Kringelum, Gjerding, 2018;
Rydehell, 2019; Spieth et al., 2019a).
Whereas most studies of BMI consider initiatives that emerge from top
management and are deployed throughout the organization, we concentrate
on a BMI that emerged from specific local conditions and was developed via
a bottom-up process (Mutka, Aaltonen, 2013). The challenge in this case
was to organize and coordinate networks for the innovation with an initial
BM and simultaneously to sustain existing relationships. Few research studies
have explored how such BMIs emerge and how they co-exist with an existing
BM at the network level (Foss, Saebi, 2017).
This paper brings new insight to the literature on BM dynamics by high-
lighting conflicts in resource allocation between the two business models as
well as different mechanisms of value capture, which may later create tension
if the BMIs interfere with the firm’s BM. Furthermore, we use the literature
on inter-organizational relationships in the context of innovative projects to
understand the challenges raised by the alignment of a BMI with the firm’s
BM and with partner organizations’ BMs. In fact, as a firm’s BM interacts

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Business Model Innovation in a Network Company

with other companies’ BMs, a BMI in the focal company may disrupt core
elements of other organizations’ revenue models.
Our research focuses on one of the leading providers of multimodal
transportation services and third-party logistics in the US. This organiza-
tion mostly offers freight transportation and brokerage services. Its worldwide
presence is characterized by a network of more than 280 entities. We study
a specific BMI, which involves suppliers and different entities in a network
of organizations and customers. This BMI, which at first appears to be suc-
cessful, can be characterized as an inter-organizational project because it is
temporary and several actors with different backgrounds and localizations
are involved. However, as the BMI was deployed into the network, major
organizational changes occurred, as well as substantial transformations of
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the relationships within the network and with suppliers. Consequently, a new
organizational form was designed to enable the deployment of organization-
wide capabilities, and the existing BM at the firm level had to be amended.
We conducted a qualitative and case study analysis based on the process and
on content approaches. We extracted and coded data into the network to
characterize both the different dimensions of the BM and the changes in
relationships among the entities in the network.
This paper shows that, as a new BMI is deployed, actors specifically focus
on mechanisms through which to create value inside the network, whereas
one of the main challenges is to capture value from the BMI without destroy-
ing existing BMs at the firm level. The integration of different levels of analy-
sis for the BM as well as the focus on a dynamic approach facilitates an under-
standing of the tensions that occur as new BMIs are deployed in a network
company.
The paper is structured as follows. First, we build a theoretical framework
for the BM concept and its deployment in a network organization, followed
by a discussion of how BMs can co-exist at different levels in a network orga-
nization. Second, we present our research methodology design and describe
our case study. Finally, we discuss the results compared to those of previous
studies.

Theoretical Framework

Defining a BM at Different Levels of Analysis


Over the last twenty years, we have witnessed a proliferation of academic
research on BMs (Demil et al., 2018; Foss, Saebi, 2017; Massa et al., 2017;

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Amina Hamani, Fanny Simon

Rydehell, 2019). One of the most popular definitions, which focuses on the
relationships that a focal firm maintains with others to perform its activities,
conceptualizes a BM “as a new unit of analysis, offering a systemic perspective
on how to ‘do business,’ encompassing boundary-spanning activities (performed
by a focal firm or others), and focusing on value creation as well as value capture”
(Zott et al., 2011, p. 1038). Consequently, relationships with customers, sup-
pliers, service providers and other stakeholders influence a firm’s capacity to
create and capture value (Casadesus-Masanell, Ricart, 2010). Indeed, BMs
do not operate in isolation; they interact with various actors (Chesbrough,
Schwartz, 2007). In that respect, the main contributions of the BM as dis-
cussed in the strategy literature are threefold. First, BMs show that value
creation does not come solely from producers but may also be generated by
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customers or other involved actors. Then, a BM derives competitive advan-
tage from both the demand and the supply sides, and that advantage can
be resource- or activity-based (Massa et al., 2017). Finally, it comprises the
firm and network level, and value creation and capture are conceived beyond
the company’s boundaries (Clauss, 2017). The BM then represents a relevant
framework to analyse value creation both within the company and externally
at the inter-organizational level (Spieth et al., 2019a).
To sustain their competitive advantage, companies need to renew their
BMs, and it is thus important to regard the BM from a dynamic perspec-
tive (Wirtz et al., 2016). Those changes in BM can lead to two different
types of BMIs: the re-configuration of the initial BM or the creation of a
new BM (Massa, Tucci, 2014; Laasch, 2019). We focus on the creation of
a new BM through adjustments involving voluntary and emerging changes
in and between BM components (Demil et al., 2018). In established com-
panies, those transformations have to be managed simultaneously with the
reinforcement of the traditional BM (Khanagha et al., 2014).
Despite the interest that scholars accord to BMI, they agree that much
remains to be explored (Demil et al., 2018; Foss, Saebi, 2017; Gassmann et al.,
2016; Massa et al., 2017). In particular, BMI allows consideration of both
changes within the company and the dynamics in its value network (Spieth
et al., 2019a). That network includes the focal firm and its partner organi-
zations, such as customers, suppliers and various stakeholders, and it influ-
ences both joint value creation and distribution (Amit, Zott, 2015; Wirtz
et al., 2016). However, we still have little understanding of the implications of
BMI on the value network (Kringelum, Gjerding, 2018; Rydehell, 2019). This
topic is of particular interest for network companies, which rely on their rela-
tionships with partners to innovate (Spieth et al., 2019a; Alcalde, Guerrero,
2016). Furthermore, in such an organizational form, different entities can

