Introduction
Business model design, or the creation of a business model (BM) for a new venture, is a complex process whereby multiple interrelated elements need to be aligned in order to allow a venture to create and capture value (Amit & Zott, 2015; Demil & Lecocq, 2010). The design is associated with extensive cognitive work (Martins, Rindova, & Greenbaum, 2015), and a body of research has consequently investigated the cognitive underpinnings of BM design (Snihur & Zott, 2019) as an effective BM can lead to superior firm performance (McDonald & Eisenhardt, 2019).
Despite a growing interest in BM design in managerial cognition studies, academia still knows relatively little about the micro-foundations of BM design during new venture creation. Venture creation is an intriguing setting to attend to BM design because it is often seen as free from structural inertia (McDonald & Eisenhardt, 2019). A new venture can experiment with and pivot its BM more openly (Kirtley & O’Mahony, 2019). Yet, a small but significant body of research has opposed this idea and has found that new venture creation also involves inertia, particularly in the form of a link between a founder identity and the BM design. That is, during BM design, founders act consistent with their founder identity or self-view, i.e., the understanding of “who I am” and “who I want to be” as a founder of a business venture (Zuzul & Tripsas, 2019). The role of the founder identity is supported by a body of literature repeatedly attesting that a founder identity causes self-reinforcing cognitive and behavioral verification effects during various aspects of new venture creation (Fauchart & Gruber, 2011; Powell & Baker, 2014, 2017; Zuzul & Tripsas, 2019).
Thus, while academia has suggested that founder identity co-shapes BM design, additional research is still required to understand how this occurs and the conditions under which the founder identity effect manifests. Moreover, in light of recent BM literature, our understanding of the founder identity effect best accounts for the observation that BM design is a longitudinal process involving updating, learning, and adapting (Andries, Debackere & Van Looy, 2013; McDonald & Eisenhardt, 2019). This longitudinal design process is required to shape consistency across and beyond multiple interrelated BM elements (Demil & Lecocq, 2010) or to match firm-internal and external factors ( Denoo, Yli-Renko & Clarysse, 2018; Gerasymenko, De Clercq & Sapienza, 2015). In the absence of a dynamic BM design, the suitability of an early-stage BM concept has mostly proven to be low (Andries et al., 2013).
In addition, although literature has highlighted that design choices can originate from founder identities, an emerging set of studies on founder identity increasingly suggests that identities are far from stable entities and that founder identities are formed, customized, and updated through founder identity work (Grimes, 2018). Therefore, we argue that by studying BM design in new venture creation without a process perspective, one is unlikely to capture how cognitive work can change over time, nor how a founder’s self-view affects this process. What is thus missing from the literature is a dynamic account of BM design in conjunction with the underlying managerial cognitive and identity work. Therefore, our study addresses this gap by answering the research question: How and when does founder identity work influence the process of BM design in a new venture?
To address this question, we conducted an ethnographic study at ScoreBridge, a newly formed technology venture in the digital sheet music market. Digital sheet music services, described as the “iTunes” or “Spotify” of sheet music, leveraged waves of e-commerce technology, mobile network devices, mobile technology, tablet computers, and cloud computing to imbue sheet music with more convenient access, visual interactivity, and auditory functionalities. Similar to other new industries, such as ridesharing and digital health, the digital sheet music market was formed at the intersection of an existing industry and digital technologies (Denoo & Yli-Renko, 2019). Both established firms and new ventures entering the field were challenged to design an effective BM. Within ScoreBridge, the founders were strongly driven by a “revolutionary” founder identity. Revolutionary founders define themselves as doing something highly novel and as desirous of having a significant impact that would radically disrupt the existing landscape (Zuzul & Tripsas, 2019). Our data collection covers a period of nine years (2009–2018) that captures the venture’s inception and emergence and consists of several important data sources that allowed us to uncover cognitive work while mitigating the retrospective biases from the venture: a two-year period of participant observation (2012–2013), formal and informal interviews at different points in time (2012–2018), and a six-year private founding team weblog (2009–2015). We complemented these sources with additional archival data and analyzed the collection using methods of theory elaboration (Burawoy, Burton, Ferguson, & Fox, 1991; Eisenhardt & Graebner, 2007).
