Business continuity of business models: Evaluating the resilience of business models for contingencies

Highlights

• We argue that existing business continuity approaches have eclipsed issues related to business models.

• We propose that a shift is needed in business continuity approaches from value preservation to value creation.

• We respond to calls to make business continuity more holistic and strategic.

• We chart new and novel areas collaboration between two important areas of information management – business continuity and business models.

Abstract

Company business models are vulnerable to various contingencies in the business environment that may unexpectedly render their business logic ineffective. In particular, technological advancements, such as the Internet of things, big data, sharing economy and crowdsourcing, have enabled new forms of business models that can effectively and abruptly make traditional business models obsolete. By disrupting or even diminishing companies’ revenue streams, environmental contingencies may present a significant threat to business continuity (BC). Evaluating the resilience of business models against these contingencies should therefore be a core area of BC. However, existing BC approaches tend to focus on the continuity of the resources and processes through which a particular business model is accomplished in practice but omit the business model itself. We argue that in order for BC approaches to become holistic and strategic, business models need to become a part of the BC considerations, entailing an expansion of the scope of BC from value preservation to value creation. We propose an approach of Strategic Business Continuity Management, which consists of two parts: (1) sustaining the continuity of the company business model (value preservation) and (2) evaluating and modifying the business model (value creation). We illustrate conceptually the value creation part with an example drawn from the sharing economy.

Introduction

We have recently witnessed numerous cases in which technological progress has enabled newcomers to innovate business models that have severely threatened incumbents’ business continuity (BC) (Eggers & Park, 2017). These disruptions have not been market specific but have shaken nearly all fields from retail to transport and from manufacturing to service providers, and they have rendered many established business models obsolete. Companies, such as Uber, AirBnB, Amazon, and Alibaba, have not just challenged established companies but have also reorganised and renewed the markets. For instance, the forerunners of the platform economy (e.g. Amazon, Alibaba) with their innovative business models have become some of the world’s biggest players in just a portion of the time it took for the giants, such as Walmart, Target and others, to grow and which now find themselves under severe pressure to renew their business models or gradually fade into non-existence. It is therefore imperative for companies—whether market leaders or challengers—be proactive with their business models. They need to stay alert and periodically evaluate the resilience of their business models against environmental contingencies.

Environmental contingencies that threaten business models are strategic BC risks to companies. Multidisciplinary groups of scholars and practitioners have sought to provide companies the necessary tools and knowledge to help them proactively and holistically prepare for all kinds of contingencies (Herbane, 2010; Niemimaa, 2015b). As an ongoing effort, scholars have argued for and sought to establish BC amongst organisational strategic initiatives (e.g. Herbane, Elliott, & Swartz, 2004; Niemimaa, 2015a). In other words, BC is seen as strategic, as it ‘readies an organisation to preserve value derived from competitive advantage’ (Herbane et al., 2004, p. 439; Sawalha, Anchor, & Meaton, 2015). This kind of thinking feels rather intuitive because, after all, unanticipated contingencies ‘threaten the strategic goals of organisations’ (Richardson, 1994, p. 63). Operational disruptions may not only create immediate loss but, when prolonged, can also prevent the achievement of the strategic goals set. Whilst these may sound as less important considerations when it comes to organisational preparations for contingencies, they are significantly important, as strategic initiatives tend to be better resourced and win management buy-in more easily than operational initiatives do¹ .

Business models are strategic assets for organisations and define the logic through which they transform the produced goods and services into profit (Foss & Saebi, 2017). The literature on BC has tended to focus on ensuring continuity by increasing the resilience of resources through which a specific business model is implemented. The resilience is inherently socio-technical in nature (Herbane, 2010; Järveläinen, 2012) and is built on diverse technological redundancy solutions (Bajgoric, 2006, 2010) and organisational social and structural arrangements (Niemimaa, 2017), such as high-availability servers, redundant network connectivity and deputy arrangements. For instance, if the business model is implemented in practice with the help of a dedicated web shop, BC aims to ensure that sufficient technological and human resources are available to ensure that the web shop can operate even under adverse circumstances (e.g. during power outage and denial-of-service attacks).

The innovative business models enabled by technological development provide significant opportunities for the companies that have innovated them but pose significant BC threats for other established companies and their business models. By focusing on the continuity of resources that implement the current business model, the business model itself is left out of consideration despite the strategic threat it poses to BC. For instance, ensuring the continuity of a company’s dedicated web shop does not provide a sufficient basis to assume BC when online sales are moving to centralised platforms (e.g. eBay and Amazon) that require rethinking, such as sales and provisioning logic. Evaluating the resilience of a company’s business model against disruptive business models may increase the company’s BC and help establish BC firmly amongst the strategic imperatives of the company. Business models need to adapt in response to the external contingencies (Demil & Lecocq, 2010) engendered by technology-driven innovations.

In this study, we focus specifically on the BC of business models because of their central role in companies’ business strategies and in ensuring the continuity of revenue streams (e.g. Amit & Zott, 2001; Bouwman, Faber, Haaker, Kijl, & Reuver, 2008; Chesbrough, 2010; Chesbrough & Rosenbloom, 2002). Incorporating business model resilience to BC has the potential to extend its value creation potential and thus make it more rightfully a strategic asset and activity. Whilst strategy-level decisions (including innovating business models (McGrath, 2010)) are often viewed as the responsibility of senior management, we can see that BC scholars and practitioners—when equipped with the right tools and knowledge—are also well apt to deal with these strategic issues (Wong, 2009). After all, dealing with environmental contingencies is customary for these experts. What is needed is merely a shift in the domain of application of this expertise and in the use of a practical method.

These considerations provide us the motivation to pose the following question: How can the BC of business models be evaluated and improved against potentially competing emergent business models? We are particularly interested in contingencies related to emergent business models enabled by technological development. Whilst technologies and business models are intimately linked, business models focus on the mechanisms through which technologies are transformed to value, as technologies do not have any inherent value outside of their use potential (Baden-Fuller & Haefliger, 2013). We turn to the literature on BC and business models to conceptually elaborate an approach called strategic business continuity management (SBCM). Our research can also be viewed as a response to calls to make BC holistic and strategic (e.g. Herbane et al., 2004; Gerber & von Solms, 2005; Gibb & Buchanan, 2006; Niemimaa, 2015b; Zuccato, 2007).

The rest of the paper is structured as follows. First, we outline the literature on BC and business models. Second, we propose the approach of SBCM and elaborate its main phases. Third, we demonstrate its use through two illustrative cases of how the approach might be used in practice. Finally, we discuss our main contributions and draw the conclusions.