A new framework for conceptualizing digital business models and their innovation

In the last decade, “digital business models” have become an increasingly common concept in the research field of entrepreneurship and innovation. But what does the concept actually mean?
“My thesis has grown out of a frustration that we researchers write about digital business models without knowing if we have a common understanding of what we mean by that”, says Linus Thomson, doctor at Luleå University of Technology.

Digital technology is developing at an ever-increasing pace. Innovations such as the Internet of Things, cloud computing and artificial intelligence are challenging traditional business models. Some applications of digital technologies are so radically different that they lead to so-called digital business models. This applies, for example, when digital technologies are used to monitor and remotely control entire machine fleets in order to maximise the machines' performance.

“In the beginning, my thesis project didn’t aim to undertake a conceptual analysis of ’digital business models’. However, as I delved deeper, I realised that the term is used too lightly in the research literature and that I could contribute to the field by specifying what is actually meant by it”, says Linus Thomson.

Growing vegetables indoors

The thesis offers a detailed analysis of the concept, examining its usage in both academic literature and industry settings. This is accomplished through interviews with representatives from a variety of manufacturing industries where digital technology is integral to their operations. A distinct segment of the thesis focuses on the emerging field of so-called vertical farming, a subject which he investigates through analysis of interviews featured in 50 unique podcasts. Vertical farming, an innovative practice, means growing vegetables at height, indoors.

“The levels of light, nutrition and water are completely controlled by digital technology. The fully digitalised process suited my research project.”

In his conceptual analysis, he has borrowed the concept “digital affordances” from information systems science. Digital affordances are what distinguish digital technology and support solutions that other technologies cannot offer. For example, digital technology can be used to disintermediate traditional value chains.

“I think it is important that we researchers try to avoid silo thinking. By looking at neighbouring disciplines, we get new perspectives and answers to our own research questions.”

Framework for digital business models

By connecting digital affordances with the analysis of digital business models, he has created a framework that highlights the uniqueness and relevance of “digital” within digital business models.

“In order to move forward, we must first have a common understanding of where we stand. Until now, understanding has been based on existing examples, which has limited our thinking and perception of what is possible. It can be compared to trying to advance the transportation sector solely based on how cars are designed today, neglecting to investigate the novel design opportunities provided by the underlying technology. By integrating digital affordances, we broaden our perspectives for what can be achieved with digital business models.”