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Business Model Innovation in a Network Company

create value and benefit from the arrangement. Consequently, “the value cre-
ated at one level of analysis can be captured at another” (Solaimani et al., 2018,
p. 81). The challenge for such a company is to involve partners in the BMI
process while simultaneously deploying a BMI that can maintain value cre-
ation for the different actors involved in its value network, not only for its
clients, in order to remain competitive (Zollo et al., 2018).
Researchers have already highlighted the challenges related to BMI
in network organizations. First, BMI can compete with the initial BM for
resources or lead to new processes that may conflict with current practices
in the organization. Hence, BMI can be used to explore new paths and may
be disruptive to the existing network. Demil et al. (2018) demonstrate that
the focal company needs to negotiate with stakeholders to convince them
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to interact in the value creation and capture processes under the conditions
expected by the focal organization. The failure of complementors, suppliers
or distributors to rally around the BMI often leads its implementation to fail.
Second, BMI can jeopardize the value creation mechanisms of the exist-
ing BMs. Thus, the co-existence of two systems of value generation may
increase costs more rapidly than turnover, which would decrease the firm’s
profitability (Moingeon, Lehmann-Ortega, 2010); cannibalization can also
occur between the BMs (Khanagha et al., 2014); and the value of the exist-
ing distribution network can be undermined (Markides, Charitou, 2004).
Chesbrough (2010) also notes that organizational processes need to change,
and resources must be allocated differently.
To overcome these different challenges, researchers have prescribed dif-
ferent organizational arrangements. The first stream of research considers
that companies should experiment within temporary structures. The new
BM should be developed in separate structures and then reintegrated into
existing business units (Markides, 2013). A second perspective considers that
companies should find a balance between an exploitation and an explora-
tion logic in their value network. Thus, BMI can first be orchestrated by
leveraging incremental changes within the focal company, and then new
opportunities are uncovered at the network level and new mechanisms of
value creation are explored with external partners. Those minor transfor-
mations could lead to major reconfigurations of the value network and the
exploration of co-created new offerings (Kringelum, Gjerding, 2018). We fol-
low this line of argument and focus on the process of BMI. That process is
characterized by a feedback loop between value creation and capture (Rodet-
Kroichvili et al., 2014). The RCOV model is particularly appropriate for cap-
turing those gradual transformations of value creation and capture within

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Amina Hamani, Fanny Simon

the value network, as it allows a dynamic perspective (Wirtz et al., 2016). We


describe this model in the next section.

The RCOV Model


Various generic BMs have been proposed in the literature (Moingeon,
Lehmann-Ortega, 2010; Osterwalder, Pigneur, 2010); we focus on the RCOV
model, as described by Warnier et al. (2016), because it explicates a multidi-
mensional view of the firm and allows a dynamic perspective (Gassmann
et al., 2016; Warnier et al., 2018).

Figure 1 – The RCOV model


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Adapted from Warnier et al. (2016)

As shown in Figure 1, the model is characterized by three compo-


nents: resources and competences, value proposition and organization. The
resources and competences component encompasses assets as well as indi-
vidual and collective capabilities, which are valuable and may be unique.
Selecting the appropriate capabilities and assets to mobilize defines the offer-
ings for customers. The perceived value that customers attribute to those
offerings and the prices that they are willing to pay for them define the value
proposition and the revenue structure. Then, the company must organize
its internal value chain and determine which activities to outsource. Such
choices impact the cost structure and the value network. The value chain
and network define the organizational component. The difference between

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Business Model Innovation in a Network Company

receipt and payment flows defines the company’s margin and determines its
profitability. Details of the four components are described in Table 1.

Table 1 – BM components according to the RCOV approach

-The physical, financial or human


resources that different actors control
or draw from the external environment
Resources -Those resources can be bought,
rented, produced internally or
Resources acquired from partnership, and they
and enable revenue generation
competences -The capability and know-how
developed by managers individually
or collectively to improve, combine
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Competences
or change the way resources are
used and that lead to different value
propositions
Every entity that generates revenues
Clients can be final consumers,
Clients
suppliers, competitors or partners
Value offering complementary products
proposition Offer Services and products of the company
Includes the “place” for each phase
Access of the buying process, including
conditions as well as price
Internal Organization: The activities of the company that are
Value chain carried out internally
Organization The relationships that a company has
External Organization:
with different external partners to
Value network
deliver value

These three components (resources/competences/organization/value


proposition) represent organizational choices. A BMI can then be associated
with changes in those components. Thus, Spieth et al. (2019a) decompose
BMI in three dimensions:
–– VOI (value offering innovation), which relates to innovations that pro-
vide additional value for customers;
–– VAI (value architecture innovation), which describes the restructuring
of company internal resources and partner networks;
–– RMI (revenue model innovation), which relates to changes in the net-
work value capture mechanisms.
These different innovations in the BM components not only transform
the firm’s BM but also the BMs of its partners (Casadesus-Masanell, Ricart,
2010). Consequently, as proposed by Spieth et al. (2019a), we study BMI from
a network perspective. As that perspective is quite new in the literature, we

