Champions for business model innovation : a quantitative study on managerial perceptions

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Champions for Business Model Innovation: A

Quantitative Study on Managerial Perceptions

Author

Alvaro Humberto Coenen - 10681892 University of Amsterdam

Faculty of Business and Economics Amsterdam Business School

Executive Programme in Management Studies

Track : Strategy

Thesis Supervisor : dr. Nathan Betancourt Date of Submission : 29.01.2016

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Statement of originality

This document is written by Student Alvaro Humberto Coenen who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Abstract

This study aims to examine managerial perceptions of champion behavioral attributes for business model innovation. There is a wealth of literature that establishes business models as a new unit of analysis that is closely linked to competitive advantage and firm performance. However, organizations face many challenges in innovating their business models. Some business model scholars have suggested champions may play a role in solving some of these challenges, yet very little research has shed any light on the role of champions for this type of innovation. This study presents some evidence that managers have a demand for champions for business model innovation.

Through an online survey administered to 88 managers we were able to determine that managers have a very favorable view of champion behavioral attributes. We were also able to show that these perceptions varied as organizations became more complex. Furthermore, we also found some significant differences in managerial perceptions across gender. Female managers showed significant favorable perceptions of champion behavioral attributes for business model innovation than male managers. Implications and future avenues for research are also offered in this study.

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List of figures

FIGURE 1:CONCEPTUAL MODEL ... 11

FIGURE 2:STATISTICAL MODEL ... 12

FIGURE 3:SIMPLE SLOPES PLOT ... 23

List of tables

TABLE 1.MEANS,STANDARD DEVIATIONS,CORRELATIONS AND RELIABILITIES ... 17

TABLE 2.RANKED CBA FOR BMI ... 18

TABLE 3.LINEAR MODEL OF PREDICTORS OF CBA FOR BMI ... 21

TABLE 4.ATTRIBUTES OF CHAMPIONS FOUND IN LITERATURE... 44

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1 INTRODUCTION

Firms are facing market and technological uncertainty, discontinuity, disruptions, convergence and intense global competition (Andries & Debackere, 2013; Doz & Kosonen, 2010). Developments in the global economy have changed the balance between customers and suppliers wherein customers have more supply options and more granular needs (Teece, 2010). Advances in technology, like the internet, allow for lower costs in acquiring information and satisfying customer needs. Firms are shifting from traditional supply-based models to customer-centric models of doing business (Teece, 2010). This shift coupled with intense global competition requires companies to re-evaluate and transform their business models rapidly and more frequently than in the past (Doz & Kosonen, 2010; Teece, 2010).

Transforming the business model of a firm is not easy as inertia from many sources defend the status quo (Doz & Kosonen, 2010). Barriers must be overcome in order to successfully develop new business models (Chesbrough, 2010). Afuah (2015) and McGrath (2010) note that new business model innovation requires a determined champion to help create a vision and articulate the gains for both the firm and employees. Organizational champions are emergent individuals who rise from within organizational ranks and take ownership of ideas until they are realized (Howell & Shea, 2006; Kelley & Lee, 2010). A champion sells the idea on how the new business model will create and appropriate value before adopting a new planning logic. Champions are often portrayed with heroic-like qualities in much of the champion literature, yet very few studies exist, beyond anecdotal accounts, that provide empirical proof of their ability to be more successful than non-champions. Furthermore, champions are described as renegades and deviants (Howell & Higgins, 1990a; Maidique, 1980) who break rules and sometimes create innovation bottlenecks by sticking too long to non-viable ideas (Walter, Parboteeah, Riesenhuber, & Hoegl, 2011).

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| 2 There is a rich body of literature that has established both business models and champions as unique units of analysis, however there is very little research that combines both streams of knowledge and even less so in the context of business model innovation. The aim of this study is to contribute an empirical link in the champion and business model literature that provides evidence that there is a degree of demand from managers for champions in business model innovation. We establish this link by measuring managerial perceptions of champion behavioral attributes in the context of business model innovation. We investigate if organizational complexity has a direct effect on these perceptions. Organizational complexity is a by-product of organizational growth and maturity. Understanding if these perceptions fluctuate in managers from small/young organizations and managers from large/mature organizations may further our understanding of the organizational context that is most appropriate for champions of business model innovation. Furthermore, we shed some light on whether this relationship is strengthened or weakened by managerial preference for deviance, that is, the propensity of managers to accept employee non-compliance.

Moving forward, this study consists of five additional chapters. In the next chapter we provide the reader with a review of the most relevant literature that pertains to business models and champions and present at the end a set of hypotheses and a conceptual model. Chapter three delineates our data collection procedure and method. Data analysis and results are presented in chapter four. A discussion of the main findings, practical implications, limitations and ideas for future research are found in chapter five. Lastly, chapter six offers our final conclusions on this study.

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2 LITERATURE REVIEW

The first two sections of this chapter offer an overview of the current state of knowledge on business models and the champion literature. Contained in these sections is a set of hypotheses that will be explored as part of this study. In the last section a visual representation of this study’s conceptual model is offered.

