Business Model Evolution In SMEs:a Comparative Case Study

The Business Model, its evolutionary dynamics and innovation are still subjects of debate. Moreover referring to Small and Medium Enterprises (SMEs) from developing countries, where research is scarce despite the general acknowledgment of them as natural innovators. Current literature provides definitions and concepts, however time is briefly discussed and authors seldom build on each other. Furthermore, issues regarding the way firms modify their business model over time remain unresolved. This study integrates previous developments that help three Colombian small enterprises to elaborate a sequence of snapshots of their business model, pointing out past, current and future modifications, evolutionary objectives, and stages of change within the Business Model. Managers, in turn, also identify the innovation mode they have engaged in at various points in time. In sum the study evidences the relation between a dynamic business model evolution process and a small firm’s sustained value appropriation and eventual success. It contributes to clarify the question of how business models of SMEs evolve over time, by proposing a framework in which SMEs follow an evolutionary process comparable to that of living organisms, where the business model is crafted in accordance with an evolutionary objective, followed by management decisions to change specific components of it in order to suit the evolutionary objective. Then, these particular changes derive in a specific stage of change, and a result, the firm engages in a specific innovation mode to confront its environment and competitors. The confrontation of these threats poses new challenges that in turn drive managers to set a new evolutionary objective, and therefore repeat the process over time.Nonetheless, further research issues are proposed considering specific sectors and geographic locations. Overall, the study implicitly presents a methodology for further studies regarding the evolution of business models, and it delivers an additional instrument for managers to periodically review the company’s business model, seeking for innovation opportunities, and anticipating possible consequences.