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Amina Hamani, Fanny Simon

bring complementary insights by leveraging the literature on inter-organi-


zational relationships in innovative projects. In fact, this research stream
has demonstrated that companies can regenerate their portfolio of offerings
and have dynamic BMs through ideas emerging from inter-organizational
partnerships (Leboulanger, Perdrieu-Maudière, 2012). For example, suppli-
ers, in particular, can be sources of new ideas (Jouini, Charue-Duboc, 2018).
However, new value creation offerings from external partners may disrupt
value capture mechanisms and reshape the organization of the whole net-
work. Consequently, in the next section, we highlight the different dimen-
sions of inter-organizational relationships that may influence the emergence
of a new BM or the co-existence of BMs.
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Characteristics of Inter-Organizational
Relationships and BM Co-Existence
We focus our analysis on the networking form of company (a ‘network
company’, for short), which has seen renewed interest in recent decades
(Clegg et al., 2016; Ricciardi et al., 2018). Numerous companies deploy vari-
ous forms of networks to enter international markets or externalize their
activities. These networks provide resources to the company embedded in
them, allowing them to generate profit (Barney, 2018; Ruiz-Ortega et al.,
2017). Previous scholars have pointed out that networking also enhances
innovation, flexibility and the development and diffusion of new knowledge
(Solaimani et al., 2018). Network companies are characterized by particular
patterns and relationships among different companies that conduct common
activities. As BMIs are deployed in network organizations, companies tend
to realign their objectives to create joint value (Demil et al., 2018). Thus,
network companies are characterized by a high degree of integration between
multiple types of socially important relations across formal boundaries, which
determine the success of BMI.
In network companies, value creation mostly comes from the network
of internal and external relationships. Value creation refers to the choice of
activities (content), the interlinkage and sequence of those activities (struc-
ture) and role repartition for those activities (governance) (Zott, Amit, 2010;
Spieth et al., 2019b). In addition, the nature and flow of value transactions
and exchanges should be considered (Weerawardena et al., 2019). Similarly,
networks can be characterized in terms of content (type of resource flows,
which are related to activity choices), structure (densely or loosely connected
ties) and governance (coordination within the network). Consequently, we
define how inter-organizational relationships can be impacted by BMI.

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Business Model Innovation in a Network Company

Bankvall et al. (2017) differentiate between firm-centric and network-


embedded BMs. As far as inter-organizational relationships are concerned,
structural embeddedness refers to densely connected groups and companies
that maintain ongoing and close relationships with partners (Uzzi, 1996).
The BMs of firms that are densely embedded into networks of relationships
cannot change independently (Bankvall et al., 2017). The transformation of
a single company’s BM impacts the BMs of other firms. Furthermore, compa-
nies that are refining their BM may have to extend their set of relationships.
Network extension can later lead to more radical BMI (Kringelum, Gjerding,
2018). Consequently, BMI transforms the set of inter-organizational relation-
ships in terms of its structure.
Different types of content also flow in relationships such as information,
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equipment, materials and support. Traditionally, research on BMs emphasizes
exchanges of tangible resources as well as financial and information flows
in networks of relationships. Thus, companies use their inter-organizational
network to convert different types of resources into sources of value (Allee,
2008). However, less attention has been paid to social resources such as sup-
port, legitimacy or trust, which are also important for innovation (Newell,
Swan, 2000). Thus, recent works by Bourcet et al. (2019) demonstrate that
trust is needed in specific conditions to reinforce value creation, but it may
be impeded by information asymmetries in the network (Bourcet et al.,
2019). As companies conjointly develop BMI, social mechanisms within
the network will be strengthened. Partners then work iteratively, and cer-
tain relationships, which at first were temporary, are reiterated and may
become permanent. Thus, staff from different companies will get to know
each other better and become more likely to trust each other. Consequently,
BMI would change resource flow with the set of inter-organizational relation-
ships. Finally, studies on inter-organizational relationships have highlighted
the role of network coordination on value creation and capture. In particular,
Dhanaraj and Parkhe (2006), highlight the role of hub firms in orchestrating
the network and allowing value extraction, notably by managing innova-
tion appropriability. However, as BMIs are deployed in the network, it may
become difficult to align a constellation of companies with diverging interest
(Berglund, Sandström, 2013). Thus, the focal firm alone may not be able to
manage changes in the network, and BMI deployment may be blocked by
members of the value network.
To synthesize, companies that develop BMI in complex networks face
several structural challenges. First, they need to support the BMI as well as
to maintain the existing BM. This could be particularly challenging, as the
structure of the network and the type of resource flow in the set of ties are

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Amina Hamani, Fanny Simon

transformed with the BMI. As a consequence, those structural conditions


that are favourable for BMI may be detrimental for the continuity of the BM.
Then, the focal firm may not be able to orchestrate those changes in the net-
work, which may trigger resistance from members of the value chain. These
tensions, which have not been studied in the literature, led us to unpack the
dynamics of BMI development in network organizations.
In this research, we focus on a case study of a network company that
established a new BMI. The BMI challenged the firm and the network’s BM.
Consequently, the company went through several trials to attempt to align
its different BMs. The following section describes the case studied and the
methods.
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Methods
We conducted a qualitative single-case study of a transportation company
that is organized as a network of independent companies. The individual
case study approach facilitates gaining insight from a specific case with a
unique context and is particularly appropriate for studying transformations
of BMs and value creation (Moyon, Lecocq, 2014; Achtenhagen et al., 2013).
This case is particularly apt for studying changes in BMs and inter-organi-
zational relationships, as the network of organizations involves both a dense
set of internal agencies and looser ties with external providers. We hereafter
refer to the entity in which the BMI emerges as the “Agency”. We began by
presenting the case.