2.1 Business models

There is no real consensus yet on what constitutes a business model. The business model literature has exploded in the last decade but has generally developed in silos of knowledge with authors developing their own conceptualizations and definitions (Zott, Amit, & Massa, 2011). Despite this lack of clarity, the business model has become a new unit of analysis in research where some authors place it closer to the firm and others closer to the firm’s network or in-between (Zott et al., 2011). Business models are conceptualized as an activity system (Chatterjee, 2013; Morris, Schindehutte, & Allen, 2005) that includes either only the firm or its network (Teece, 2010). For this research we use Afuah’s (p.9, 2003) definition of business models “the set of activities a firm

performs, how it performs them, and when it performs them as it uses its resources to perform

activities, given its industry, to create superior customer value . . . and put itself in a position to

appropriate the value.” Chesbrough (p.355, 2010) adds a complementary overview of the

functions that business models fulfill:

 Articulates the value proposition (i.e., the value created for users by an offering

based on technology);

 Identifies a market segment and specify the revenue generation mechanism (i.e.,

users to whom technology is useful and for what purpose);

 Defines the structure of the value chain required to create and distribute the

offering and complementary assets needed to support position in the chain;

 Details the revenue mechanism(s) by which the firm will be paid for the

offering;

 Estimates the cost structure and profit potential (given value proposition and

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| 4  Describes the position of the firm within the value network linking suppliers

and customers (incl. identifying potential complementors and competitors); and

 Formulates the competitive strategy by which the innovating firm will gain and

hold advantage over rivals.

Business models are important because they are closely related to value creation, through novelty, lock-in, complementarities, efficiency, value appropriation (Teece, 2010; Zott & Amit, 2010), firm performance and even competitive advantage (Sinfield, Calder, McConnell, & Colson, 2011). 2.1.1 Business model erosion and business model innovation

Because business models embed logic of operating business constraints at a given point in time, they will inevitably erode over time as competitors catch on, imitate, or as disruptions appear in the environment, or constraints relax or shift that pose new opportunities or threats (McGrath, 2010). Even the most successful business models need to be revamped or, in the worst case, abandoned in favor of new innovative methods that reinvigorate business (Teece, 2010). Many ventures fail despite the presence of market opportunities, novel business ideas, adequate resources and talented entrepreneurs. A possible cause is the underlying model driving the business that is failing (Morris et al., 2005). As a response, firms engage in business model innovation to offset erosion. Business model innovation is associated with progress as sometimes it can define industry revolutions (Baden-Fuller & Mangematin, 2013). Business model innovation is also associated with competitive advantage, as few companies have mastered the means through which a company can adopt new templates of doing business (Sinfield et al., 2011). An IBM study from 2006 also ties business model innovation to firm performance. However, there is no real definition offered by both the business model literature and innovation literature on what constitutes business model innovation (Taran, Boer, & Lindgren, 2015). Nevertheless, many authors point toward the importance of business model innovation as a process of experimentation and trial-and-error learning (Andries & Debackere, 2013; Chesbrough, 2010; McGrath, 2010; Morris et al., 2005;

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| 5 Teece, 2010). Sinfield et al. (2011) provide the following view on business model innovation through experimentation:

“The pursuit of growth through the methodical examination of alternative business models. At its heart, business model experimentation is a means to explore

alternative value creation approaches quickly, inexpensively and, to the extent possible, through thought experiments.”

Experimentation is central to discovering new business models, as business models cannot be fully anticipated in advance therefore requiring means of discovering new models (McGrath, 2010). Morris et al. (2005) note that some firms may not have a complete business model to start with and that a process of experimentation may be involved as the model emerges. Experimentation allows for the assembly of evidence needed to validate assumptions and ideas about costs, customers, competitors, complementors, suppliers, and distributors (Teece, 2010). Doz and Kosonen (2010) note experimentation may also contribute to challenging assumptions of the existing business model. Experimentation also helps mitigate problems associated with barriers in business model innovation for example, dominant logic, inertia, and business model incompatibility due to current asset configurations (Chesbrough, 2010).

2.2 Organizational champions

“New ideas either find a champion or die” (Shon, 1963, p.84)

In 1974, Chakrabarti noted that lack of innovation in organizations was due to inertia, fear of criticism and futility about the idea being received and acted on, and lack of attention paid to the idea. Very little has changed since 1974 because many organizations are still plagued by similar challenges in getting ideas off the ground. Stevens and Burley (1997) note that it takes approximately 3000 ideas to generate one commercial success. This statistic is a stark reminder to

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| 6 firms and managers alike to get ideas heard and acted on. Someone must take the creative idea and guide it until it becomes an innovation; such people are typically called champions. Champions are said to be emerging individuals, that is, they take on the role when social context demands it (Markham, Green, & Basu, 1991). Champions actively and enthusiastically promote innovation by building support until it overcomes resistance and is implemented (Howell, 2005; Howell & Boies, 2004; Howell & Higgins, 1990a; Howell & Higgins, 1990b). There are several definitions offered in the literature on champions (individuals) and championing (process). For this research, we borrow from two complementary definitions to create our baseline: “A champion is an

individual that is willing to take risks by enthusiastically promoting the development and/or

implementation of an innovation inside a corporation through a resource acquisition process

without regard to the resources currently controlled” (Jenssen & Jørgensen, 2004, p.3).

Complementing Jenssen and Jørgensen’s definition, Shane (p.13, 1995) adds the following: “championing is the process by which an individual employs various strategies to get members of

an organization to support a new idea that other members of the organization do not initially

support.” We thus define champions as emergent individuals who take ownership of an idea and

vigorously advocate it within the organization employing various tactics to convince organizational members, whilst taking personal risk and having little power over resources.

