Risk-managing the business model: locating tripwires at the start

Abstract

Purpose This paper aims to address risks inherent in business model innovation. The authors make the case that entrepreneurs and managers, in relying on sources of innovation when designing business models, need to pay heed to these hidden risks – or tripwires – that can prevent the venture from efficiently, effectively and profitably scaling. The authors provide a guiding framework to help entrepreneurs and managers identify four distinct tripwires in their business model underlying the sources of innovation. Design/methodology/approach The authors build a systematic framework of the four tripwires – structure, scaling, systems and strategy – underlying offer-driven, customer-driven, finance-driven and resource-driven business model innovations. By relying on academic research, the authors’ scholarly work on organizational decline, innovation and corporate turnaround and the authors combined experiences and observations in industry, this study makes explicit and highlights problem areas in the business model, providing examples of representative companies to illustrate the challenges and consequences of failing to identify and manage its tripwires. Findings The authors demonstrate that awareness and attention to the tripwires underlying sources of innovation can mitigate a business model’s future challenges. Business model innovations can and often do conceal hazards that become apparent only as a venture begins to grow. As such, it is essential that entrepreneurs and managers attend to these potential problem areas in the early stages of designing their business models. In bringing awareness to innovation-related tripwires, the authors offer a risk-management “patch” for managers and entrepreneurs when developing their business models. Originality/value Business model innovation is a powerful tool to help in identifying growth opportunities. Yet in launching, scaling or transforming their business models, entrepreneurs and managers can encounter unforeseen challenges. While sources of innovation in the business model prioritize the discovery of growth opportunities, this has often come at the expense of the potential risks underlying them. The authors provide a means to identify four distinct tripwires that may be triggered when implementing business model innovations.