Case Description
CH Robinson Worldwide is the leading provider of multimodal transpor-
tation services and third-party logistics. This company was set up in 1905,
and its headquarters are in Minnesota, USA. It provides clients with logis-
tics solutions as well as transportation services and technological solutions
worldwide. The company draws its competitive advantage from its expertise
in logistics processes and from specific technological tools as well as from its
worldwide network of agencies.
CH Robinson Europe BV comprises 43 agencies in 19 European coun-
tries. Its agencies are logistics service providers and act as brokers. The
agency we are studying is specialized in road transport for all types of goods.
The Agency operates in a specific geographical zone that has been allocated
to it. All clients domiciled in that zone are referred to the Agency, and no
other agency can interfere in the zone. The Agency does not own trucks
to transport its customers’ goods, thereby eliminating the costs of acquiring
and managing trucks. It charters carriers with different nationalities in all

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European zones, from the point of loading to the point of delivery, which
enables the Agency to offer lower prices than its competitors. Therefore, we
can represent the component of the initial BM as follows.
In 2012, the Agency started to use the same truck and driver to pro-
pose round-trip contracts and paid the transporter based on the kilometres
travelled instead of per discrete trip. Then, the Agency formed partnerships
with certain transport providers. These carriers would commit their trucks
to the Agency for periods of time. Carriers were then paid, based on kilome-
tres travelled, with a minimum monthly fee, such that the Agency had total
control of the truck. This arrangement between the Agency and their trans-
porter represents a BMI, as it represents a new value proposition for clients
and changes in the “organization” dimension of the BM. This BMI was sub-
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sequently extended across the Agency’s network and led to transformations
in both the firm and its network’s BM. We detail our methods for analysing
changes in the BM and inter-organizational relationships; then, we present
our results. Table 2 presents the initial BM of the company.

Table 2 – The initial BM components of CH Robinson


according to the RCOV approach

Components Description
Financial resources
Physical, financial and
Head office
human resources that
28 employees
CH Robinson Agency
Navisphere platform,
holds, develops
provided by the
internally or obtains
Resources headquarters, CH
from the external
Robinson Worldwide
environment, through
Trucks provided by
buying, renting
CH Robinson network
and acquiring from
Trucks provided by
partnership
carriers
Bargaining skills and
Resources knowledge of foreign
and languages
competences Skills developed
collectively with CH
The capability and
Robinson network:
know-how developed
Knowledge about
by CH Robinson
transportation market
Competences Agency managers
price
individually or
Expertise on
collectively with the
European zones
CH Robinson network
and on coordination
between these zones
Carriers’ profiles
Knowledge of regional
specificities

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Amina Hamani, Fanny Simon

Components Description
Direct customers
Other agencies
Every entity that from CH Robinson
generates revenues European network
Clients
for the CH Robinson which has
Value Agency merchandise to
proposition transport on the
assigned zone
Services provided Road transport across
Offer by the CH Robinson Europe for all types of
Agency merchandise
Prospecting for clients
The activities of the
from its assigned zone
CH Robinson Agency
Value chain Finding carriers in
that are carried out
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European zone at the
internally
best value for money
Organization Punctual relationships
The relationships that
with carriers on the
CH Robinson Agency
spot market
has with different
Value network Cooperation with
external partners to
CH Robinson Europe
create and deliver
network to serve their
value
respective clients

Longitudinal Case Study


We carried out a longitudinal analysis to study changes in the BM and
inter-organizational relationships based on the earlier prescribed methods
(Moyon, Lecocq, 2014). We integrated both process and content approaches.
Our data analysis jointly used secondary and primary data representing a
seven-year period (from 2010 to 2017); these data were cross-checked with
different sources to enhance the study’s validity. The primary data were gath-
ered through semi-structured interviews. Each interview lasted from 30 min-
utes to 1 hour. These data were collected at two different periods to follow
BM evolution. We also went to the site and observed working practices. In
terms of secondary data, we had access to internal reports, the organizational
chart and general information about the company’s organization. Table 3
synthesizes the different sources of data.

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Table 3 – Information sources

Primary data Secondary data


2016: 9 interviews with managers,
customers, quality managers and
account representatives as well as CH Robinson Worldwide annual
participants’ observations and a report, 2010 and 2016
meeting with the General Manager, Internship reports of 2015 and 2017
Customer Manager and CH Robinson Research paper of 2016
Quality Manager Organizational chart of 2010 and 2012
2017: 6 interviews with managers, Press articles from 2007 to 2017
dedicated truck account managers
and account representatives

First, we wrote a narrative, which we had validated by an expert, to study


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the evolutions experienced by the BMs and their contexts. That narration
allowed us to identify the key events that shaped the BMI.
Then, we used a content approach to understand how the BM and the
inter-organizational relationships evolved throughout the three phases, sim-
ilar to the method used by Ziaee Bigdeli et al. (2016). We first performed
thematic coding of the BM at different levels according to the three main
components used in the RCOV framework (resources and competences,
organization and value proposition). Then, we coded inter-organizational
relationships according to the different features described in the literature
review.
Next, we described the components of the BM concept as they existed at
different periods of time, and we compared them to identify innovations in
the BM (Casadesus-Masanell, Ricart, 2010). We also determined the attri-
butes of the inter-organizational relationships, which allowed us to under-
stand the interrelationships between BMI and the inter-organizational rela-
tionships.

Results
We organize the results section according to the three phases that char-
acterized the BMI. The first phase began as a team in the Agency was setting
up the new BMI. The second phase ended as difficulties arose and the new
organization was scrutinized; the last phase is characterized by the decision
that the new BMI should remain at the Agency level. Figure 1 represents the
initial BM. It particularly highlights the competition within the external
network and the cooperation inside the internal network, which ensure a
high profit for the company.

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Figure 2 – The initial BM

118
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Business Model Innovation in a Network Company

Description of the BMI and the


Changes in the Firm’s BM
The BMI emerged from changes in the context: specifically, the opening
of the European Union triggered new opportunities for change in the freight
sector. Hence, the enlargement of the European Union towards the countries
of Eastern Europe between 2004 and 2007 opened the market to Polish and
Romanian carriers, which became the main actors in the European freight
transport market. These carriers seek to work with transportation companies
that provide them with orders on a regular basis. In this case, the Agency
used to work with Eastern European carriers. The embeddedness of relation-
ships with those carriers opened the way for a BMI. Even though this BMI
was highly related to this particular context, it was subsequently adopted by
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the US headquarters and was developed worldwide.
The BMI involved both a new value proposition for the client and a new
organization. The Agency guaranteed carriers a certain number of kilome-
tres per month. In exchange, carriers provisioned their trucks to the Agency
for periods ranging from 2 to 4 months. Hence, the Agency then became
responsible for loading, tracking deliveries in time and place, and sending
trucks to other loading locations, whereas traditionally, it had only been in
charge of finding a transporter at the best price to do these tasks. Henceforth,
it assumed total control of the trucks and came to handle them as if it owned
them.

Value Proposition
The introduction of dedicated trucks allowed the Agency to make a new
proposition to its customers because it now controlled the truck’s itinerary.
Previously, the Agency had chartered trucks on the spot. However, for vari-
ous reasons, transporters preferred certain destinations to others. In addi-
tion, in certain periods of the year there was greater demand than available
means of transport; transporters became less available, and transport prices
soared. Furthermore, it became difficult to contractually set the conditions
of the trucks prior to loading, which could adversely affect the quality of
service and customer satisfaction. Finally, for certain trips, customers had
to pay a very high price because the Agency could not find any load for the
return trip, and the customers had to pay for the empty truck to return to its
initial location. Consequently, the Agency could not guarantee its offering
to its regular customers. The new value proposition provided a certain level
of quality to customers by monitoring the trucks, which could be sent to the
loading point, as described by the following verbatim transcript outlining
the new value proposition: “Customers want to pay less, so we look for the

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cheapest… and when it’s cheaper, the quality is not always excellent, and it’s really
difficult to manage everything, so now with the trucks that circulate, it is ours,
so we can guarantee a certain quality, and it can stabilize our prices.” (Account
Representative)
This BMI also prices to be anticipated and assurances provided for a given
offering for certain destinations. Finally, it enables lower prices by loading
trucks for round-trip travel, and it aims to address customers’ needs with
greater flexibility and customization, as described below: “For example, I was
talking about loads to Bretagne that are very difficult to get out; the trucks belong
to us, so we can move it to Bretagne because we already have internal knowledge
to provide the re-out, so we can meet the specific and complicated needs of cus-
tomers.” (Dedicated Truck Account Manager).
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Resources and Competences
The Agency’s BM relies on one main resource to manage all its activities:
a technological platform called the “Navisphere”. This platform was devel-
oped by CH Robinson Worldwide and connects all its agencies throughout
the world. It comprises a database where CH Robinson agencies share their
information and knowledge of their customers and carriers to optimize pro-
cess and transportation flows. In addition, the Agency mobilizes two types of
logistical and transportation skills: skills that are developed individually by
the Agency’s staff (such as bargaining skills and expertise in the geographical
zone) and skills developed collectively within the CH Robinson Europe net-
work (such as coordination among zones). These skills principally concern
transportation in terms of price, transporter profiles, and region specifici-
ties, as described in the following verbatim transcript: “If we take the case of
UK imports to go to France, the Agency is not [a] specialist, but the agency of
Manchester and London know very well how to do that. So, if we want to have a
chance to better position our offer in terms of price, it is better to ask the agency of
Manchester or London.” (Client Manager)
The resources and competences component has also undergone several
changes. The main transformation is that the Agency has trucks available
(thus, a new tangible asset). The team in charge of the BMI also acquired new
skills insofar as its members now have deep knowledge of the driver and truck
with which they are working. Moreover, they have to carry out new duties,
such as finding loads for a truck and optimizing the truck’s itinerary, and
develop new skills, such as knowledge of Europe’s zones, because the “dedi-
cated trucks” cover all Europe. Thus, they have developed new competences.

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Internal Organization
The value chain of the existing BM is organized around two services: cus-
tomer service, whose primary mission is to find new loads, and the mission of
the carrier service, which is to find transporters for these loads. Responsibility
for the transport of goods may be assigned directly to the Agency’s carrier
service or may be entrusted to a carrier service belonging to another agency
of CH Robinson Europe network that proposes transporters. This structure
characterizes all CH Robinson Europe agencies: “Each agency works in the
same way [with regard to its] customer and carrier service. Customer service cre-
ates an order, for example from Paris to Madrid, [and] there are two choices that
are offered to Paris customer service; either they choose the carrier service of [the]
Paris Agency, which assigns the truck, or it can choose another agency of the
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group that assigns this truck.” (General Manager)
The BMI completely changes this organization. The Agency has added
a new service in its organizational chart. This service supports a new pro-
cess by which to circulate and guide dedicated trucks throughout Europe. Its
objective is no longer to find trucks for customers but instead to search for
loading opportunities (hence customers) for dedicated trucks from potential
customers in its zones or from the CH Robinson Europe network in other
zones: “Most of the people who work here are looking for trucks for loading, and
dedicated trucks are looking for loading for their trucks…” (General Manager)

External Organization
In terms of the value network, the relationships with transporters were
disrupted. The task allocation between the Agency and its transporters was
altered, and the Agency now provides more value for the transporters. Thus,
these carriers have entrusted their trucks to the Agency for a short period.
The Agency then covers round trips with the same truck and the same driver
and provides a minimum fee to the carrier for a given period. Hence, the
relationship between the Agency and those transporters has evolved from an
on-the-spot market transaction to long-term cooperation, as described in this
verbatim transcript: “Those transporters are interested in transport companies
that provide them regularly with loads; for them, it is another way to run their
trucks, with very little investment, because we make everything for them, and we
choose the loading from point A to a point B, and from point B to a point C, and
so on.” (General Manager)

