The Theoretical Rationale for a Framework for Appraising The Profitability Potential of a Business Model Innovation

Abstract

Because of the uncertainty associated with innovation, it is difficult to assess the profitability potential of business model innovations. However, since theory predicts and explains, and assessing the profitability potential of a business model is about predicting what its profitability will be in the future, we can use strategy theories to help with the assessment. Therefore, I draw on three strategic management theories—the resource-based view, the product-market position view, and the dynamic capabilities perspective to derive a framework for assessing the profitability potential of a business model innovation. I then illustrate how the framework could work by applying it to Quirky's crowdsourcing business model innovation.