The Effects of Information Technology on Business Model Innovation

The Effects of Information Technology on Business Model Innovation Abstract IT and the digital revolution transform modern society, including the way we do business. Outmoded business models are toppled only to see new, innovative enterprises rise from the rubble. In their best-selling book Business Model Generation, Osterwalder & Pigneur (2010) describe the nature of business models along with a tool the Business Model Canvas for visualizing how organizations create, deliver, and capture value. Using the canvas nine building blocks customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, and cost structure as analytical framework, we review the literature to answer this research question: How can IT help drive business model innovation? The paper shows how IT supports innovation through changes to the building blocks, allowing new business model patterns to emerge. The article provides practitioners with advice on harnessing the power of IT to innovate business models, and it suggests avenues for future research. 1. Introduction Information Technology (IT) and the digital revolution transforms all aspects of society, including the way we do business. There are many examples of how IT influences businesses by affecting business models, revolutionizing products and services, disrupting existing markets, and transforming entire industries. Apple with its innovative products and services such as the iphone, ipad, and itunes is a prime example of successful IT driven business model innovation [11]. Apple has created new markets and fundamentally changed the music industry, setting new standards for service provision and delivery. Among other things, IT has reduced transaction costs and established new links between customers and suppliers. Dell is an example of a company that has cut costs while simultaneously exploiting the benefits of mass customization and just-in-time delivery of PCs though the use of IT [14]. Due to hypercompetition and an ever-changing business landscape, companies are forced to innovative to stay competitive. If companies hesitate and wait, chances are that by the time lead customers request innovative products, it is too late to compete in the new market [18:47]. The history books are full of examples of companies that were too busy milking prize cash cows, not wanting to stake their hitherto successful business models and cannibalize their existing products. Many companies including Polaroid, Kodak, Blockbuster, and Borders have lost to the likes of Fuji, Olympus, Netflix, and Amazon due to lack of innovation [18]. In their article, Johnson & Christensen (2008) argue that business model innovations have reshaped entire industries and redistributed billions of dollars of value [11:52]. Business model innovation not only allows companies to retain existing customer segments, but also to enter new markets and acquire new customers. This paper investigates how IT can help drive business model innovation by reviewing the existing literature. First we define the business model concept and lay out the business model canvas which is used as analytical framework. Second, we describe the review methodology. Third, we present our findings in terms of how IT can be used in support of innovation of each element of the canvas (business model building blocks). Fourth, we discuss what constitutes IT driven business model innovation and the implications for practice and research. 2. Theoretical framing The business model concept is new in origin, there is no consensus about its meaning, and definitions are still being debated. Teece (2010) points out that a business model summarizes the business logic and describes how the organization creates customer value [28] in addition to revenue [35]. Similarly, Chung et al. (2004) stress that a business model answers two fundamental questions: (1) Who is the customer? (2) What does the customer value? [5]. Furthermore, Johnson & Christensen (2008) describe four elements that together create and deliver value. The four elements are (1) customer value proposition, (2) profit formula, (3) key resources, and (4) key processes [11]. Despite being a somewhat fuzzy concept, several authors share an understanding of a business model as a framework that illustrates how a business creates, captures, and delivers value [24]. In addition, the business model concept underlies much of the current debate concerning business innovation. Thus, business model innovation represents a break with old school management thinking, moving away from a more traditional focus on product and process innovation toward business model innovation [11]. Osterwalder et al. (2005) have surveyed the business model innovation literature, identifying the basic elements (building blocks) of a business model. They studied a variety of different business