But we must add caution, the champion literature is overwhelmingly positive and anecdotal. Some scholars argue that champions enjoy a positive bias from post-hoc claims of their success even when they are unsupported by any empirical proof (Markham & Griffin, 1998). Other scholars also point out that champions may not affect firm-level outcomes (i.e., performance) directly, but rather indirectly and mediated by other organizational factors (Gupta, Cadeaux, & Dubelaar, 2006; Markham & Griffin, 1998). Further, the extant literature on champions has not

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| 7 answered the question of how much championing is too much before it becomes detrimental. In a recent study by Walter et al. (2011) it was found champions may cause bottlenecks within organizations. These bottlenecks are created by a champion who sticks too long to non-viable ideas and in doing so discourage social mechanisms, like feedback and constructive criticism, that are necessary for the flow of new ideas. So instead of encouraging team members to engage in new idea generation a champion may become a barrier that needs to be overcome. Furthermore, champions are rare in their emergence within organizational ranks (Howell & Shea, 2006) so although champions are presented with mythical-like attributes we have to note they should not be viewed as a panacea for all organizational challenges.

2.2.1 The role of champions in new business model innovation

The role of leadership is important in business model innovation as leaders must encourage open conversations with those who challenge and question business model viability (McGrath 2010; Deschamps, 2005). Firms need to identify internal leaders for business model change so that processes can be managed to deliver new and better business models for the firm (Chesbrough, 2010). McGrath (2010) stresses a determined champion is necessary to help implement a different business planning logic for business models and convince managers of the merits of business model redesign. Champions question tried and true ways of doing business in favor of new opportunities; they are in a constant search for new ideas using formal and informal channels (Howell & Higgins, 1990a). They use external links, like customers, partners, and suppliers to gauge new trends and identify new opportunities. Once they identify an idea, they will take ownership of it bearing great personal risk in doing so (Galbraith, 1982; Howell & Higgins, 1990b; Markham, 1998). They will try to gather support for the idea by packaging and enthusiastically promoting and selling it within the organization to stakeholders and leaders until it wears down

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| 8 resistance or opponents to get proper resources (Burgelman, 1983; Howell, 2005). If the idea is met with too much opposition then the champion will bend rules, procedures and norms to funnel necessary resources until the idea can prove itself and become successful (Burgelman, 1983; Day, 1991; Howell, 2005; Howell & Higgins, 1990a).

2.2.2 Organizational antecedents of champions

The demand for champions is embedded deep within the nature of the firm itself. Adam Smith (1776) once asserted that the driving force behind the wealth of nations was the division of labor; making job specialization a cornerstone of modern economics. As jobs became specialized, this created new challenges that revolved around proper coordination and cooperation—to avoid shirking and increase efficiency. To cope with these challenges monitors (managers) were added to control, compensate employees, and exercise authority. Managers in turn were given a residual that serves as a type of monitor for them (Alchian & Demsetz, 1972). As firms grew and became older, these layers made way for complex hierarchies designed to control different functional areas within the organization. New systems were designed to maintain authority which rely on rules, procedures, guidelines and norms, to ensure individuals working in a hierarchical system can still perform their individual specialized tasks and still be able to coordinate activities as efficiently as possible (Shane, 1994).

It has been well established in the literature that a firm’s survival requires innovation. Without innovation, a firm simply cannot maintain a long enough competitive advantage to ward off competitors and survive (Mueller, Rosenbusch, & Bausch, 2013; Somech & Drach-Zahavy, 2013). However, innovation challenges the status quo and sometimes disrupts existing organizational systems designed for efficiency. These systems slow down the ability, at the firm and individual level, to respond to these rapid environmental changes (Shane, 1994). Innovation

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| 9 brings along a high degree of uncertainty, making it very difficult for decision makers to gauge success and enact changes without a high degree of personal risk. Some managers are risk averse as they are very limited in their ability to diversify risk, because their careers and their rewards are closely tied to firm performance (Eisenhardt, 1989). This aversion prevents necessary violations to existing norms, rules and procedures that breed innovation. This organizational limitation drives the demand for individuals—champions to rise and absorb the risk associated with removing organizational obstacles to innovation (Shane, 1994; Shane, 1995).

2.2.3 Organizational stages and emergence of champions

Champions are emergent individuals; they can originate across various functional areas within the organization for example, general management, research and development, production and marketing (Markham et al., 1991). This is also supported by Day (1994) who introduced the idea that champions have different power bases to draw from, depending on where they originate from within the organization for example, bottom, middle and top hierarchies. Traces of these power bases are also found in Maidique’s (1980) model on the evolution of the entrepreneurial network. In his model, Maidique (1980) argues that as organizations move away from an entrepreneurial organization to a more integrated and diversified organization, a disconnection emerges between the entrepreneur and the technologist base that breeds innovation. As firms become more integrated and diversified, new roles like champions arise that fill in the gaps created by the disconnection between top and bottom parts of the organization. In earlier organizational stages, the entrepreneur plays a pivotal role in controlling resources and pushing for the organization’s development. Entrepreneurs, like champions, have a tendency to express deviant preferences from those of the majority. This unwillingness to submit allows them to combine resources in new ways that create value-added (Maidique, 1980; Shane, 1994). Entrepreneurship and championing are

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| 10 two distinct roles that differ along two important points (1) control of resources (2) emergence from within the organizational ranks (Kelley & Lee, 2010). Using Maidique’s model as a base, it can be argued that as organizations transition from entrepreneur-driven ventures to integrated and diversified businesses a similar disconnection will arise that will require a champion to drive business model innovation inside the firm. Thus, it is plausible that there will be a difference in the desirability of champion behavioral attributes in both small and large organizations for business model innovation. Managers in smaller organizations will look at the entrepreneur and its leadership to solve new business model innovation challenges, and not a champion.