Transformation of Inter-organizational Relationships


The BMI was triggered both by new demands from customers and new
opportunities from carriers. Thus, the mutual trust between certain carriers

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and the Agency allowed mobilization of a new resource: dedicated trucks


without formalizing a contract, as described in the following verbatim tran-
script: “We do not make a contract; we are really flexible for the moment. There
are things signed in some cases, but it is never signed for duration.” (General
Manager)
The embeddedness of the Agency with those transporters allows progres-
sive validation of the BMI. This new BM also contributes to a strengthening
of relationships with specific carriers, as they regularly work with the Agency.
Thus, in terms of inter-organizational relationships, the BMI implies multi-
plex relationships with external partners who share both tangible resources
(trucks) and intangible resources (knowledge). The intensity of exchange is
high, as organizations frequently work together. The network structure is
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embedded because ties must be set up among partners to ensure maximum
loading for each truck. This structure is based on informal governance mech-
anisms, such as trust and reciprocity.
The BMI has also impacted relationships among agencies. Hence, tradi-
tionally, the revenue allocation among CH Robinson Europe agencies has
led to uncivil competition between carrier services. At present, each agency
is in charge of a specific zone, and it can only serve customers from within
this zone. However, the carrier service of each agency can propose transport-
ers from all Europe not only to its customer service but also to the customer
services of other agencies. The revenue component of the firms’ BM is based
on the margin that its customer services and carrier services can earn, as
described in the following verbatim transcript: “If we make 1 euro of margin,
50% goes to the customer service because it had prospected the customer, and
50% goes to the carrier side, which had dealt with the transportation, so if I take a
load from another agency, 50% goes to the carrier service of my agency, and 50%
remains for the customer service of this other agency. It is then interesting for us to
get the loads from other agencies.” (Account Representative).
They compete to obtain loadings from customer service entities, while at
the same time, they aim to access resources at the best price (by competing in
bids for transporters). Our results therefore show that the firm existing’s BM
aims at capitalizing on its CH Robinson Europe network agencies to obtain
synergistic effects in terms of resources and competences. However, relation-
ships between the Agency and its CH Robinson Europe network are char-
acterized by a low level of embeddedness because they only work together
when they need to or when they can maximize their economic profitability,
but they do not maintain strong social relationships. The BMI involves a
transformation of those relationships. Because each CH Robinson agency
has an assigned geographical zone and cannot surpass it, sending trucks to

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other loading zones (knowing that the trucks will not circulate and can-
not return empty to the Agency) therefore requires accepting loadings from
the other CH Robinson Europe agencies responsible for those zones. Its per-
formance depends on cooperation and complementarity between the differ-
ent CH Robinson Europe agencies. Otherwise, the dedicated truck returns
empty to Paris, and the Paris agency pays the carriers for these kilometres
despite the truck’s being empty: “It’s about having the trucks available from the
other agencies, loadings available from the other agencies, because it really works
only if we have the loading of the other agencies because it is the network finally…”
(General Manager)
Because the BMI was successful at the Agency level, it was subsequently
integrated by the CH Robinson Europe network, as each agency of this net-
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work operated in the same way and was looking for solutions. That led not
only to an evolution in the firm’s BM but also in the external network’s BM.
We discuss in the following section the path of this evolution in detail.

The Experimentation Phase at the


Firm and Network Level
BMI was progressively deployed in the other agencies as described below:
“It began when I started working at CH Robinson: at the beginning, we made
back and forth trips with the trucks; then, we decided to really handle trucks and
roll them all over Europe…. So, using our network, we managed the trucks…”
(Dedicated Truck Account Manager)
While the new value proposition was simply extended to all European
customers of CH Robinson, the organization and the resources and compe-
tences components of the network’s BM were amended, as described below.

Resources and Competences


Once all CH Robinson Europe agencies had integrated the BMI, certain
coordination mechanisms were deployed: the “dedicated truck” became a
focal priority in the Navisphere platform, with each agency being responsible
for exchanging information regularly and sharing its loadings with dedicated
trucks within its zone. Furthermore, CH Robinson agencies in Europe were
no longer competing for trucks and instead could focus on commercial activi-
ties: “I have four dedicated trucks, and I’m going to circulate them in Europe…We
often found loads for the dedicated truck because we have the platform and have
access to all CH Robinson loads throughout Europe, and we have the priority if
we have a dedicated truck…” (Account Representative)

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Amina Hamani, Fanny Simon

The truck fleet also expanded to include different European carri-


ers, which relates to the acquisition of new tangible resources. Thereafter,
employees developed a better understanding of the conditions related to spe-
cific trips in Europe to determine where dedicated trucks should be allocated.
They also developed their coordination skills with specific drivers. These
skills mainly concern transportation with regard to price, transporter pro-
files, the specificities of certain regions, etc.
“With what we do with the truck that moves, because moving every-
where in Europe…. So, you can imagine that when the truck arrives
in Barcelona, I cannot use something that is at my Agency to make
it move, so I have to go through the Barcelona Agency.” (Dedicated
Truck Account Manager)
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Internal Organization
In terms of the value chain, the Agency has added a new service in its
organizational chart. This service facilitates the circulation and guidance of
dedicated trucks throughout Europe. It finds loads either from potential cus-
tomers in its zones or from the CH Robinson Europe network in other zones,
as described in the following verbatim transcript: “[Traditionally,] most of the
people who work here are looking for trucks for loading, whereas the department
in charge of the dedicated trucks are looking for loading for their trucks, but there
is place for both organizations.” (General Manager)
This verbatim transcript describes the co-existence of the two BMs set up
in different organizations. This co-existence also impacts the cost structure,
as the network now needs to cover higher fixed costs (fees need to be paid
to carriers regardless of the contracts generated by customers), whereas previ-
ously, it mostly sought to manage marginal costs.