Our study contributes to the literature in several ways. First, we advance the study of BM design by arguing that founder identities and BM design are intertwined and can form a dual process in the context of new venture creation. By developing a process model, our study shows that the dual process prompts founders to engage in a mechanism that we labeled “identity-business model decoupling.” It meant that in our setting, founders did not alter their founder identity but, over time, attentively grew self-aware and mindfully disengaged negative identity effects to design an effective BM. With the new social construct of identity–BM decoupling, we contribute to the study of BM design from a cognitive perspective (Aspara, Lamberg, Laukia, & Tikkanen, 2013; Furnari, 2015; Martins et al., 2015) and suggest that identity–BM decoupling can create critical identity-spillover effects that serve a deeper exploration of BM designs since it guides paradoxical thinking. Furthermore, we connect founder identity theories (Fauchart & Gruber, 2011; Grimes, 2018; Powell & Baker, 2014, 2017; Zuzul & Tripsas, 2019) to BM theories by showing how and when founder identities play a role during BM design and uncover three particular identity mechanisms in founder identity work (construction, verification, and decoupling). We hence highlight the boundary conditions of founder identity effects in BM design and extend prior academic understanding on founder imprints (Beckman & Burton, 2008; Johnson, 2007; Mathias, Williams, & Smith, 2015; Snihur & Zott, 2019).
BMs and Cognition
A BM is a system of interconnected organizational activities performed by a focal firm to create and capture value (Demil & Lecocq, 2010; McDonald & Eisenhardt, 2019; Zott & Amit, 2010). BMs constitute a specific unit of analysis in business management that spans or bridges traditional units of analysis, such as the firm or the network (Zott, Amit, & Massa, 2011). Because of the interconnected configuration, a BM involves complex and creative design choices, which has spurred research on BM design from a cognitive perspective (e.g., Martins et al., 2015). Primarily drawing on a managerial cognitive perspective (Gavetti, 2005), these scholars refer to BM design as a forward-looking search process in which cognitive representations and alternatives are conceived, created, and selected (Berends, Smits, Reymen, & Podoynitsyna, 2016). Three elements are essential in order to understand BM design through a cognitive lens.
First, scholars suggest that the cognitive work in BM design is compounded. Developing a BM design involves a variety of cognitive work: analogical reasoning (Farjoun, 2008; Gavetti, Levinthal, & Rivkin, 2005; Martins et al., 2015), conceptual combination (Martins et al., 2015), conceptualization and creation (Berends et al., 2016), design theme thinking (Amit & Zott, 2015), complex system thinking (Snihur & Zott, 2019), and configuring heuristics (Loock & Hacklin, 2015) have been described as important in the BM literature.
Second, the cognitive work during BM design results in a structural representation of the underlying activity systems (Baden-Fuller & Haefliger, 2013). This structural representation can be very simple or can be very rich, influenced by a deep knowledge and understanding of social and technical possibilities (Baden-Fuller & Morgan, 2010). Simple representations are helpful decision tools in a volatile environment (Bingham & Eisenhardt, 2011), yet simplifications can also result in biased business decisions about interdependent settings (Adner & Feller, 2019). Also, representations are difficult to ideate from scratch due to the challenges of working out all the attributes and interrelationships comprising a complex system at once (Baden-Fuller & Morgan, 2010).
Third, cognitive work benefits from the mental awareness of a BM designer. This academic notion stems from a rich tradition of managerial cognition research that informed us how individuals are subject to cognitive constraints and are bounded in rationality (Cyert & March, 1963). The mental awareness of a BM designer is an important contingency condition. It influences the ways in which BM templates shape the resulting design outcome (Amit & Zott, 2015). Literature herein explicitly underscores a state of active awareness where a designer mindfully improves a templa...
