Business model innovations driven by changing regime boundary conditions

“From 2012 to 2020, 17 vehicle manufacturers and 38 electric cars revealed a diverse menu of options with business model innovations originating at the crossing of boundaries between the electric and automotive socio-technical systems.”
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The energy and industry transition, increasingly present on the global agenda, require complex socio-economic involvement, as they move away from individual approaches and linear principles of cause-effect to collective approaches to systemic causes (Frantzeskaki and Rok, 2018). In this context, the business model, defined as how an organization creates, delivers, and captures value, in economic, social, cultural, or other contexts, can play a crucial role in supporting innovation and the development of economic activities (Costa et al., 2021).

Business models innovation, forged by new socio-technical arrangements, driven by incumbents' new interactions with science, technological evolution, and digitalization, can generate opportunities to define, create, capture value (monetary and non-monetary) and leverage new arrangements and development opportunities (Wang & Wells, 2021; Pedersen et al., 2021).

However, less structured companies may not have the scope or depth of competencies needed to deal with complex and comprehensive issues such as regulatory provisions, consumer attitudes and restricted market access, and, thus, may be limited to business models ossified within highly structured socio-technical systems. Nonetheless, well-structured organizations capable of dealing with complex elements, such as those in the automotive and renewable energy industries, are more likely to develop and benefit from business model innovations (BMI).

For example, the development of electric mobility with consequent growth in the demand for electricity (Aguilar Dominguez et al., 2020), preferably from renewable sources, has caused the boundary spanning of the automotive and energy industries. Confronted with emerging technologies, innovation, and alternative forms of mobility (Hildermeier and Villareal, 2014) both industries realized new opportunities for interaction and collaboration from through crossing-boundary system, enabling the emergence of business model innovations.

This new confluence of interests between the participants of the electricity system (from the possibility of supplying electricity and new services for electric vehicles) and the automobility industry (from the possibility of storage, generation, and supply of electricity for consumer) can influence sectoral policies and favour the emergence of BMI potentially capable of contributing to processes of socio-technical transition (Aagaard et al., 2021).

In addition, a number of other factors also contribute to changes in the perspective of the energy sector's business models such as a) Change from the centralized generation model in plants dominated by large public organizations to decentralized, digitalized, and small-scale production such as prosumers supported by broad incentive policies (Sovacool and Geels, 2016; Kamenopoulos and Tsoutsos, 2019), b) Deregulation potentially capable of stimulating increased competition and greater financial pressure on state monopolies, and c) Privatization with the expansion of renewables, especially solar PV and wind sources that are modular and scalable, flexible, decentralized, digitally enabled, and whose facilities can be shared by homes and small businesses (Olkkonen et al., 2017; Van de Graaf, 2019) capable accelerate the process of expanding renewables in the electricity grid (Haar, 2020).

On the automotive industry perspective, a mass production of batteries (both for vehicles and for energy storage applications), emergence of new technologies (such as smart grid, smart charging, vehicle-to-grid, etc.), expansion of the charging infrastructure, digitalization with the launch of new applications and services diversification (battery swap system, the consumers may have the option of leasing batteries and buying the cars separately), and the emergence of new mobility systems (its ride sharing and ride hailing) were the most significant aspects for the emergence of innovative business models (Costa et al., 2021).

A recent study on the business model innovations due to the boundary-spanning of the automotive and energy industries analyzed more than 100 projects and found that “from 2012 to 2020, 17 vehicle manufacturers and 38 electric cars revealed a diverse menu of options with business model innovations originating at the crossing of boundaries between the electric and automotive socio-technical systems” (Costa et al., 2021).

See full article at https://doi.org/10.1016/j.jclepro.2021.130034

Reference:

Aagaard, A., Lüdeke-Freund, F., & Wells, P. (2021). Business Models for Sustainability Transitions. Springer.

Aguilar-Dominguez, D., Dunbar, A., & Brown, S. (2020). The electricity demand of an EV providing power via vehicle-to-home and its potential impact on the grid with different electricity price tariffs. Energy Reports6, 132-141.

Costa, E., Wells, P., Wang, L., & Costa, G. (2022). The electric vehicle and renewable energy: Changes in boundary conditions that enhance business model innovations. Journal of Cleaner Production333, 130034.

Frantzeskaki, N., & Rok, A. (2018). Co-producing urban sustainability transitions knowledge with community, policy and science. Environmental Innovation and Societal Transitions, 29, 47-51.

Haar, L. (2020). An empirical analysis of the fiscal incidence of renewable energy support in the European Union. Energy Policy143, 111483.

Hildermeier, J., & Villareal, A. (2014). Two ways of defining sustainable mobility: Autolib’and BeMobility. Journal of Environmental Policy & Planning16(3), 321-336.

Kamenopoulos, S. N., & Tsoutsos, T. (2019). Assessment of renewable energy projects using a decision support system: a process to endorse the social license to operate. In Understanding Risks and Uncertainties in Energy and Climate Policy (pp. 223-237). Springer, Cham.

Olkkonen, L., Korjonen-Kuusipuro, K., & Grönberg, I. (2017). Redefining a stakeholder relation: Finnish energy “prosumers” as co-producers. Environmental Innovation and Societal Transitions24, 57-66.

Pedersen, E. R. G., Lüdeke-Freund, F., Henriques, I., & Seitanidi, M. M. (2021). Toward collaborative cross-sector business models for sustainability.

Sovacool, B. K., & Geels, F. W. (2016). Further reflections on the temporality of energy transitions: A response to critics. Energy Research & Social Science22, 232-237.

Wang, L., & Wells, P. (2021). Regime Confluence in Automobile Industry Transformation: Boundary Dissolution and Network Reintegration via CASE Vehicles. Energies, 14(4), 1116.

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