H1: Managers in mature firms will perceive champion behavioral attributes as more desirable for

business model innovation, than managers in younger firms.

2.2.4 Managerial preference for deviant behavior

Champions use different strategies to promote the idea and influence a positive outcome for it. These strategies have been identified by several researchers as rational, participative, and bootlegging/renegade (Howell & Higgins, 1990a; Jensen & Jørgensen, 2004). Some, but not all managers may find champions desirable. Some managers may be too risk averse and have a low tolerance for deviant behavior that violate organizational processes. In a study by March and Shapira (1987) managers reported to be greater risk-takers than they actually were. Although managers had favorable views on risk-taking, organizational incentives largely discouraged managers from engaging in risk-taking actions. Further, an earlier study by Kahneman and Tversky (1979) demonstrated that when presented with a risky alternative with a greater positive outcome human subjects appeared to be more risk-averse. Attitudes toward risk-aversion becomes more salient as managers move up the hierarchy (March & Shapira, 1987). Some managers may resist breaking rules, norms and procedures needed for innovation in favor of stability and efficiency

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| 11 (Shane, 1995). In his study about championing preferences and experience, Shane (1994) noted that champions are risk-takers who find it acceptable to engage in deviant behavior (e.g., through bootlegging and renegade strategies) to innovate, and that organizations need to develop a tolerance for deviance. Although Shane’s (1994) recommendations are on the firm level, it is plausible it also holds true on the managerial level. A manager’s preference for deviant behavior could affect the extent champion behavioral attributes are seen as desirable by managers. Thus, we posit the following hypothesis:

H2: Managers in mature firms will perceive champion behavioral attributes as more desirable for

business model innovation, when managers have a high preference for deviant behaviors. 2.3 Conceptual Model

In the previous section the two main hypotheses for this research have been established. The model depicted in figure 1 demonstrates the direct effect of our independent variable (x) organizational stage on the dependent variable (y) perceptions of desirability of champion behavioral attributes for business model innovation. The figure also illustrates our moderator (m) managerial preference for deviant behavior. In figure 2 a depiction of the statistical model is offered that showcases the different elements that were tested as part of this study.

(+)

(+)

Figure 1: Conceptual model: CBA= Champion Behavioral Attributes; BMI=Business Model Innovation

Organizational Stage

(Mature/Complex Organization)

Managerial Preference for Deviant behavior

(High)

Perceptions of desirability

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Figure 2: Statistical model: CBA= Champion Behavioral Attributes; BMI=Business Model Innovation.

3 METHOD

In this chapter the empirical setup of this research is described. The first section outlines the sample and its main characteristics. The second section provides an overview of the measurements, items and scales used to test the variables. The last section delineates the analytical strategy used. The survey administered for this research can be found in the appendix.

3.1 Sample

As part of this research 164 people were invited to participate in an online survey out of which 138 completed the survey. Out of those who completed the survey, 88 (63%) respondents passed additional checks designed to filter out non-managers and respondents who failed attention checks and who were speeding through the survey. Because we are interested in measuring only managerial responses the inclusion of these filters were very helpful in ensuring the recorded

(X) Organizational Stage (M) Managerial Deviance (X*M) Organizational Stage * Managerial Deviance Covariates (Y) Perceptions of desirability

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| 13 information came from our intended population. This in turn increased the reliability of our data giving us confidence in our results and subsequent generalizations.

From the 88 respondents 46 were female (53%), reported age of the respondents (in years) was Mage = 39, SDage = 12, age-range: 20-75. The reported experience level of the respondents was

(in years) Mexperience = 18, SDexperience = 12, experience-range: 1-60. 42% of the respondents had a

university degree, 25% had done some university, 17% had a master’s degree, 15% had a high school diploma and 1% had a doctoral degree.

The majority of the respondents reported their primary managerial functional area to be in general management (61.4%) followed by operations (11.4%) and technical (8%) the remainder of the responses were spread over marketing (4.5%), legal (2.3%), administration (2.3%), finance (1.1%) and other (9.1%). The respondents came from various industries, most notably information technology was represented by 22% of the respondents followed by retail trade (10.2%), professional, scientific or technical services (9.1%), finance or insurance (8%) and construction (8%). The majority of the respondents were based in the US (98%) and the remaining 2% in Europe.

3.2 Measurements of variables

The items used in the research have been used in previous scientific research and have high degree of reliability. No back translation was necessary as the survey was administered in the English language and the items were originally developed in the same language. Some items were slightly modified to make them concise and easier to understand for respondents.