models, resulting in a conceptual model consisting of nine building blocks [24]. These nine building blocks and their mutual influence can be illustrated using the so-called business model canvas [25]. In this paper, we rely on this canvas as our analytical framework, endeavoring to answer the following research question; how can IT help drive business model innovation? We chose the business model canvas due to the fact that it is firmly grounded in theory, specifically the article Clarifying business models: origins, present and future of the concept by Osterwalder et al. (2005) [24]. Furthermore, Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers in which the canvas is described is one of the most cited books on the topic. Last, but not least, the conceptual clarity of the canvas makes it a useful analytical tool. 2.1. Business model canvas The business model canvas [25] consists of the following nine building blocks: (1) customer segments, (2) value propositions, (3) channels, (4) customer relationships, (5) revenue streams, (6) key resources, (7) key activities, (8) key partnerships, and (9) cost structure (see Table 1 for descriptions of the building blocks). Building&Block& Customer)Segments) Value)Propositions) Channels) Customer) Relationships) Revenue)Streams) Table&1.&Business&model&canvas& Description& The) different) groups) of) people) or) organizations) an) enterprise) aims)to)reach)and)serve.) The) bundle) of) products) and) services) that) create) value) for) a) specific)customer)segment.) How) a) company) communicates) with) and) reaches) its) Customer) Segments) to) deliver) a) Value) Proposition.) The) types) of) relationships) a) company) establishes) with) specific)customer)segments.) The) cash) a) company) generates) from) each) Customer) Segment) (subtracting)costs)from)revenues) to)create)earnings).) Key)Resources) The) most) important) assets) required) to) make) a) business) model)work.) Key)Activities) The) most) important) things) a) company) must) do) to) make) its) business)model)work.) Key)Partnerships) The) network) of) suppliers) and) partners)that)make)the)business) model)work.) Cost)Structure) All) costs) incurred) to) operate) a) business)model.) Source: adapted from [25]. Drawing on the canvas with its nine basic building blocks, it is possible to illustrate how a company captures and delivers value to customers, and ultimately how it makes money. The nine building blocks cover four main areas of any business: customer, offer, infrastructure, and financial viability [25]. In essence, the business model is like a blueprint for a strategy to be implemented through organizational structures, processes, and systems [25:15]. Using the canvas, a company has to consider which customer segments to serve, focusing on, for example, mass or niche markets; which value propositions to offer customer segments, e.g. in terms of customization, price, and design; which channels to use to deliver and reach customer segments, for instance through its own stores, partner networks, or e-business; how to interact with customer segments, for example having either personal or transaction-based customer relationships; how to generate revenue streams, e.g. through direct sales, usage fees, licensing, or advertising; which key resources to acquire to sustain and grow the business, for instance in terms of physical, intellectual, and financial assets; which key activities to perform to operate successfully, for example R&D and supply chain management activities; which key partnerships, e.g. alliances and supplier networks, to build to acquire particular resources and capabilities; and which cost structure to base the business model on, for example a cost-driven or value-driven business model. 3. Literature review This literature review is based on Webster & Watson (2002) and Okoli & Schabram (2010) [23,32]. 3.1 Literature search For the purpose of searching the literature, the Web of Science and Scopus citation databases were used. The searches were limited to journal articles and conference papers (henceforth referred to as papers). Since business model innovation is an emerging research area, conference papers were

included. New research is often published at conferences before finding its way into journals due to the shorter review and publication processes. Before starting the actual literature search, a small pilot study was conducted. The aim of this study was to test the search strategy, evaluate the appropriateness of search criteria, and identify meaningful combinations of keywords to use in the literature search. The search process consists of three steps as illustrated in Figure 2. Step 1; Search During step 1, the following search string was used: ((TITLE-ABS-KEY("Information system*" OR "information tech*")) AND (TITLE-ABS- KEY("Business model" AND "develop*"))) OR ((TITLE-ABS-KEY("Information system*" OR "information tech*")) AND (TITLE-ABS- KEY("Business model" AND "emerging"))) OR ((TITLE-ABS-KEY("Information system*" OR "information tech*")) AND (TITLE-ABS- KEY("Business model innov*"))) OR ((TITLE- ABS-KEY("Information system*" OR "information tech*"))) AND (TITLE-ABS-KEY("Business model" AND "innov*")) Based on lessons learned from the preceding pilot study, a search string was constructed incorporating synonymous words for business model innovation, e.g. business innovation and innovative business model. In both citation databases, we looked for these words applying the search string in either the title, abstract, or keywords. The search was limited to English, peerreviewed journal articles and conference papers. Step 2: Collection The purpose of step 2 was to separate relevant from non-relevant papers. The abstracts of all 518 papers were read and two action cards (see Figure 1) were used to determine their relevance, resulting in a pool of 24 papers selected for further study at this stage. Many papers were discarded due to their technical nature, for example looking at the application of RFID and logistics tools. While these papers describe the technology behind RFID and the design of such tools, they do not discuss the impact on business model innovation. Because they focus on technical rather than managerial and organizational aspects of how IT can help drive business model innovation, these papers were not included. Consequently, articles focusing on, e.g., design and development of IT systems in support of business model innovation were discarded. Articles on, for example, logistics and healthcare that only mention but do not elaborate on the impact of IT on business model innovation were also discarded. Furthermore, articles focusing on measuring the effects of IT investments and not how IT impacts the organizational strategy or business model were also discarded. 