Towards Business Model Innovation: The Interrelationship between Digitalization and Sustainability in a Digitally-Servitized Firm

The Purpose: The aim of this study is to investigate the interrelationship between digitalization and sustainability in shaping business model innovation in the digital servitization context. Additionally, the study aims to explore how intentional narratives, as a discursive practice used for managing business model innovation, steered by digitalization and sustainability, ultimately driving organizational change. Theoretical Framework: The study overviews business model innovation and servitization literature from strategy-as-practice and narrative theoretical lenses, incorporating all business model elements that constitute business model innovation through digitalization and sustainability. The conceptual model serves as a framework to investigate the sayings (intentional narratives) and doings (micro-practices) of managers in managing business model innovation in the realm of digital servitization. Methodology: The empirical setting is an in-depth single case-study that has undergone various business model transformations over the years by embracing digitalization and sustainability. Data was obtained through semi-structured interviews with managers and secondary sources (i.e. annual reports), employing a subjective and interpretative method with an inherently abductive approach based on the exploratory nature of the study. Findings: First, the study affirms digitalization and sustainability are no magic bullets in reconfiguring BMs, yet they are undeniably crucial drivers when a firm goes through BM transformations toward DS. Undeniably, empirical evidence suggests that digitalization is a key driver and an enabler in BMI, enabling gradual strategic changes in all its elements in a service-centric BM, which further yields sustainable outcomes (i.e. broadening the scope of offerings, carbon emission reduction, and cleaner operations) in the long run. Notably, sustainability is also a driver of BMI but to make it a winning tool, digitalization must be employed simultaneously and be aligned with careful strategy planning and long-term commitment. Second, this interrelationship between digitalization and sustainability in BMI can be managed through intentional narratives (sayings), shared by top management (i.e. strategists). Such narratives can serve as a guiding mechanism in translating to micro-practices (doings) where employees take actions to make significant organizational changes in developing a digitally-servitized, sustainable business model (i.e. outcome-based BM). Contribution: The study contributes different literature streams at the crossroads of different research lines, including digitalization, servitization, sustainability, and BMI, delivering profound theoretical and managerial advancements.