The Concept of Business Model Scalability

Morten Lund, Christian Nielsen

Keywords

Business Models, Scalability, Growth, Flexibility, Business Model Configurations, Strategic Partners


Abstract

Purpose: The purpose of the article is to define what scalable business models are. Central to the contemporary understanding of business models is the value proposition towards the customer and the hypotheses generated about delivering value to the customer which become a good foundation for a long-term profitable business. However, the main message of this article is that while providing a good value proposition may help the firm ‘get by’, the really successful businesses of today are those able to reach the sweet-spot of business model scalability.

Design/Methodology/Approach: The article is based on a five-year longitudinal action research project of over 90 companies that participated in the International Center for Innovation project aimed at building 10 global network-based business models.

Findings: This article introduces and discusses the term scalability from a company-level perspective. It illustrates how managers should be using this term for the benefit of their business by focusing on business models capable of achieving exponentially increasing returns to scale, thus fulfilling the objective of making it applicable for business decisions and not merely an abstract economical concept. The article finds five pat- terns of business model scalability that all companies, regardless of industrial affliation, can use to their advantage. Especially the role of stakeholders in the business model is highlighted in achieving scalability.

Research limitations/implications: Limitations relating to qualitative research confine the generalisation of the findings. The implication of this research is that achieving scalability is not solely a matter of digitalizing business models. Rather, there are a number of specific business model configurations that support scalability and the mechanisms to do this are not merely characterized as digital.

Practical implications: This article provides managers with a concrete roadmap for how to work towards business model scalability including suggested managerial processes and how to facilitate these.

Originality/Value: The power of business models lies in their ability to visualize and clarify how firms’ may configure their value creation processes. Among the key aspects of business model thinking are a focus on what the customer values, how this value is best delivered to the customer and how strategic partners are leveraged in this value creation, delivery and realization exercise. This paper couples these advantages with a structure for identifying scalability, and hence stronger business models.


Top