12 papers required special consideration in order to decide whether to include them or not. Some abstracts were vague, referring to business model innovation using other concepts, e.g. business model development, improvements of business models, and business innovation. Other articles described the application of very specific technologies like SST (self-service technologies) rather than IT in general. In some instances, there were mismatches between abstracts and the content of articles, business model innovation being mentioned only in passing. The decision to include or exclude these articles was made in collaboration between the authors. The authors read these papers separately and subsequently discussed the basis for either including or rejecting them. The degree of inter-rater agreement was measured using Cohen s kappa [6] with a result of ϰ = 0,60. This indicates a relatively high level of agreement among the authors. Cohen s kappa was calculated as follows: ϰ = Pr(a) Pr(e) / 1 Pr(e) = 0,80 0,50 / 1 0,5 = 0,6, where Pr(a) is the relative observed agreement among the researchers, and Pr(e) is the hypothetical probability of chance agreement (in this case relevant or non-relevant ). ) Does)the)article)focus)on)business)model)innovation)enabled)by) information)technology)or)information)systems?) IF& Action& Yes) Keep) No) Remove) ) ) Does)the)article)have)an)organizational)or)managerial)focus?) IF& Action& Yes)) Keep) No) Remove) Figure&1.&Action&cards& Step 3: Forward and backward search Forward and backward searches were performed based on the articles, applying the same selection criteria as during step 2. The result was an additional six papers being added to the pool. Figure&2.&Literature&search&

3.2 Literature analysis Having identified all relevant papers, the next step was analyzing their content. The goal was to categorize the papers according to the nine building blocks in the business model canvas. For this purpose, we followed Webster & Watson s (2002) advice in using a concept matrix as each article was read. Each building block in the business model canvas represents a concept used in the matrix (see Table 2). During literature analysis, each paper was placed in the matrix according to its contribution to our understanding of how IT enables changes to the nine building blocks in support of business model innovation. For example, Joo (2002) describes how internet technology impacts the building block channels which in turn affects value propositions and customer relationships; many businesses in the tourism industry are attempting to use the internet to seamlessly integrate internal reservation systems, database systems, and workflows. Such integration may lead to creating values such as cost reductions, speed, convenience, and improvements in communication and coordination [12:59]. Consequently, this paper was placed under the channels, value propositions, and customer relationships building blocks. Another example is the paper by Wu et al. (2013). The authors argue that IT supports innovation within value propositions and channels simultaneously; Information technology can make many customer interaction processes more efficient by supplying customers with a wide range of information on products, prices and availability and by offering customized real-time information [33:363]. This paper was categorized as relating to the value propositions and channels building blocks. Lastly, Kraemer et al. (2000) describe how IT increases Dell s ability to broaden its network, not just to customers but suppliers as well, exemplifying how IT drives innovation of both customer segments and key partnerships. In doing so, the authors discuss how IT affects key activities, customer relationships, channels, and the company s cost structure as well [14]. In the process of categorizing articles, interpreting the content using the business model canvas proved challenging. As the examples demonstrate, many business model innovations involved changes to several building blocks. Interpretation was therefore required in linking statements and case descriptions to the building blocks. See Table 2 for the categorization of papers. Paper)#) 4. Findings Customer)Segments) Table&2.&Findings) Value)Propositions) Channels) Customer)Relationships) Revenue)Streams) Key)Resources) Key)Activities) Key)Partnerships) Cost)Structure) [1]) X) X) X) ) ) [2]) X) X) ) ) ) ) [3]) ) ) X) ) ) X) ) ) ) [4]) ) ) ) X) ) ) X) ) X) ) [5]) ) ) ) ) ) X) ) X) [7]) ) ) ) ) ) ) X) ) [8]) X) ) ) ) ) ) ) ) ) [9]) X) ) X) ) X) ) ) ) ) ) ) [10]) X) ) X) X) X) ) ) ) ) ) [11]) ) ) X) ) ) ) [12]) ) X) ) ) X) ) ) ) ) ) [13]) ) ) X) ) ) ) ) ) [14]) X) ) X) ) X) ) X) ) X) ) X) ) X) ) X) ) [15]) X) ) X) X) [16]) ) X) ) X) ) ) ) ) [17]) ) ) ) ) ) X) ) ) [18]) X) ) ) ) ) ) X) ) ) ) [19]) X) ) ) ) X) ) ) ) ) [20]) ) X) ) ) X) ) X) ) ) ) [21]) ) ) X) ) ) ) ) [22]) X) ) ) X) ) ) ) ) X) ) ) [26]) X) ) ) X) ) ) ) ) [27]) ) ) X) ) ) ) ) ) [28]) ) X) ) X) ) X) X) ) ) X) ) ) X) ) [29]) X) ) ) X) ) [30]) X) X) ) X) ) ) ) ) ) ) [31]) X) X) X) X) ) ) ) ) ) ) [33]) X) X) X) X) ) ) ) ) ) [34]) X) X) X) X) ) ) ) ) ) [35]) X) ) ) ) ) ) ) ) ) ) ) ) ) ) In this section, we synthesize the contribution of each paper to our understanding of IT driven business model innovation, using the nine building blocks of the business model canvas as analytical lens [25]. 4.1. Customer Segments The most pertinent question facing any company is: whom are we creating value for? [25]. IT makes it possible for a company to reach new customer segments, because it enables new forms of interaction and new ways of retrieving customer information. Through internet and social media such as Facebook and Twitter or e-mails and text messages companies can inform and interact with customer segments and also monitor their activities,

