Handbook on the Knowledge Economy, Volume Two
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Handbook on the Knowledge Economy, Volume Two

Edited by David Rooney, Greg Hearn and Tim Kastelle

Readers with interests in managing knowledge- and innovation-intensive businesses and those who are seeking new insights about how knowledge economies work will find this book an invaluable reference tool. Chapters deal with issues such as open innovation, wellbeing, and digital work that managers and policymakers are increasingly asked to respond to. Contributors to the Handbook are globally recognised experts in their fields providing valuable guidance.
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Chapter 14: Knowledge-based Business Models: A Digital Network Strategy

Tim Kastelle


Tim Kastelle BUILDING KNOWLEDGE-BASED BUSINESS MODELS Business models describe the logic that organizations use to turn resources and competencies into economic value (Teece, 2010). There are many different business models (see Baden-Fuller and Morgan, 2010; Osterwalder and Pigneur, 2010) but they all tend to include common components. The first academic description of business models came from Henry Chesbrough (2003, 2006). His version suggests that an effective business model has clear definitions of the target market, the value proposition for this market, the economic logic (costs and revenues), how the value chain and value network are best constructed and the competitive advantage brought to bear by the organization. The value proposition is concerned with how to best meet customer needs. In many cases, effective value propositions have been built on competitive advantages based on the physical production of goods. For example, low cost products and services are usually dependent upon economies of scale in production. Differentiated products and services are built upon advantages such as superior quality or access to unique raw materials. As we move into an economy where an increasing number of business models are built around knowledge-based assets, it is increasingly difficult to build value propositions on advantages grounded in physical things (Wirtz et al., 2010). Consequently, the question of how to build value propositions in knowledge-based organizations is growing in importance. One way to learn about how to do this effectively is to study the business models built by digital organizations. These firms are nearly always knowledge-based,...

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