3.2.1 Predictor variable: Organizational stage

Hypothesis one proposes that managers in mature organizations will perceive champion behavioral attributes as more desirable for business model innovation than managers in younger

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| 14 organizations. To test this hypothesis, we used a scale developed by Lester, Parnell, & Carraher (2003) that allows for the classification of organizations into five different stages: existence, survival, success, renewal, and decline. For this research we decided to use items that only measure stages of existence, success and renewal from the scale because they provide enough granularity to differentiate between young and mature organizations (simple/complex). The stage existence is attributed to small/young and homogenous organizations with informal structures and simple ownership. The stages success and renewal are attributed to mature/large heterogeneous organizations with formalized bureaucratic structures. The stages were measured on a 5-point Likert scale (1 = strongly disagree, 5 = strongly agree) examples of items for the stage existence (α = .75) are: “Our organization is small, both in size and relative to our competitors,” “The seat

of power in our firm is primarily in the hands of the founder.” For the stage success (α = .57) and

renewal (α = .81) example of items are as follows: “As a firm, we are larger than most of our

competitors, but not as large as we could be,” “Power in our firm is concentrated in our vast

number of shareholders,” “We are a widely dispersed organization, with a board of directors and

shareholders.”

3.2.2 Moderator: Managerial preference for deviance

Hypothesis two posits that managers in mature firms will perceive champion behavioral attributes as more desirable for business model innovation when managers have a high preference for deviant behavior. To measure managerial preference for deviant behavior we used a scale used by Shane (1994) that measures managerial preference for championing roles across six factors. These factors are: preference for decision-making outside of the hierarchy (HIER); preference for rule breaking (RULE); preference for treating the innovation team members as equals (EQUA); preference for plans and projections as a way to gain the support of others (SELL); preference for a high level of

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| 15 monitoring in the innovation process (MON); preference for a cross-functional appeal (CROSS). The items were measured on 5-point Likert scale (1 = strongly agree, 5 = strongly disagree) for our research we used factors HIER (α = .69) and RULE (α = .73) to measure managerial preferences for deviant behavior. Examples of items in the scale HIER are the following: “Work

without formal plans,” “Decisions based on intuition.” Examples of the scale RULE are: “Bend

organizational rules,” “Bypass personnel procedures.”

3.2.3 Outcome variable: Champion behavioral attributes

Howell, Shea, & Higgins (2005) contributed to the organizational champion literature by testing and identifying a 14-item scale (α = .94) of champion behavior measures that are part of the core domain of championing. We used this scale to rank perceptions of managers from young and mature organizations using a 5-point Likert scale (1 = strongly agree, 5 = strongly disagree) and a 10-point scale (1 = least important, 10 = most important). Examples of items on the scale include the following: "Enthusiastically promotes the innovation’s advantages," "Expresses strong

conviction about the innovation," "Expresses confidence in what the innovation can do." A

complete overview of the champion behavior measures is found in table 5 in the appendix.

3.3 Control variables

The following control variables were used as part of this research: industry, gender, education level, work experience, nationality, number of employees, and function. These variables have been found to be relevant in studies pertaining to champions and innovation.

3.4 Statistical strategy

The survey was developed using the online survey platform Qualtrics. We ran the survey from November 2nd until November 12th. Analysis of the data was done using the statistical package IBM SPSS Statistics (v21 & v22). Once the data was collected, it was checked and prepared for

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| 16 subsequent statistical tests. Data preparations consisted of recoding counter-indicative items, normality tests, skewness and kurtosis checks, outliers, missing values, computing scale means, factor analysis, correlations and scale reliability checks. We found a few cases that SPSS flagged as possible outliers in our variable age (range 20-75) and experience (range 1-60). However, upon closer inspection and using Hoaglin's & Iglewicz's (1987) method of 2.2 as multiplier for outlier demarcation we found these cases to belong to the data. The dependent variable champion behavioral attributes displayed moderate negative skewness, however this is to be expected as the items in the scale were generally positive propositions that will load around higher values of the scale.

A factor analysis was carried out for the independent variable organizational stage to verify if the scale correctly measured two separate factors that we denoted simple organizations and complex organizations. Analysis of the output confirmed items 1-4 corresponded to simple organizations and items 6-10 to complex organizations. A scale reliability check was also carried out on the complete scale, Cronbach’s alpha = .89. An overview of the means, standard deviations, correlations and Cronbach’s alpha of key variables is found in table 1.

We used the macro PROCESS by Hayes for SPSS to test hypotheses one and two. PROCESS automatically tests direct effects and interaction while at the same time standardizing (mean-centering) all variables for easier interpretation (Hayes, 2012). PROCESS allowed us to test the interaction effect of deviance and organizational stage to see whether or not the direction or magnitude of the relationship between organizational stage and champion behavioral preference was being affected.

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| 17 Table 1. Means, Standard Deviations, Correlations and Reliabilities

Note: N = 88. Reliabilities are reported along the diagonal

CBA = Champion behavioral attributes; BMI = Business model innovation

**_{. Correlation is significant at the .01 level (two-tailed)}

*_{. Correlation is significant at the .05 level (two-tailed)}

Variables M SD 1 2 3 4 5

1. Age (years) 39.36 12.21 -

2. Gender 1.52 0.50 -.06 -

3. Organizational stage 2.74 0.90 -.29** -.09 (.89)

4. Managerial preference for deviance 2.78 0.83 -.26* _-.07 _0.12 _(.91)

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| 18 Table 2. Ranked CBA for BMI