External Organization
In terms of the value network, the BMI leads to closer relationships with
carriers’ services within the CH Robinson network, who no longer compete
for trucks. Instead, they focus on commercial activities and negotiate to
obtain the loads of other agencies. This is described in the following quote:
“…You just have to respect, because when you come out of your zone and you
take loads of other agencies, this is where a little negotiation [occurs] for the price.
So, you have to negotiate with the other agencies to have their loads, but in my
opinion, it’s easier in this way…” (Account Representative Carrier North)

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The Challenging Co-Existence of BMs and Conflicts in Inter-


Organizational Relationships
However, the agencies refrained from cooperating as expected, since
agencies tend not to share all information on the platform and do not allo-
cate loadings to dedicated trucks. In fact, cooperation between CH Robinson
Europe agencies tends to depend on fluctuations in the market price of trans-
port. European agencies compare the prices of the dedicated truck relative
to spot prices. When spot prices surpass the costs borne by an Agency when
chartering a dedicated truck, the Agency does not share information with
the other agencies and mobilizes the dedicated truck for its own shipments.
Conversely, as spot prices sink below the prices paid by the Agency for a
committed truck’s shipment, the other agencies from the network prefer to
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work with the transporter at a spot price to earn a higher margin. Those
opportunistic behaviours not only affect the performance of the BMI but also
generate tension among CH Robinson Europe agencies.
“The dedicated truck is given priority over spot, and it is something that
has changed. But, it’s still a tough negotiation with colleagues (other CH
Robinson agencies). When you present your truck in the quiet period,
and that is necessarily more expensive than the spot, the other agency
does not necessarily want to open the trip, does not necessarily want to
share it with you.” (Client Manager)
In fact, the two BMs involve different content flows and governance
mechanisms inside relationships. Whereas BMI fosters cooperative and
reciprocal relationships as well as a formal mode of governance, the firm’s
BM, which is based on spot transportation, fosters one-shot relationships
based on a sharing of profit.
“But, the big difficulty … is especially having loads available from other
agencies…and sometimes it is very difficult because each agency is a
profit centre and wants to maximize its sales; it will not necessarily see
the dedicated truck as something sustainable.” (General Manager)
Moreover, challenges also occur in terms of relationships with external
partners. Thus, the BMI involves embedded and reciprocal relationships
between representatives from the transportation service within the CH
Robinson Europe network and with transporters. Consequently, it became
difficult to maintain the benefit from those same transporters of dedicated
trucks. Thus, relationship embeddedness lowers brokerage benefits, and the
following verbatim transcript illustrates this conflict:

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“The last years and with a flow that changes, the negotiations started
with the transporter three four years ago. Today, they are more to the
advantage of the transporter than to CH Robinson because prices made
with a single transporter in spot [on the spot] are more interesting than
things in [the] long-term (dedicated trucks).” (General Manager)
Once more, the transformation of inter-organizational relationships in
terms of structure and content alters the set of relationships that are needed
to conduct the traditional BM, and it was decided that the new project BM
should be deployed in a separate entity. Figure 3 synthesizes all the changes
that have been triggered in the network due to the deployment of the BMI.
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The Disconnection Phase
In April 2016, a meeting among CH Robinson agency general manag-
ers was conducted to find a solution. Their reflection led them to consider
reshaping the network. The management of the dedicated truck would be
entrusted to a new agency independent of the other CH Robinson European
agencies. This new agency would be in charge of negotiating with the carri-
ers and supplying the entire CH Robinson Europe truck network with ship-
ments, which could resolve the conflict of interest between the agencies
based on obtaining and mobilizing the means of transport: “If we want to this
to really work, dedicated trucks organization must not be as it is now. It should be
in a completely separate unit and not dependent on agencies. Today, the dedicated
truck depends on a profit centre that has to make money. Dedicated trucks today
must make money, but it must not be associated with the agencies revenues within
agencies because there are conflicts of interest.” (General Manager)
The solution that was envisioned seems to sustain the claim that BMI
and a firm’s BM should be deployed as separate entities with little connec-
tion. The need for separation could be justified by the fact that different
governance modes and structures, in terms of relationships, are needed for
the two BMs.
However, in the end, the general managers decided not to set up this new
agency as of yet because they had not determined how the agency could be
managed in the future, particularly because of the unstable environment of
road transportation in Europe. To avoid conflicts of interest relative to the
BMI, the Agency has resumed going back and forth with the same truck and
the same driver instead of spreading that truck throughout Europe. However,
those trips are restricted to the Agency’s geographical zone and that of other
agencies with which the Agency has embedded relationships. This solution

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can be qualified as a disconnection between the BMI and the firm’s initial
BM.

