Given the relatively recent interest of researchers in the issue of business models, there are still various definitions of the business model. Business model can be defined according to the three perspectives: strategic, operational, and economic [1
]. In its essence, the business model is concerned with the economic settings of a business venture (i.e., the way of generating revenues). After that, the focus shifts to operational aspects: process structure, infrastructure, and administration. Finally, at the strategic level, the business model shows the direction of the business and market positioning, and includes stakeholder interests as well as opportunities for growth. A similar view is that a business model is a firm’s plan to create value, fight competition, use resources, structure relationships with partners and customers, and generate profit [10
]. The business model defines how the enterprise creates and delivers value to customers and then converts the payments received into profit [2
]. Moreover, the business model is a simplified and aggregated representation of all the relevant activities of a company, which describes how a company, by creating additional value, creates marketable products or services. The business model represents a conceptual framework to organize the process of value creation of a firm, which can help to achieve profitability [5
]. Finally, another view is that business model definition differentiates according to the discipline that studies them [12
]. In the field of strategic management, business models are defined as activities, strategies, and actions that create, deliver, and ensure value for the firm. In the field of entrepreneurship, a business model is a set of decisions that an entrepreneur must make in order to exploit a business opportunity. In the study of marketing, the business model is viewed from a network perspective, looking primarily at relationships with partners and other stakeholders, which are essential for value creation. In organizational studies, the focus is on the organization of activities and the basic elements of the business model, which are necessary for the functioning of the organization. Finally, scientists who focus on studying practice, view the business model as a tool that can monitor the company strategies and tactics, and changes in them.
The business model of a firm provides an overview of the firm’s entire business and the relationships it creates. The importance of setting up a clear business model is reflected in the fact that it allows an assessment of all elements of business and their sustainability, and it is possible to clearly read the relationship toward the firm’s stakeholders.
2.2. Creating and Innovating a Business Model
The business model is created based on thee proven potential of the product or service and can serve as the basis for a sustainable business [10
]. Creating a business model is different for each venture and each organization (profit-oriented, socially-oriented, artistic, scientific, etc.), and due to the fact that starting a business venture is triggered by different motivations, the processes of designing, operationalization, outcomes, and changes of the business model are different [15
]. All relevant factors in creating the value of the final product/service must be taken into account when creating a business model, since the business model shows the logic of creating and delivering value to the customer, and provides the necessary information about this process [11
]. It must start from the decision on the technologies to be used, the features of the products/services it will offer, and the benefits that these products/services will provide to customers [11
]. Furthermore, it is important to identify the target market and how the firm will generate revenue, and to design mechanisms that will monitor and record the value achieved. From this process, it can be concluded that the business model contains the organizational and financial architecture of the firm and it shows how the firm creates value for the customer, collects payments, and converts payments to profit. The business model can be designed through a process that consists of five phases:
Mobilization involves the preparation for designing the business model. In this phase, the project objectives are determined, preliminary ideas are tested, the project is planned, and a team is assembled to understand the aims of the research and to analyze the elements needed to design a business model. Here, it is important to understand the context in which the business model will be developed, which means that all important elements of the business such as customers, technology, and environment must be examined. The third phase, designing, seeks to convert ideas from previous phases into business models that will be explored and tested, and select the one that is the best solution. The goal of the implementation phase is to implement the business model prototype into practice, and in order to implement it successfully, it is essential to ensure the participation of all necessary participants and constant communication in the company. Managing is the last phase, which involves constantly monitoring the business model and scanning the environment to improve or adapt the business model to the reactions that have been identified in the market.