Note: N=88

M SD

1. Shows tenacity in overcoming

obstacles 8.43 1.55

2. Gets key decision makers

involved 8.40 1.58

3. Continues to be involved with the innovation until it is

implemented

8.39 1.57

4. Gets the right people involved 8.32 1.70 5. Persists in the face of

adversity 8.20 1.65

6. Gets problems into the hands

of those who can solve them 8.19 1.89

7. Keeps pushing

enthusiastically 8.17 1.53

8. Enthusiastically promotes the

innovation’s advantages 8.17 1.68

9. Points out reasons why the

innovation will succeed 8.15 1.70

10. Sticks with it, even when

others say it cannot be done 8.14 1.70

11. Knocks down barriers to the

innovation 8.10 1.70

12. Expresses confidence in

what the innovation can do 8.09 1.50

13. Shows optimism about the

success of the innovation 8.08 1.41

14. Expresses strong conviction

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4 RESULTS

In this chapter we discuss the main findings based on analysis of statistical tests. We start by looking at significant correlations found in table 1. We then explain direct effects of the variables on desirability of champion behavioral attributes for business model innovation (see table 3). In the last section we explain two-way interactions between organizational stage and managerial preference for deviant behavior and its effect on desirability of champion behavioral attributes for business model innovation.

4.1 Correlation analysis

Age has a weak but significant negative correlation with organizational stage (r = -.29, p < .01). This suggests an inverse relationship between age of managers and the type of organizations they are active in. This can be explained by our sample characteristics as 98% of our respondents were based in the US. Data from the U.S. Census Bureau (2007) has established that small organizations (1-99 employees) tend to be owned by small business owners who work until very old age. Age was also significantly negatively correlated with managerial preference for deviance (r = -.26, p < .05), as age of managers increases their preference for deviant behavior decreases. A possible explanation for this could be that older managers have a disposition to follow organizational rules and protocols (Shane, 1995) than younger managers. Lastly, age has a significant positive correlation with desirability of champion behavioral attributes (CBA) for business model innovation (BMI) (r = .26, p < .05). This finding would suggest that as age of managers increases their perception of CBA for BMI becomes more desirable. A reason for this could be that organizational tenure is a function of age, as managers climb the corporate ladder their aversion to risk increases (March & Shapira, 1987) thus making CBA for BMI more desirable.

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| 20 Gender has a significant positive correlation with desirability of CBA for BMI (r = .28, p < .01). This suggests that as our variable gender (1 = male, 2 = female) changes from male to female then the desirability of CBA for BMI increases. This could indicate female and male managers differ in the way they perceive CBA for BMI. Using an independent sample t-test we tested the difference in means in the variable gender. Analysis of the results show there is a significant difference in the scores for male managers (M = 7.85, SD = 1.23, N = 42) and female managers (M = 8.53, SD = 1.13, N = 46), t(86) = -2.73, p < .05) in the desirability of CBA for BMI. Concretely, female managers perceive champion behavioral attributes more favorably than male managers. An explanation of this is that men and women differ in the influence strategies they use for business activities and their preference for risk taking (Instone, Major, & Bunker, 1983; Powell & Ansic, 1997).

4.2 Ranking of champion behavioral attributes

In table 2 we offer a ranking of the champion behavioral attributes as perceived by managers for business model innovation. We used the mean of each individual champion behavioral attribute to populate the table. From the table we learn that, in general, the champion behavioral attribute labeled “shows tenacity in overcoming obstacles” is the item with the highest mean (M = 8.43). The lowest rated champion behavioral attribute (M = 8.05) is “expresses strong conviction about

the innovation.” Interpreting the results of this table has to be done with a certain degree of caution,

as the means depicted do not conclusively say whether one item is more important than the other. However, it is interesting to note that for business model innovation the highest rated champion behavioral attribute deals with the champion’s ability to overcome obstacles. This lends some credence to Chesbrough’s (2010) observation that organizations must overcome many internal barriers for successful business model innovation.

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| 21 Table 3. Linear model of predictors of CBA for BMI

b SE B t p Constant 19.35 19.534 0.990 .325 Man. Deviance (M) 0.20 0.185 1.085 .282 Org. stage (X) 0.52 0.229 2.247 .028 Deviance x Stage (XM) -0.09 0.187 -0.471 .639 Covariates Age 0.07 0.022 2.997 .004 Gender 0.89 0.250 3.539 < .001 Education -0.19 0.132 -1.425 .158 Nationality -0.07 0.105 -0.689 .492 Experience -0.03 0.025 -1.164 .248 Industry 0.002 0.023 0.094 .925 Function -0.01 0.061 -0.229 .820 Employees -0.18 0.136 -1.312 .194 Note: R2 = .30, p < .05, F(11, 76) = 4.33

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| 22

4.3 Direct effects

In table 3 an overview of the direct effect of the main predictors and covariates on perceptions of CBA for BMI can be found. Upon examining our variables individually, we find that organizational stage b = .52, t(76) = 2.25, p < .05 is significant, so for every 1-unit increase in organizational stage (complexity/ maturity) we get a .52-unit increase in managerial perceptions of CBA for BMI. This finding provides support for hypothesis one that posits managers in mature organizations will perceive CBA for BMI as more desirable than managers in younger organizations. Managerial preference for deviance b = .20, t(76) = 1.09, p > .05 is non-significant. Upon examining our covariates, we find that age b = .07, t(76) = 3.0, p < .05 is significant and gender b = .89, t(76) = 3.54, p < .001 is significant as well.

4.4 Moderation effects

To test hypothesis two, we used PROCESS to test the two-way interaction between our variables. The regression coefficient for the interaction is b = -.09 and is not statistically different from zero

t(76) = -.47, p > .05. Analysis of the interaction results provide no support for hypothesis two that

posited managers from mature organizations would perceive CBA for BMI as more desirable when managers had a high preference for deviance, as the interaction is non-significant and also not positive.