gathering useful information [8,9,14,22,26,31,33]. Emerging technologies, e.g. for m-commerce, make it possible to do business with existing customer segments in new ways, but also to reach new and profitable customer segments [30,34]. If a company fails to take advantage of IT and make the appropriate changes to its business model, the company risks losing customer segments [18], which is what happened to Kodak when the company failed to take stock of the digital revolution and adopt new and innovative technologies [18]. As Kraemer et al. (2000) describe, IT makes it possible to reach new customer segments [14] due to the fact that IT brings competition to the global arena [29]. The company Aromatherapy experienced this when using the internet not only for advertising purposes but also to sell products online, reaching additional customer segments [29]. 4.2. Value Propositions! What creates value varies from customer to customer. Some customers may value intangible benefits such as design or personalized products and services, while others may value tangible benefits like speed of service or price [25]. Due to IT, some companies within the service industry have been able to leverage the technology to go from simple webpages, providing one type of information, to complex integrated e-markets, fulfilling a wide range of customer needs. The tourism industry is a case in point, using various platforms to provide all the information travelers need [12]. IT also makes it possible to supply customers with additional, up-to-date information on, e.g., products, availability, customization possibilities, and price [1,10,19,28,30,31,33,34]. One of the best examples is Dell and their use of IT, especially internet technology. First, IT facilitates contact with customer segments. Second, IT makes it easier for Dell to provide customer segments with different value propositions. Customers have the added value of being able to customize their PCs. Dell can provide them with timely and personalized customer service, and customers can track order status 24-7. Third, IT supports supply chain management, helping Dell to keep track of partners, which lowers operating costs and in the end product prices [14]. Furthermore, IT solutions make cost reductions possible, not just on the consumer market, but also in terms of operational costs within the company and at suppliers production facilities. IT innovations such as biometrics methods for identifying people based on some biological or behavioral characteristics such as fingerprints, voice recognition, or facial features are helping to reduce costs. They also add value in the form of enhanced security from a consumer standpoint [16,19]. 4.3. Channels How to deliver value to customer segments is another question faced by all companies. Companies assess and compare different channels in order to identify the most appropriate and efficient way of delivering value to customer segments [25]. IT has made it possible to reach not only customer segments but also new potential key partners via different channels through, e.g., the use of m-commerce [30,34]. This is true for both product vendors and service suppliers [2,9,10,14,20,28,31,33]. IT, such as self-service technologies (SST) [21], has made it possible for companies to reach out to customer segments conveniently and flexibly from providing services at physical locations to making them available when and where customer segments need the services, for example through mobile banking and online investment trading. Another example is Nongfu Spring in China which is using a web portal accessible over cellphones to interact with customers, making it easier for customers to gather information, purchase goods, and conduct payments [34]. However, IT not only makes it possible to reach out to wider audiences, but also to customize activities to the needs of particular customer segments. The banking, tourism, and retail industries use such technologies extensively. SAP provides another example of how channels change due to IT. As a vendor of ERP systems, the company adapted their product offerings to the internet media, providing ERP solutions as Software as a Service (SaaS). The idea behind the SaaS model is that it moves the focus from owning the software to using the software as it examines the service aspect of the software business and ways for the software companies to offer a new value proposition to their customer by moving away from the product-based approach to software procurement to more service-oriented one [15:67]. This move allowed SAP to reach out to new customer segments, but also to improve the value propositions for current customers. 4.4. Customer Relationships Establishing and maintaining customer relationships are integral parts of any business model [25]. IT enables more direct and personal relationships between the company and its customers as well as key partners [12,26]. Developments in IT change the way businesses communicate with their customers. For example, e- mails and personal text messages facilitate convenient and timely information exchange between customers and companies, enabling companies to reach customers with low-cost, personalized information [2,4,9,10,13,14,16,26,27,28,31,33,34,35]. IT has

