How is value created? How does the business model link to innovation?

Meggitt Bird Partner, Christie Sarri, submitted last March 2013 a dissertation in part fulfilment of the requirements for an MBA degree of the University of Warwick.

The dissertation is based on the belief that social entrepreneurship will enable future generations to satisfy their needs more fully and that innovation, through co-creativity set within a supportive business model, is a pre-requisite for solving societal problems.

It commences with a review of the scientific literature focused on answering the question, “What does the scientific literature reveal about the similarities and / or differences between conventional commercial business models and social ones?” Conducting analysis on four different types of linear frameworks, partial answers were identified, but gaps in the literature existed for linking business models with innovation and, in particular, social and open innovation. To address this, a dynamic approach to analysis was adopted that revealed that the interlocking area of social and commercial enterprise is innovation itself – a hybrid enterprise - and answered the question “How does innovation connect to a business model?” Further, the dynamic value network approach directly addressed how value is produced in an enterprise and how value generating transactions impacted assets when expressed as a business model.

To prove the differences / similarities and the links between a business model’s components and innovation, two study cases are adopted: Grameen-Danone and the arC cases. Whilst the former is well known in literature and an example of how a social and commercial enterprise respectively combined together, arC is a start-up venture in Greece modelled at the outset as a hybrid enterprise. Analysis of these cases using the dynamic approach explained how adoption of open innovation techniques to create an open business model creates more opportunities for value creation and addressed the key question, “How is value created?” with an action syllabus:

• Holistically overview the business system/ecosystem

• Blur the social/commercial boundaries and adapt to current need for doing good and well at the same time

• Co-create with all participants independently of their roles

• Invest on informal relationships

• Break enterprise’s boundaries and convert to an open structure

The dissertation concludes with suggested areas for further research to address the following questions:

• Which is the critical path of value creation from a holistic point of view?

• How is a hybrid enterprise organised?

• How can the value network approach assist innovation and value creation?

​Note: The "value network approach" is now recast by Meggitt Bird as a "value exchange system" residing in a "value network space." This ties the term value network directly to the originator of the term Clayten Christensen in his classic The Innovator's Dilemma and The Innovator's Solution published works.