Further analysis of the simple slopes revealed that although the interaction is non-significant, at low levels of managerial deviance there was a significant interaction b = .59, t(76) = 2.37, p < .05. This finding suggests that when managerial preferences for deviant behavior is low there is a significant positive relationship between organizational stage and perceptions of CBA for BMI, but as managerial preference for deviance increases this relationship is no longer present. A visual representation of this finding can be found in figure 3. However, since our

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| 23 interaction is not significant this already informs us the difference in slopes are not statistically different. Why one slope is significant and the other is insignificant may be attributed to lack of statistical power. Future research with a larger sample size may be able to clear some of the ambiguity found in our results and prove/disprove the effect we are observing.

Figure 3: Simple slopes plot

5 DISCUSSION

In this chapter we discuss and elaborate on the results found in the previous section. We use existing theories and relevant literature to provide explanations of the results. We also delineate some practical implications for managers on how these results can best be applied. We also look at limitations of this research and provide suggestions for future research.

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| 24

5.1 Theoretical and practical implications

Business model innovation is more relevant than ever before because of the convergence of forces that create a cloud of uncertainty, discontinuity and bring about disruptions that are changing the way organizations do business. However, changing the business logic of an organization is not easy. Finding a new template takes a great deal of resources and experimentation, and many internal barriers need to be overcome before a new business model can be implemented. Within the business model literature, we find some direction to solve the business model innovation conundrum, namely champions (Afuah 2015; McGrath 2010). Champions are emergent individuals who promote new ideas, overcome obstacles and take on a great deal of personal risk in pursuing their cause. This research set out to establish a link between these two streams of research, business model innovation and organizational champions. By measuring managerial perceptions of champion behavioral attributes in the context of business model innovation we were able to identify some aspects of this relationship.

In general, managers perceive champion behavioral attributes as very favorable, in table 1 we find the mean score for the attributes is 8.2 (10-point scale). This finding by itself is not robust enough to support any claim about the necessity of champions for business model innovation. However, it does provide a starting point for the conversation of the merits of champions for business model innovation. If managers envisioned no role for champions in business model innovation one would expect less positive results at the outset (i.e., a lower mean). When we look at factors that may affect these perceptions we find that organizational stage, that is, the relative complexity of the organization, significantly (positively) affected these perceptions. As organizational complexity increases managerial perceptions of champion attributes become more favorable. In other words, as organizations become more mature and more dependent on layers for

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| 25 decision making the perceptions of these behaviors became more salient. This result provides support for hypothesis one that tested for an increase in favorable perceptions of champion behavioral attributes in mature/complex organizations. This result adds to our understanding of the disconnect that arises within organizations as they become more complex. Maidique (1980) had already theorized that champions arise to fill in the gaps that are created between top organizational layers and the technical base that breeds innovation as complexity increases. These layers are inherent to organizational design as organizations are designed to exploit and defend existing practices rather than pay attention to or explore new ideas (Van de Ven, 1986). A practical implication for managers is that young/small organizations will not benefit as much from champions as would mature/complex organizations and fostering environments that breed these types of emergent individuals may not necessarily yield results. That is not to say that champions for business model innovation in small organizations have no merit, however the findings of this study suggest larger organizations stand to benefit more. An explanation for why small organizations stand to benefit less can be attributed to the role of the entrepreneur. In smaller/younger organizations the entrepreneur plays a prominent role and assumes some the behaviors and activities that are normally attributed to champions. Entrepreneurs, like champions have a tendency for constructive deviance that allows them to combine resources in new and novel ways that breed innovation. Furthermore, because the primary focus of the entrepreneurs is profit and growth they have a higher propensity for risk taking that allows them to pursue new avenues for business (Stewart, Watson, Carland, & Carland, 1999).

We also investigated if these perceptions became stronger when managers displayed a preference for deviant behaviors. We looked at this moderating effect because from the literature we know that some managers have a propensity to being risk-averse and follow rules, norms and

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| 26 protocols. Whilst champions have a propensity to display deviant behaviors as part of their repertoire to move ideas forward. Furthermore, Shane (1994) called for organizations to create environments that encourage tolerance for deviant behaviors to support champion emergence. It seemed therefore plausible that some managers would not agree with champion behavioral attributes and that their individual preference for deviance would have an effect on their perceptions of the champion behavioral attributes. This notion was tested with hypothesis two that posited managers from mature/complex organizations with a high preference for deviant behavior would perceive champion behavioral attributes for business model innovation as more desirable. We found no support for this hypothesis as the interaction was neither significant nor positive. Further analysis of the simple slopes revealed that when managerial preferences for deviant behavior are low there is a significant positive relationship between organizational stage and perceptions of champion behavioral attributes for business model innovation, but as managerial preference for deviance increases this relationship is no longer present. In other words, it would seem that managers in larger organizations who have low preference for deviant behaviors are likely to perceive champions as more useful for business model innovation. However, because the interaction was not significant this would preclude any subsequent analyses as the non-significant interaction is telling us the slopes are not different from each other. The fact that one of the slopes is significant and the other is not, is likely attributed to a lack of statistical power in finding a proper interaction.