also made it possible to include customers in the production process in order to create and deliver value for individual customers. For example, in the textile industry customers are able to contribute with their own design [1], which is what Osterwalder & Pigneur (2010) refer to as cocreation [25]. Another example is the game industry where cloud computing makes it possible for endusers to participate in the game design and development process [22]. 4.5. Revenue Streams How to make money is key to any business. Questions such as how much customers are willing to pay, and how payments are made both relate to revenue streams [25]. Some industries, e.g. the newspaper and music industries, are undergoing radical changes due to IT, for example in terms of how to deliver value propositions [1,3,20]. These changes affect the original revenue streams, going from, e.g., traditional purchasing to usage or licensing fees, taking customer segments value propositions into consideration when designing revenue streams. Many customers expect basic internet services to be free [28]. It is therefore sometimes a difficult transition when pioneers, e.g. companies within the newspaper industry, try to build an online community by initially providing free access to news and subsequently by charging customers subscription or usage fees when the customer base has been established [19]. Some customers might value right of use over ownership, and IT not only makes it possible for customers to consume products and services in new ways but also gives rise to new payment models. Besides the music and newspaper industries, the television and telephone industries have also been able to change their revenue streams. When television shows allow viewers to participate, e.g. in voting for favorite candidates on American Idol and other reality shows, phone companies and the TV stations charge consumers for participating, sending text messages over cellphones [10]. 4.6. Key Resources Key resources are needed to support and sustain the business model [25]. IT driven innovations and changes affect companies key resources, e.g. physical resources needed for manufacturing purposes as well as knowledge, intellectual property, and human resources. A good example of a company failing to adapt its key resources is Kodak. The company neglected to take advantage of new digital camera technology eventually resulting in bankruptcy [18]. The case of Dell illustrates a very different pattern, redirecting their resources toward supply chain management and customer relationship building which has provided the company with competitive advantages [14]. In terms of knowledge management, IT can be used to support and improve knowledge sharing. Since knowledge-based assets cannot easily be copied or imitated, they are key to long-term competitive advantages. 4.7. Key Activities Certain activities are key to delivering customer value, maintaining customer relationships, and supporting distribution channels [25]. IT supports product development and enhancement in trying to satisfy changing customer needs. Netflix is a prime example of a company using IT to change key activities and other building blocks to better match its value propositions to customers changing needs. Netflix was a pioneer in delivering rental DVDs by mail [28]. Later its business model evolved, changing channels from delivering rental DVDs by mail to providing subscription based online streaming services. In the case of Dell, key activities were changed from selling mass produced computers to customizing PCs based on the needs of its customer segments [14]. This example illustrates that IT driven changes to value propositions and customer relationships are closely related to key resources. Such changes require that key activities also change in order to deliver on customer segments growing expectations. Furthermore, globalization and advancements in IT, which facilitate coordination and outsourcing of activities, result in key activity changes within companies [5]. For example, outsourcing customer service has consequences for activities related to customer relationships as the Dell case shows [14]. Some key activity changes are necessary in order to fulfill certain customer needs. As previously mentioned, the music industry is switching channels to internet based delivery due to changes in customer segments value propositions, transforming activities related to the production of physical products such as CDs [3,11,20]. 4.8. Key Partnerships In an increasingly globalized and interconnected world, cooperation with partners is key to business model success [25]. IT improves communication and collaboration with suppliers, enhancing information flows and reducing the number of supply chain members. Furthermore, IT enables companies to establish new and improve existing key partnerships through, e.g., the use of ERP systems, cloud computing, and other internet technologies. Such technologies make it possible for companies to outsource selected activities, improve supply chain efficiency, reduce operational risks or risks associated with investments to increase firm competitiveness. Examples include

investments in sales and support personnel in foreign countries or other regions [15], and activities that will add new revenue streams [4,5,14,17,22,29]. Hasbro, one of world s leading toy companies, provides an example of how IT has led to innovations in communication with key partners through the Windchill and SAP systems [5]. Windchill facilitates online interaction and communication between designers, engineers, and manufactures during production processes, reducing both risks and costs. SAP makes it possible for all partners to forecast capacity and plan for efficient use of suppliers, minimizing waste and bringing down costs [5]. 4.9. Cost Structure Cost structure is the structure and allocation of costs associated with the business model [25]. IT enables cost savings due to new production as well as product and service delivery methods, creating customer value. Information technologies, such as ERP systems and cloud computing, make it easier to customize services to customer demands which gives customers greater flexibility and value compared to one-size-fits-all products. Companies can now rent server capacity depending on need instead of making upfront capital investments in hardware before knowing the actual demand [28]. Likewise, individual customers can use cloud services like Dropbox and Google Drive instead of buying additional hard disk storage [7]. IT, e.g. ERP systems, can also support supply chain management, improving collaboration with suppliers and lowering transaction costs [4]. Dell has, for example, been able to change its build-toorder production system, support direct customer contact, and lower production costs through the use of IT [14]. 5. Discussion and conclusion The purpose of this study is to describe how IT can help drive business model innovation, reviewing the literature using the business model canvas by Osterwalder & Pigneur (2010) as our analytical framework. In this section, we discuss implications for both researchers and practitioners, highlighting knowledge gaps, identifying the need for future studies, and suggesting how practitioners can use IT to innovate existing business models. From a bird s eye perspective the literature describes the many ways in which IT pushes businesses from traditional commerce toward e- and m-commerce. E- and m-commerce entail the use of new channels, for example internet platforms and mobile technologies, to deliver products and services, and maintain relationships with both customers and key partners [34]. However, a key finding is that innovation within one building block affects other building blocks as well. Thus, there is evidence of spillover or ripple effects. Managers would do well to understand the consequences of these ripple effects. For example, as IT innovations reduce production and delivery time, value propositions might also change, affecting customer segments as well. This is due to the fact that companies are now able to offer added value in terms of speed and convenience, making products and services attractive to new customer segments valuing these features. To accommodate the needs of new customer segments, changes to customer relationships, channels, revenue streams, key resources, and key activities are needed to address increasing customer expectations. Key partnerships might also be affected due to changes in business foci to satisfy new customer segments. As an example, when SAP started delivering their products (ERP systems) and services online through the previously mentioned SaaS model, they needed to change customer service related activities to handle new issues and problems. New key partnerships were also established helping SAP deliver services to larger and increasingly globalized customer segments. Their customer relationships and revenue streams were also affected in order to support new value propositions. The value propositions were dramatically changed as SAP was able to offer customized ERP soultions to their customer segments. By implication, managers seeking to innovate, need to envisage all building block changes and plan the transition to new business models. Due to the aforementioned ripple effects, our findings show that focusing innovation efforts on one element (building block) often leads to changes in other business model building blocks. Consequently, if a company with scarce resources wants to innovate its current business model, hoping to expand, for example, its customer base (customer segments), it might focus on other building blocks, such as value propositions or channels instead of striving to acquire new and expensive key resources, and still reach new customers due to these ripple effects. As illustrated by Table 2, it is evident that the literature focuses more on the value propositions, customer relationships, and channels building blocks of business models than, e.g., cost structure and key resources. It suggests that creating value for the customer is a prerequisite for IT driven business model innovation. This was, for example, the case for SAP and the deployment of their SaaS model, delivering added value to their customer segments. Trying to change value propositions through new product and service offerings was the driver behind the company s business model innovation. The literature indicates a strong link between IT driven innovation within value propositions on the one hand and customer segments as well as customer relationships on the other [12,14,15,33].