Discussion and Conclusion


Although the concept of the BM has attracted renewed interest from both
academic and professional communities, BMI has been given less emphasis
(Foss, Saebi 2017; Gassmann et al., 2016), whereas BM evolution is often a
powerful trigger to deploy change in organizations. Indeed, changing the BM
is central to creating sustainable values for business leaders and responding
to changes in their environment (Demil, Lecocq, 2010; Schneider, Spieth,
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2013).
We bring new insights to the literature on BMI by using concepts from
the literature on innovation in inter-organizational networks. Current stud-
ies focus on changes within the firm and mostly do not consider the trans-
formations of external networks (Berglund, Sandström, 2013). The literature
on inter-organizational networks allows us to take into account modifications
of the structure, content and governance of the value networks, which may
conflict with the logic of the existing BM. Thus, an increase in the level of
embeddedness inside the network may be detrimental for the focal firm’s
value capture mechanisms, while changes in the flow of resources may ham-
per value creation within the network. Furthermore, we highlighted gover-
nance challenges, as BMI often requires specific structures of cooperation.
More particularly, we focus on the structure, content flow and coordina-
tion mechanisms inside networks. BMI requires changes to organizational
structure, coordination and control mechanisms, but these dimensions are
less explored (Foss, Saebi, 2017). BMI is often considered based on changes in
a single or more components. However, this literature is particularly suitable
for analysing BMIs because such an innovation requires the transformation
of exchanges among companies in the value network to generate new rev-
enue streams. It allows us to better understand the interdependencies and
complementarities that exist between the BM of different organizations. On
the one hand, complementarities with external partners’ BMs trigger a new
value proposition and allow a new allocation of tasks and resources between
the firm and its suppliers. Thus, the BMI emerges from specific relationships
with partners and, ultimately, allows value creation and capture for both the
focal firm and its partners. Consequently, the BMI was rapidly adopted and
could be deployed at a local level without formal agreement. On the other
hand, the interdependencies of the different firms’ BMs fell inside the net-
work organization constraint of BMI deployment. Hence, whereas value was

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Figure 3 – Inter-organizational relationship dynamics and the evolution of BMs

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Business Model Innovation in a Network Company

created for customers through new offerings and better quality, the mecha-
nisms for value capture inside the network were not clear. Eventually, the
BMI brought into question the revenue generation structure of the exist-
ing BM, and firms inside the network had to choose either to cooperate to
enhance the network’s overall profitability or to benefit from both BMs to
increase their own profit. This particular example demonstrates that the BMI
and the firms’ BMs were not aligned. Thus, enhancing revenue generation
for individual firms in the network do not always lead to the optimization
of value creation inside the network, as in our example; this would lead to a
certain potential for a truck’s loadings not to be shared across the network.
Consequently, it shows that a company set up under a BMI should assess the
interdependencies of that BM with other organizations’ BMs both at the firm
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and the network levels.
Consequently, our article develops new insights into the literature on
BMI in a network organization by demonstrating that the new project can
differentially affect a local entity’s and the network firm’s BMs. The litera-
ture has already highlighted the complexity of new BM implementations in
a networked organization and, in particular, depicted several factors that may
hamper said implementation, such as the uncertainty of operational pro-
cesses, a lack of availability of resources, the lack of clarity among the stake-
holders’ strategic intent or their lack of consensus on operational aspects
(Solaimani et al., 2018). Our work reveals other factors that may also impede
the deployment of a BMI. In particular, it demonstrates that the lack of for-
mal governance mechanisms at the level of the network to organize resource
sharing (such as the availability of trucks) also plays a role at the network
level. Consequently, specific governance mechanisms may have to be set up
in a network organization to manage the allocation of new resources as BMIs
are deployed. Thus, our work allows a better understanding of interactions
among actors in a BMI, which have previously been overlooked (Wirtz et al.,
2016).
We also contribute to the debate on whether BMIs should be carried out
in a separate unit or connected to the main BM. Our findings indicate that a
BMI may be aligned with the agency’s BM but may also be disconnected from
its network’s BM. Our results are consistent with Khanagha et al.’s (2014)
work, which recognizes recursive iterations between different modes of sepa-
rated and integrated structures. We found that, at first, it seems that this
situation could lead to the creation of new structures supporting inter-organi-
zational BMIs, which would be in line with the literature on structural ambi-
dexterity (Raisch et al., 2009). Instead, we discovered that the deployment
of the BMI was suspended, and the exploratory BM was then disconnected

n° 33 – Journal of Innovation Economics & Management 2020/3 129


Amina Hamani, Fanny Simon

from the network’s BM. Thus, studies on ambidexterity in networks or the


management of different types of ties to deploy exploratory and exploitative
activities in a network provide a better lens through which to understand the
performance of the BMI than do studies on structural ambidexterity.
Naturally, a single-case study cannot lead to definitive conclusions; how-
ever, our research indicates that the concept of network ambidexterity could
be an interesting notion by which to study BMI and answer challenges rela-
tive to the co-existence of BMs in networks. Indeed, building on the lit-
erature reviewed in this paper, our conclusion is that the literature on inter-
organizational relationships in innovation helps to understand the challenges
relative to the co-existence of BMs.
Our work presents one main limit, which deals with the network’s
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boundaries. Thus, recent works point out that network company manag-
ers are adopting an ecosystemic representation of their inter-organizational
relationships (Chatterjee, Matzler, 2019; Demil et al., 2018; Warnier et al.,
2018). According to this representation, a focal company regroups different
actors, which represent groups or individuals who create and capture value
in the value network around a product, a resource or a technology, and coor-
dinate its relationships with those actors through platforms (Garcia-Castro,
Aguilera, 2015). Thus, ecosystems offer different opportunities to create and
capture value by establishing closer relationships and interacting with differ-
ent actors at the inter-organizational level (Chatterjee, Matzler, 2019; Demil
et al., 2018). It could then be interesting to consider the Navisphere system as
a broader platform for orchestrating the ecosystem and to carry out a detailed
study of the alignment of interests around that platform in line with Adner’s
(2017) work.

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