Although this research did not include any hypothesis on gender differences on managerial perceptions of champion behavioral attributes for business model innovation we do feel compelled to say a few words about it on our discussion because it showed some significant results during our data analysis. Concretely, we found that male and female managers significantly differed in

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| 27 the way they perceived champion behavioral attributes for business model innovation. Female managers in general perceived them as more desirable than male managers. There is a wealth of research that suggests that men and women differ when it comes to risk-taking, women are believed to be more risk-averse than men (Dawson & Henley, 2015). This dichotomy with regard to risk-aversion between genders could shed some light on our findings. It could be the case female managers find champion behavioral attributes more desirable because they are trait characteristics they themselves do not possess but see as necessary for the task at hand. From gender role theory (Eagly, 1987) it is understood that men and women use different influence tactics that are bound to their gender. For example, men are believed to be more aggressive, dominant and assertive and women to be more submissive, gentle and sympathetic (Smith et al., 2013). Our findings could simply be an implicit reflection of these gender differences.

5.2 Limitations and future research

This research is only but a piece of a much larger puzzle. Although great care was taken to ensure this work is well-balanced there are inevitably some limitations. First, this research is cross-sectional. Although there is nothing inherently wrong with this type of research it could still be beneficial for future research to focus on a longitudinal study that measures perceptions across time, pre and post business model innovation. This could potentially provide a better picture of how these champion behaviors are perceived before and after the process of innovation, perhaps managers going into the process think a champion is necessary but after completing the process they may think otherwise (or vice versa). Second, we only measured perceptions of champion behaviors. Measuring perceptions does not give us any insights as to how a champion can actually help the business model innovation process, what strategies they would employ or whether the business model innovation was more successful with or without a champion. Third, our sample

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| 28 size although adequate, could have benefited from more respondents. A larger sample size could also have helped with some ambiguity found in some of the results that seem to stem from lack of statistical power. Fourth, although gender differences were not part of our main study, it proved to be an interesting area that can provide new avenues for future research on the topic.

6 CONCLUSIONS

We see this study as a first step toward discovering the intricate relationship between business model innovation and champions. This research contributed to the business model innovation literature and the organizational champion literature by bringing the two streams together and testing some aspects of their relationship. Through this study we were able to demonstrate that managers look at champion behavioral attributes as a set of traits that are desirable in the context of business model innovation. Furthermore, we were also able to demonstrate that organizational complexity affects these perceptions and that managers in large/mature organizations perceive these behaviors more favorably. We can speculate from these findings that champions are in demand for this type of innovation. There is an evident trend, as found in the results, that speak to the necessity of having individuals who can take on a great deal of personal risk to move ideas forward until they are realized. In the organizational champion literature, we are introduced to many different types of champions, product, innovation, corporate venture, executive, customer, and network champions (Greene, Brush, & Hart, 1999; Jenssen & Jørgensen, 2004; Maidique, 1980; Markham et al., 1991; Shane, 1995). We hope future research will be able to further our understanding of these two streams of research and possibly even identify a new type of champion, the business model innovation champion.

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8 APPENDIX

8.1 Survey

Dear participant,

You are invited to participate in a research project that is being carried out under the auspices of the University of Amsterdam.

For my master’s degree at the Amsterdam Business School, University of Amsterdam, I am conducting a research on business model innovation and organizational champions. The research focuses specifically on understanding managerial preferences on champion behavioral attributes needed for business model innovation.

The survey will take about 5-7 minutes to complete. There are no wrong answers- I am interested in your personal and honest opinion. All data collected from the survey will be used for academic purposes only. This means that your answers will remain anonymous and will only be used for scientific research and under no circumstance will be passed on to third parties. You can stop the survey at any time without any consequences.

For more information or questions about the research, send an e-mail to: alvaro.coenen@student.uva.nl

I hope I have provided you with sufficient information. I would like to take this opportunity to thank you in advance for your participation in this study! Sincerely,

Alvaro Coenen

Amsterdam Business School University of Amsterdam

 I declare that I have read these statements and I agree to take part in this study. --Section Break--

Are you currently employed in a managerial position?  Yes

 No

--Section Break--

Please read the statements below and select an answer from the scale that best describes the organization you currently work for.

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| 34 Strongly

Disagree Disagree

Neither Agree

nor Disagree Agree

Strongly Agree Our organization is small, both in size and relative to our competitors      The seat of power in our firm is primarily in the hands of the founder      Our firm's organizationa l structure could best be described as simple      Information processing could best be described as simple, mostly word-of-mouth      As a firm, we are larger than most of our competitors, but not as large as we could be     

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| 35 Power in our firm is concentrated in our vast number of shareholders      We are a widely dispersed organization, with a board of directors and shareholders      Structure in our firm is divisional or matrix in nature, with highly sophisticated control systems      Information processing is very complex, used for coordination of diverse activities to better serve markets     

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| 36 Most

decisions in our firm are made by managers, task forces, and project teams who are trying to facilitate growth through participation     

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| 37 Please read the following statements and select from the scale the degree to which employees should be allowed to carry out the following actions:

Strongly Disagree Disagree Neither Agree nor Disagree Agree Strongly Agree Make decisions without higher officials      Make decisions outside hierarchy      Avoid financial justification      Work without formal plans      Make decisions based on intuition      Take initiative without approval      Bend organizational rules      Bypass standard operating procedures      Bypass budgetary procedures      Bypass personnel procedures     

Champions for business model innovation : a quantitative study on managerial perceptions