Moreover, innovation of revenue streams is tied to changes within the building block channels [20] as illustrated by the Netflix and Nongfu Spring examples [28,34]. Additionally, our analysis highlights the importance of tapping into the information and knowledge residing within customer segments in order for a company to improve its products and services faster than its competitors. This can be accomplished effectively using, for example, ERP systems which make it easier to track customer activities. Being able to leverage this information in order to meet unfulfilled customer demands before the customer segments discover competing offers elsewhere is key to sustaining competitive advantages [18,33]. Business model innovation is the means to outsmarting and outperforming competitors. So, by constantly innovating their business models using IT, companies may beat competitors, making them unable to respond effectively and quickly enough to changes to the rules of the competition game. As seen in many industries, IT has made it possible for companies to substitute web sites for physical presence, providing information and establishing e- markets. This is an example of how IT driven innovations radically change customer service (customer relationships), shipment (channels), payment methods (revenue streams), and the ability to personalize and customize products and services (value propositions) through ripple effects. Increased accessibility (value propositions) through SST and internet technology has a ripple effect on channels, but also on other building blocks such as customer segments, due to the fact that the products and services being offered are accessible to a larger population. At a basic level, the literature suggests that these different IT innovations, such as SST, first and foremost have an effects on particular business model building blocks and do not necessarily result in business model innovation. For example, innovative use of IT supporting new channels for reaching customer segments does not constitute business model innovation in itself, but is more appropriately described as business process innovation. However, since such an innovation causes ripple effects, the entire business model might be affected, resulting in business model innovation at an aggregate level. Consequently, to warrant the use of the term IT driven business model innovation, IT enabled changes to more than one building block is required, including value propositions. As demonstrated by the examples provided in this paper, any IT driven business model innovation is essentially about improving value propositions for selected customer segments. In studying the literature trying to answer the research question how IT can help drive business model innovation some interesting questions emerge. Curiously, there is a lack of case studies in the existing literature, illustrating how IT affects business model innovation. The literature points to different ways in which IT helps drive business model innovation, but few papers exemplify through case studies how to accomplish this. Management involvement is necessary, but our current knowledge of the role of management in business model innovation is insufficient. Clearly, there is need for research exploring management s role in facilitating and affecting business model innovation. Such studies should clarify whether IT driven business model innovation is best accomplished through top-down processes, relying heavily on managers IT knowledge, or bottom-up collaboration between managers and employees working together to change the business model building block by building block. Another question that needs answering is whether it is possible to have dual or multiple business models within the same company? The ways of doing business have evolved over the past decades from traditional commerce to also including e- and m-commerce. The literature emphasizes the advantages of e- and m-commerce, but to what extent should companies abandon business models based on traditional commerce and focus exclusively on either e- or m- commerce? Is it possible to operate dual or multiple business models without one cannibalising the other? Yet another question is whether all companies benefit equally from IT? The literature demonstrates the positive effects of IT on business models, but are some technologies and innovations more useful in certain types of companies? Are there any differences between, e.g., SMEs and large enterprises? Are certain types of innovations more likely to increase market shares and revenues in some companies compared to others? 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