Crafting Business Architecture: the Antecedents of Business Model Design

• Author: Raphael Amit,Christoph Zott
• DOI: http://doi.org/10.1002/sej.1200
• Date: 01 December 2015
• Published date: 01 December 2015

CRAFTING BUSINESS ARCHITECTURE: THE

ANTECEDENTS OF BUSINESS MODEL DESIGN

RAPHAEL AMIT1and CHRISTOPH ZOTT2*

1The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania,

U.S.A.

2IESE Business School, Barcelona, Spain

Anchored in the broad design literature, we derive four antecedents of business model design:

goals, templates, stakeholder activities, and environmental constraints. These business model

design antecedents are illustrated using interview data from nine new ventures in the peer-to-

peer lending space. Weproceed with the theoretical development to link the design antecedents

to the design themes of business models and conclude with implications for business model

research and entrepreneurial leaders. Copyright © 2015 Strategic Management Society.

INTRODUCTION

Progress in information and communication tech-

nologies has facilitated new types of technology-

mediated interactions between economic agents.

These developments have enabled firms to funda-

mentally change the ways they ‘do business,’in par-

ticular, the ways they organize and conduct

exchanges and activities across firm and industry

boundaries with customers, vendors, partners, and

other stakeholders (Amit and Zott, 2001, 2012;

Chesbrough, 2010). The technological advances

enable entrepreneurs to consider innovative designs

of boundary-spanning exchanges and activities. This

design is captured by the firm’s business model.

The business model describes the system of inter-

dependent activities performed by a focal firm and

its partners and the mechanisms that link these

activities to each other. An activity in a focal firm’s

business model can be viewed as the engagement of

human, physical, and capital resources of any party

to the business model (the focal firm, end customers,

vendors, etc.) to serve a specific purpose toward the

fulfillment of the overall objectives (Zott and Amit,

2010). This activity-system definition is broadly

consistent with a range of conceptualizations that

have been proposed in the literature (for a review, see

Zott, Amit, and Massa, 2011), and also with the

various ways in which the term ‘business model’ is

often used in practice, for example, as ‘the way your

business is run’ (Economist Intelligence Unit, 2005).

While reaching consensus on the concept of busi-

ness model is important to advance the study of

business models, we believe that the questions of

how to design a business model and what its ante-

cedents are, are just as important for both scholars

and practitioners. A few articles have begun to

address this issue. Zott and Amit (2007, 2008), for

example, have introduced the idea of ‘design

themes,’which orchestrate and connect the elements

(i.e., the content, structure, and governance) of a

business model. But these early contributions have

not considered the question: what are the anteced-

ents that foster a particular design theme? This ques-

tion is important for two reasons. First, since design

themes are linked with actual value creation out-

comes (Zott and Amit, 2007), considering the

antecedents of business model design enables resear-

chers to develop more robust theories that link

business model design with the performance of a

focal firm. Second, by thoughtfully considering the

Keywords: business model; design; design antecedents; design

themes

*Correspondence to: Christoph Zott, IESE Business School,

Av. Pearson 21, 08034 Barcelona, Spain. E-mail: czott@

iese.edu

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Strategic Entrepreneurship Journal

Copyright © 2015 Strategic Management Society

Strat. Entrepreneurship J., 9: 331–350 (2015)

Published online 1 May 2015 in Wiley Online Library (wileyonlinelibrary.com). DOI: 10.1002/sej.1200

range of antecedents of business model design,

entrepreneurs are better able to mitigate blind spots

and cognitive biases and thereby strengthen the

overall value proposition to each stakeholder.Hence,

we ask: what are the antecedents of business model

design? And, how do these antecedents relate to the

design themes of business models?

In this article, we draw on the design literature as

a starting point to address these questions. Since

designers are typically faced with the need to design

something (e.g., a house, a software algorithm, a

product) from scratch, we focus on the design of

business models for new ventures rather than the

redesign of business models for established firms.

Building on the received business model literature,

we then provide further theory development.

Although the design literature allows us to identify a

set of design antecedents, it does not tell us precisely

how they are linked to the design outcomes (e.g.,

design themes) that are relevant for business models,

as opposed to products, which have been the focus of

design in the management literature. This makes

theory development necessary.

Business model design and product design differ

in a number of theoretically meaningful ways:

product design centers on the broad relationship

between the focal firm and its customers (Luchs and

Swan, 2011), while business model design includes

considerations of multiple stakeholders, such as sup-

pliers and partners, in addition to the firm and its

customers. In other words, business model design

involves the conceptualization of a boundary-

spanning activity system that includes the mecha-

nisms that connect these interdependent activities

and the identification of the party that carries out

each of the activities within the system. Product

design, however, is ordinarily centered on identify-

ing a set of interdependent physical components and

features that characterize the firm’s offerings to its

clients. Relevant features of product design, such as

technical functionality or aesthetic appeal, do not

readily apply to business model design. Hence, any

theory that links antecedents and outcomes of

product design does not automatically carry over to

business model design.

Using a conceptual theory development method-

ology that is anchored in the design literature, along

with illustrations drawn from interviews with found-

ers and senior executives of nine new ventures in the

financial services industry, we identify and analyze

the following four design drivers: goals to create and

capture value, templates of incumbents, stakehold-

ers’ activities, and environmental constraints. Our

theory development suggests that these design

drivers crucially affect the resulting business model

designs in terms of their design themes.

BUSINESS MODELS AND THEIR

ANTECEDENTS

The business model concept has rich theoretical

roots. In one research stream, Chesbrough and

Rosenbloom (2002: 529) link the business model to

technology management and define it as the ‘heuris-

tic logic that connects technical potential with the

realization of economic value,’ emphasizing its role

in linking technology to market outcomes. Consis-

tent with this perspective, Casadesus-Masanell and

Ricart (2010) posit that one important component of

business models is the set of managerial choices

about how the organization operates, such as com-

pensation practices, procurement contracts, location

of facilities, or assets employed. Another component

of business models, according to this view, relates to

the consequences of these choices, such as low cost

or culture of frugality, which describe the ‘logic of

the firm’ (Casadesus-Masanell and Ricart, 2010;

Sanchez and Ricart, 2010).

Other scholars have promoted a more parsimoni-

ous definition of the business model. McGrath

(2010) suggests thinking about business models by

using two core ideas concerning managerial choices:

units of business (i.e., what you are selling that

someone is prepared to pay for) and key metrics (i.e.,

the set of activities employed to sell those units). The

idea of business models as boundary-spanning

systems of transactions and activities has been devel-

oped in a series of research articles by Amit and Zott

(2001) and Zott and Amit (2007, 2008, 2010) to

capture the essence of ‘how firms do business.’ A

focus on the activity system—a ‘system that is made

up of components, linkages between the compo-

nents, and dynamics’ (Afuah and Tucci, 2000:

4)—could indeed provide a useful common perspec-

tive across the various conceptualizations of the

business model (Zott et al., 2011) and, hence, we

adopt it in this study.

Zott and Amit (2010) have shown that the design

of a business model can be characterized by ‘design

themes,’ which are specific configurations of the

content, structure, and governance of activities.

There are at least four such design themes: novelty,

lock-in, complementarities, and efficiency. The

R. Amit and C. Zott

Copyright © 2015 Strategic Management Society

DOI: 10.1002/sej

Strat. Entrepreneurship J.,9: 331–350 (2015)

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