It is important to understand that business models have their life cycle [15
]. The phrase life cycle is known from the concept of the product life cycle and company life cycle, and these authors apply it to the process of creating and evolving a business model. It is a common belief that all business models need to change over time. Business model innovations have reshaped entire industries and redistributed billions of dollars [13
]. Every organization needs to carefully review whether the time is right to revise its business model, either to pursue new opportunities in its industry or to respond to threats [16
]. Business model innovation is the subject of numerous scientific studies for two main reasons [4
]. The first reason is that firms commercialize innovative ideas and technologies through their business models. The second reason lies in the fact that business models are a new subject of innovation in firms, which is complementary to the previous process, product, and organizational innovation, and involves new forms of cooperation and partnership. Business model innovation is a process that changes the firm’s current business model and creates a new combination of elements, which will help the firm to retain the existing or create a better position in the market [4
]. What many definitions of business model innovation have in common is the emphasis on completely replacing the existing business model with a new one (i.e., a complete reversal in thinking and doing business) [17
]. Firms constantly innovate their business models, thus trying to create added value and change the standard ways in which products and services are produced and sold in their industry [10
]. Today, the so-called disruptive business models, which completely change certain industries or create new ones, are appearing with increasing frequency. Disruption is the creation of a business idea that disrupts and changes market conventions and enables the achievement of the new vision of the firm [20
]. Disruption creates a foundation for business model innovation. The main goal of business model innovation is the generation of a sustainable competitive advantage [5
]. Business model innovation can be seen as a result of one of the following company objectives:
to satisfy existing but unanswered market needs,
to bring new technologies, products, or services to market,
to improve an existing market, or
to create an entirely new market [2
Furthermore, two types of innovation can be distinguished: innovation within the business model, where changes occur in the design and functioning of the elements of the business model, and innovation of the entire business model, which involves questioning and changing fundamental business ideas [15
]. In this context, the authors talk about the drivers of innovation (internal and external) as well as the nature of innovation (proactive and reactive). Changes take place in response to internal or external circumstances relevant to the firm and its business model. Changes that are proactive take place because of the initiative of the entrepreneur, while reactive changes occur because the firm must respond to the new circumstances that affect the functioning or effectiveness of the business model.
In order to create or maintain a competitive advantage, it is necessary to critically examine the need for business model innovation due to internal or external changes that have occurred over time [19
]. Business models have to change and evolve to be sustainable [15
] and business model innovation is extremely important for firm growth and longevity [21
]. However, a firm should be aware that business model innovation is unpredictable and time-consuming, and it is necessary to solve numerous ambiguities and uncertainties, analyze alternatives, and find a good solution [2
]. A major obstacle to business model innovation stems from the fact that only a few companies understand their existing business model well enough, the premise behind its development, its strengths, and limitations, and therefore cannot know when a new business model is needed to ensure business success [13
]. Lately, research suggests that firms should consider business model experimentation as a way of overcoming organizational inertia, gaining new knowledge and boosting innovation [22
]. The newest focus of the research of business model innovation is oriented toward sustainable business model innovation, where companies must include environmental and societal elements in their new business model [22
]. Finally, it can be concluded that creating a new business model, which is neither new nor disruptive to the industry or market in which the firm operates, is a complete waste of time and money [13
2.3. From Business Model to Competitive Advantage
Although there is still debate about the precise definition of the business model term, and whether it is a prospective field of research or extension of strategy research [26
], the business model is surely a tool that can provide better understanding of how companies conduct their business, what their focus is in creating sustainable competitive advantage and how they are changing in today’s turbulent era. A model is a simplified abstraction of a real situation; it is a structure that gives meaning to something, and therefore it can be said that by creating a business model, an entrepreneur wants to show key aspects of a sustainable business venture [1
]. A business model is a model, meaning that it has an embedded set of cause–effect relationships [27
]. By understanding the business model of a firm, we can understand what are the relevant and crucial elements needed to obtain success.
Previous research has shown that the strategic awareness of the firm implies profound understanding of the business model and its components. Competitive strategy of the firm is based on the differentiation from the competition, which is grounded in the deliberate choice of different sets of activities in order to be able to deliver a unique value mix [28
]. That choice to be different from the competition requires conscious and continuous work on creating and sustaining competitive advantage. Comprehension of the current business model and business model innovation are the basis for the development of lasting competitive advantage.
As has been stated, the aim of this paper was to show the importance of a firm’s business model in creating sustainable competitive advantage within SMEs in the ICT industry. Therefore, the specific research questions this research seeks to answer, are as follows: