OR I G I N A L AR T I C L E Microfoundations for business model innovation: Exploring the interplay between individuals, practices, and organizational design Rodrigo Rabetino1 | Marko Kohtamäki1 | Nicolai J. Foss2 | Nayeem Rahman3 | Tuomas Huikkola1 1School of Management, University of Vaasa, Vaasa, Finland 2Department of Strategy and Innovation, Copenhagen Business School, Frederiksberg, Denmark 3School of Marketing, University of Vaasa, Vaasa, Finland Correspondence Rodrigo Rabetino, School of Management, University of Vaasa, PO Box 700, 65101 Vaasa, Finland. Email: rodrigo.rabetino@uwasa.fi Funding information Business Finland, Grant/Award Number: 6988/31/2018 Associate Editor:Minu Kumar Abstract This article explores the microfoundational aspects of business model innova- tion (BMI) under conditions of rapid change caused by technological and regu- latory disruptions. Based on empirical analysis of relevant industry incumbents, we address the following research question: How do key microfoundational ele- ments, notably individual behaviors and organizational processes and design, interact to drive business model innovation? Despite its importance, little is known about this question. We explore the microfoundations of BMI via a multiple-case study method. We specifically investigate the interplay between microfoundational components at varying levels (individual, process, interac- tion, and organizational design) in three incumbent companies in Finland's power electricity sector. Theoretically, this article's contributions lie in examin- ing the interaction mechanisms that drive the interplay between microfounda- tional elements at macro and micro levels during the different BMI stages. These mechanisms are critical for shaping interaction processes in BMI and sup- porting value creation and appropriation. For managers, our research provides a microfoundational framework for guiding BMI, including guidelines for critical tasks such as promoting a creative culture, enhancing cross-functional collabo- ration, balancing innovation with operational stability, aligning with industry trends, and preparing the organization for continuous innovation. KEYWORD S business model innovation, digital servitization, dynamic capabilities, microfoundations, strategic change 1 | INTRODUCTION Companies must often reconsider their business models— the logic, architecture, and mechanisms for creating, deliv- ering, and capturing value (Teece, 2010)—to address external disruptions and changing organizational contin- gencies (Geissdoerfer et al., 2022). Such a process often entails innovating the business model (Aspara et al., 2010). Business model innovation (BMI) implies changing the business model's essential elements (Foss & Saebi, 2018), Received: 15 September 2022 Revised: 16 January 2025 Accepted: 27 February 2025 DOI: 10.1111/jpim.12784 This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited. © 2025 The Author(s). Journal of Product Innovation Management published by Wiley Periodicals LLC on behalf of Product Development & Management Association. J Prod Innov Manag. 2025;1–33. wileyonlinelibrary.com/journal/jpim 1 that is, value creation, delivery, and capture activities (Gassmann et al., 2020), and how these elements are linked. Extant research offers valuable insights into the overarching dynamics of BMI (Snihur & Markman, 2023). It provides an understanding of the driving forces of BMI across indus- tries, the organizational responses to evolving environmen- tal conditions, and their consequences for collective outcomes that impact companies' performance (Fjeldstad & Snow, 2018; Foss & Saebi, 2017; Latifi et al., 2021). Thus, the literature has addressed the core issues of BMI concep- tualization, BMI as an organizational change process, BMI as an outcome, and the consequences of BMI (Foss & Saebi, 2017, 2018; Wirtz & Daiser, 2018). However, while it is a prevalent form of innovation and constitutes a key area for future innovation manage- ment research, BMI is still understudied compared to product and process innovation (Spanjol et al., 2024; Spieth et al., 2025). Many matters remain underexplored and poorly understood or in search of cumulative theoreti- cal foundations, clarifications, and operationalization (Foss & Saebi, 2018). Foss and Saebi et al. (2017) identified research gaps concerning external and internal anteced- ents; moderators at the macro, firm, and micro levels; out- comes; and boundary conditions (e.g., fields of application). Notably, BMI is a scholarly domain domi- nated by macrolevel explanations regarding success, per- formance, or competitive advantage and in search of microfoundational accounts (Mancuso et al., 2024; Palmié et al., 2023). An important gap remains in the exploration of the microfoundations of BMI, that is, the interplay between underlying organizational members' agency/ behavior and interactions, organizational processes, and organizational designs (Foss & Saebi, 2017; Ringvold et al., 2023). Ultimately, BMI develops due to human agency, and choices concerning, for example, organiza- tional design and processes are made to facilitate BMI ide- ation and implementation and generally support the new business model. BMI is both a firm- and a system-level activity (Zott & Amit, 2010) but is ultimately driven by human decisions, behaviors, and interactions (Andreini et al., 2022). From a microfoundational perspective, agency is attributed to individuals (Kurtmollaiev, 2020), and the micro level is primary (Contractor et al., 2019). Thus, research on the microfoundations of the BMI pro- cess must examine the firm's governance system and the attributes of employees, managers, and the top manage- ment team (TMT) (Spanjol et al., 2024). Despite the relevance of adopting a microfoundational perspective on BMI, with few recent exceptions, the micro- foundations and BMI research streams have few touch- points (Palmié et al., 2023). Studies address microfoundations of related domains, such as value crea- tion and capture mechanisms (Mancuso et al., 2024), HR practices (Loon et al., 2020), global strategies (Contractor et al., 2019), and dynamic capabilities (Randhawa et al., 2021; Sandberg & Hultberg, 2021; Santa-Maria et al., 2021; Teece, 2007). Nevertheless, only a few studies have consistently adopted the microfoundational perspec- tive in a BMI setting (e.g., Ringvold et al., 2023). This is a significant problem, not only from a research perspective but also from a practical perspective, as the lack of attention to microfoundations means that key aspects of decision support for managers are missing. Such decision support is essential for companies, particularly those within disrupted traditional sectors dominated by deep-rooted and conserva- tive practices (Malmi et al., 2023). Disruptive forces offer opportunities for BMI but require a business logic shift (Volberda et al., 2017). Understanding such a change in business logic requires addressing the interplay of individ- ual agency, organizational processes, and design elements in BMI (Spanjol et al., 2024). A lack of understanding of the underlying microfoundations driving BMI prevents Practitioner points • Critical managerial tasks during business model innovation (BMI) include aligning strat- egy with industry trends, promoting an innova- tive culture, enhancing cross-functional collaboration, balancing innovation with oper- ational stability, and preparing the organiza- tion for continuous innovation and adaptation. • Senior leaders must clearly communicate the strategic vision for scoping BMI and balancing long-term goals with adaptability by promoting autonomy and agile methodologies to create flexible, silo-breaking organizational structures and ensure responsiveness to market opportu- nities while maintaining operational stability. • To accelerate BMI, managers must promote an innovative culture by enhancing communica- tion channels, promoting cross-functional pro- ject teams, setting incentives and rewards, and establishing internal innovation programs that include hiring innovation champions, training employees, and reinforcing behaviors that drive BMI. • Engaging with external stakeholders, such as customers, regulators, and industry forums, provides joint innovation opportunities, fosters co-creation, and accelerates new business model recognition, development, and adoption. 2 JOURNAL OF PRODUCT INNOVATION MANAGEMENT 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License transformative business logic change, potentially overlook- ing or misdirecting any attempts to foster BMI (Ringvold et al., 2023). Consequently, this article addresses the follow- ing research question: How do key microfoundational ele- ments, notably individual behaviors and organizational processes and design, interact to drive BMI? Here, we take “microfoundations” to refer to both the actual phenomena and their theoretical representation. Following the conceptual underpinnings of the microfoundation movement in strategy and organization theory (Felin et al., 2015), our research examines the microfoundations that drive BMI in the context of a multiple-case study aimed at investigating the factors that foster or hinder BMI within three incumbents in Finland's power electricity sector. This sector, once con- servative and rooted in traditional practices, now faces disruptive challenges from digitalization, fluctuating energy prices and costs, regulatory changes, and emerg- ing renewable technologies. Consequently, companies must discover new, often digital, business models. The contributions of this article are twofold. First, we break new ground from a conceptual perspective by investigating the interplay between microfoundational components and outlining interaction mechanisms. Spe- cifically, we develop a process framework that addresses BMI in three phases: opportunity identification, business model development, and integration and implementa- tion. While this sequence is not new per se, the novelty of our contributions lies in examining the mechanisms that drive the interplay between microfoundational elements at different levels during the three stages. These mecha- nisms are critical for shaping interaction processes, such as sensemaking, strategizing, coordination and integra- tion, information processing, learning, and knowledge sharing (Andreini et al., 2022; Felin et al., 2012), and sup- porting value creation and appropriation (Fjeldstad & Snow, 2018; Sjödin et al., 2020). Here, we underscore the crucial role of individuals in fostering BMI, mainly focus- ing on the importance of managerial agency (Helfat & Peteraf, 2015). In doing so, the research adds to the microfoundations of the dynamic capabilities research stream by connecting Teece's (2007) approach and the microfoundation movement (Felin et al., 2015), also shedding some light on the individual-level components (Helfat & Peteraf, 2015). Second, from a managerial view- point, our research may support and guide BMI efforts by offering relatively concrete suggestions for fostering an innovation culture, enhancing cross-functional collabora- tion, balancing innovation with operational stability, aligning with industry trends, and preparing organiza- tions for continuous innovation. The rest of the article is structured as follows. The next section presents the theoretical underpinnings for the research, characterizing BMI from a microfounda- tional perspective as an organizational change process that spans levels in the organization. Section 3 presents the article's multiple-case study methodology and design, describing the research strategy and context, case selection, the data sources and their collection, the data analysis approach, and the trustworthiness and rigor of the analysis and conclusions. Section 4 introduces the main findings, addressing macro- and microlevel relationships in BMI through the micro- foundational lens. Section 5 discusses the big picture, highlighting the links between critical microfounda- tional elements at the micro and macro levels and the situational, action-creation, and transformational mechanisms driving their interplay. Section 6 presents the research's takeaways and implications, including conceptual and practical contributions. Finally, the last section presents the main limitations of this research and suggestions for future research. 2 | BMI AS A MULTILEVEL ORGANIZATIONAL CHANGE PROCESS 2.1 | Representing the BMI process: A microfoundational approach BMI denotes a strategy-driven corporate change (Aspara et al., 2011; Leih et al., 2015) where strategy guides BMI and influences the resulting business models (Casadesus- Masanell & Ricart, 2010; Cortimiglia et al., 2016). BMI may be examined as both a process and a content phe- nomenon, but our primary interest is in the process of adapting the organization to changing organizational and environmental conditions (Saebi, 2015; Saebi et al., 2017; Zott & Amit, 2010). To gain insight into the BMI process as it plays out within companies, we begin by fitting the abstract process of BMI, as described in the extant litera- ture, into a specific framework. This exercise aims not to derive particular predictions but to prepare the ground for our empirical examination of BMI later in this article, where we delve into the finer, still poorly understood mechanisms of BMI. Conceptually, BMI can be represented as a linear multi- stage process, from discovery to ideation and implementa- tion (Gassmann et al., 2020; Morris et al., 2005). In actuality, BMI deviates from linearity (Bucherer et al., 2012), as it involves (bidirectional) interactions between the various phases from discovery to implementation. Additionally, BMI is a highly complex process, not only because of its nonli- nearity but also because it involves interactions between multiple organizational components placed at different RABETINO ET AL. 3 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License analytical levels (e.g., macro and micro) and organizational levels, such as organizational design, organizational rou- tines, individual behaviors, and processes of interactions among individuals within the firm, as well as across the boundaries of the firm (Felin & Foss, 2012; Grigoriou & Rothaermel, 2014; Ringvold et al., 2023). From the micro- foundational viewpoint, grasping the ‘microfoundational challenge’ of BMI implies understanding howmanagers and organizations do what they do (Ringvold et al., 2023). Based on the so-called “Coleman bathtub” (Coleman, 1990: Chpt. 1), three microfoundational components and how they are linked need to be considered (see Figure 1). Note that the bathtub figure may be thought of as a directed acyclic graph (DAG), that is, a graph whose nodes are directionally related without forming a closed loop. Because we are concerned with the BMI process, we think of the bathtub-DAG as time- dimensioned (i.e., the northwestern node may be thought of as the temporally first node). The ultimate goal is to comprehend how microlevel actions and interactions mediate relationships between macrolevel variables. Thus, it is essential to understand both how supra-organizational (e.g., sociopolitical, regula- tory, and competitive landscapes) and organizational attri- butes (e.g., structure and design) facilitate or impede individual and collective action and interaction and how the behavior and interactions of microlevel actors influence organizational processes and lead to emergent and collec- tive outcomes and impact macrolevel entities (Palmié et al., 2023). 2.2 | Macrolevel supra-organizational and organizational components of BMI At the macro level, social facts such as supra- organizational and organizational facts may be repre- sented as antecedents of social outcomes such as BMI (Palmié et al., 2023; Ringvold et al., 2023), as shown by Arrow 4. However, a basic microfoundational claim is that Arrow 4 is merely “shorthand” (as there is no causal- ity at the macrolevel only) for more complex microcausal mechanisms (i.e., arrows 1, 2, and 3). Thus, a complete explanation of BMI calls for addressing the underlying causal sequence of macro–micro or situational (Arrow 1), micro–micro or action-formation (Arrow 2), and micro– macro or transformational (Arrow 3) mechanisms (Felin et al., 2015). 2.3 | Microlevel components as conditions of individual behavior and interactions for BMI At the micro level, individual-level components are affected by situational mechanisms (Arrow 1) and involve microfoundational conditions for individual agency and resulting actions and behavior through action-formation mechanisms (Palmié et al., 2023; Ringvold et al., 2023), as shown by Arrow 2. BMI requires exploration, experimentation, trial and error, and FIGURE 1 Microfoundations: Key components and linking mechanisms. 4 JOURNAL OF PRODUCT INNOVATION MANAGEMENT 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License learning (McGrath, 2010; Sosna et al., 2010) undertaken and shaped by employees and managers. Thus, the atti- tudes, motivations, abilities, emotions, and cognition of employees and managers are critical aspects of the BMI process (Aspara et al., 2011; Frankenberger & Sauer, 2019). Cognitive capabilities (Helfat & Peteraf, 2015) and processes are crucial for sensemaking, overcoming inertia, and coping with biases to address BMI. They drive decision-making, sensing, perception, attention, learning, problem-solving, and information processing (Martins et al., 2015; Roessler et al., 2019). 2.4 | Processual and interactional components of BMI: Routines, processes, and practices BMI requires adjusting existing processes, routines, and practices, and reconfiguring resources and structures (Demil & Lecocq, 2010; Doz & Kosonen, 2010; Teece, 2010). Therefore, dynamic capabilities such as sens- ing and seizing opportunities and integrating and reconfi- guring core competencies are essential for BMI (Leih et al., 2015; Teece, 2018). Individuals' behavior impacts organizational doings through transformational mecha- nisms (Arrow 3), which define how microlevel individual actions and interactions embedded in processes, activities, and practices define macrolevel outcomes, such as BMI (Palmié et al., 2023; Ringvold et al., 2023). Individuals' behaviors and interactions underpin organizational routines, the cornerstone of capabilities, and, in turn, dynamic capabilities (Cautela et al., 2022; Eggers & Kaplan, 2013; Felin et al., 2012). Dynamic man- agerial capabilities (Helfat & Peteraf, 2015) support broader capabilities by influencing organizational rou- tines (Wenzel et al., 2020) and empowering managerial vision and the ability to overcome path dependencies (Helfat et al., 2007; Teece et al., 2016). Moreover, trans- formational mechanisms may also have a crucial impact on transforming organizational culture, notably estab- lishing a creative culture, which is essential during BMI (Bock et al., 2012). Thus far, we have argued that on conceptual grounds, it is possible to represent the BMI process in terms of the Coleman bathtub. We have done so to represent funda- mental mechanisms present in the BMI process in a highly general manner. Although the bathtub framework does involve causal claims (as captured by the arrows connecting the nodes), it is placed on such a high level of generality that it is hardly predictive. However, the framework neatly organizes much of the existing knowl- edge about BMI and helps us identify where we know the least about the BMI process. Thus, it prepares the groundwork for our empirical analysis in the following. 3 | RESEARCH METHODOLOGY In the following sections, we undertake an exploratory multiple-case study to gain insight into how microfoun- dations, encompassing individual characteristics and behaviors, organizational processes and interactions, and structural design components, drive BMI. We aim to highlight different underexplored mechanisms linking microfoundational components at different analytical levels (Contractor et al., 2019; Palmié et al., 2023; Reynolds et al., 2023) to better understand how BMI unfolds. 3.1 | Research strategy and design Following a qualitative research strategy, we conducted an exploratory multiple-case study within the Finnish power electricity sector, an industry known for its histori- cal conservatism. This type of study allows the explora- tion and description of a relevant and complex phenomenon, such as BMI, and its driving forces and mechanisms under rare and difficult-to-replicate condi- tions within specific contexts (Yin, 1994). The method allows for comparative analysis and provides a deeper understanding of the dynamics across different compa- nies (Eisenhardt, 1989; Eisenhardt & Graebner, 2007). While this research focuses on BMI to understand its microfoundations, it also considers the context's role and the sector's inherent characteristics that can support or hinder BMI. During the implementation, this research followed abductive reasoning (Dubois & Gadde, 2002). Based on the underpinnings of the microfoundation movement, the conceptual framework, empirical field- work, and case analysis coevolved. Thus, we moved back and forth between the empirical and conceptual worlds (Dubois & Gadde, 2002) to derive and conceptualize our findings. 3.2 | Research context Historically, the power electricity industry has been highly regulated, and its transformation has been driven by technological changes in electricity generation and transmission (Erlinghagen & Markard, 2012). After years of regulatory changes from the 1990s onward aimed at liberalizing, the progressive introduction of renewable generation technologies and digitization (e.g., self- RABETINO ET AL. 5 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License generation, electricity storage, micro, smart grids, smart meters, and zero-net-energy buildings) recently emerged as the leading disruptors. Connectivity-enabled smarter grids emerge from the digitization of electricity, integrat- ing hardware, sensors, software, and communication/ connectivity (Shomali & Pinkse, 2016). They involve dis- tributed electricity resources and generation, demand aggregation and management, energy efficiency and stor- age, energy communities, microgrids, prosumers, smart metering, and consumption control (Erlinghagen & Markard, 2012; Rodríguez-Molina et al., 2014). Regulatory changes challenge the traditional generation–transmission and distribution–retail model (Nillesen & Pollitt, 2016) of selling units of electricity through centralized generation and grids (Bryant et al., 2018). Electricity has become a commodity, and costs have increased, eroding utility company revenues (Richter, 2013). Conservative incumbents face a growing need to engage in BMI to sense and seize business oppor- tunities (Palmié et al., 2021; Rochlin, 2016). In this con- text, the tremendous volume of information and data generated by recent technological advances based on the Internet of Things (IoT) has fueled BMI (Rahman et al., 2021). Thus, BMI involves complex offerings based on connectivity, sensors, and software-enabled advanced services (Hall & Roelich, 2016). The transition involves a new business logic based on offerings only partially developed upon the commoditized good (i.e., electricity), such as new digitally enabled product-service-software offerings and smart solutions (Kohtamäki et al., 2022) built on remote monitoring and sensors, control systems, and optimizing the operation of smart connected equip- ment. This technology was previously unknown to most industry stakeholders. This is a formerly conservative industry with little exposure to change, which has undergone a triple transi- tion from (1) fossil fuels to renewable energies, (2) centralized generation and transmission to a decentra- lized smart grid based on increasing digitization sup- ported by connectivity (e.g., IoT devices and smart energy metering), and (3) electricity as a commodity to service- led business logic (Rabetino et al., 2017) that involves efficient energy generation and consumption. Conse- quently, new models have emerged that benefit from the ability to measure how consumers use products and sup- port the transition toward more distributed electricity resources. The emerging options range from service- based solutions (e.g., standard power products and ser- vices) to other energy-related services (e.g., life-cycle EV batteries change out, home-related convenience services, or the management of net-metering driven grid sell- back). Depending on utilities' capabilities for information management, service opportunities involve demand and energy management offerings related to energy efficiency and savings. Prominent examples include prosumers, peer-to-peer energy trading, energy-as-a-service, prescription-based energy retailing, demand response programs, and virtual power plans/aggregators (Larrea Basterra & Bilbao Ozamiz, 2020). 3.3 | Data sources, data collection, and case selection This research draws on multiple data sources, including semistructured interviews, document analysis, interac- tion with case companies' managers and other key stake- holders in a research project, and a few master's courses on business model development, where one company acts as a live case. However, semistructured interviews are the primary data source for this research because they balance guided questioning and the flexibility to follow unexpected exploration paths (Creswell & Poth, 2018), which allows for a deep understanding of different TABLE 1 Interviews in the Finnish electricity ecosystem. Interviewee code Organization role Job title Duration (min) E1 Energy services Development Director 101 E2 Fingrid (TSO) Corporate Advisor 67 E3 Fingrid (TSO) Specialist 69 E4 Electricity retailer Head of Unit, Risk Management 57 E5 Electricity retailer Business Director 70 + 81 E6 Industrial actor (BRP) VP, Energy Markets 58 E7 Energy regulator Deputy Director-General 55 E8 Energy industry interest group Expert 61 E9 Aggregator Operations Manager 54 Abbreviations: BRP, balance-responsible party; TSO, transmission system operator. 6 JOURNAL OF PRODUCT INNOVATION MANAGEMENT 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License microfoundational elements that influence BMI. The semistructured interviews were organized in two phases, following Bolton and Hannon (2016). First, we conducted nine semistructured interviews via Zoom (due to the pandemic) for a broader sectoral- level analysis between August 2020 and July 2021 (see Table 1). These interviews mainly aimed to gather perspectives on industry megatrends and the related challenges and opportunities for BMI in Finland's electricity sector. We wanted to understand BMI not as an isolated process but as embedded in an ecosystem of diverse stakeholders that may influence BMI possibilities, including utilities and private companies with different industry roles, regula- tors, and other public or private organizations. We tar- geted persons with a strong understanding of the industry's megatrends and their implications for compa- nies' operations based on our experience from an ongoing three-year research project concerning BMI in the sector and reviewing industry reports and other documents. Some interviewees were representatives of the organiza- tions that participated in the above project, which included a series of face-to-face and online workshops (during the pandemic). A snowball sampling strategy was also used (Patton, 2015), in which interviewees provided the names of more interviewees who were invited for interviews. The second phase of our research was conducted in two waves and consisted of a multiple case study involv- ing 16 interviews with 12 key informants in business development roles from three Finnish electricity retailers, two of whom were part of the above project (see Table 2). Denoted as C1, C2, and C3, the case selection followed purposeful sampling (Patton, 2015) and was based on the following criteria that allowed for a comparative analysis to extract nuanced insights. First, we wanted to study incumbent companies with a scale that enables them to engage in BMI actively but not be dominated by interna- tional shareholders since it is such that they could import new business models from parent companies abroad. Thus, we concentrated on medium-sized companies with some market share, excluding small, local electricity retailers and large companies with enormous economic power and resources (even with participation in or from foreign markets). Second, we focused on companies com- mitted to BMI and effectively offering innovative busi- ness models to the market, regardless of financial and commercial success. Finally, we also accounted for geo- graphical differences, so we chose one case on the west coast, one in the country's center, and one in the east of Finland (thus reflecting the existence of managers and consumers whose preferences may be affected by local traditions and demographics). We interviewed team leaders (e.g., Directors) and at least two more people (typically middle managers) related to BMI in each company. The semistructured interviews with key informants from the three case com- panies were conducted in two rounds between August and December 2021 and between February and October 2023. The interview protocols elicited insights into indi- vidual cognitive processes, organizational routines, and structural elements influencing BMI. In each case, at least two authors participated in the Zoom interviews, which were video and audio recorded and transcribed verbatim to ensure accuracy in the data analysis. Other sources were also used to complement the interviews. First, we reviewed companies' annual reports and press releases for indications of new business models TABLE 2 Interviews in case companies. Case Company type Interviewee code Job title Duration (min) C1 A medium-sized company that operates in the center of Finland M1 Unit manager, Partnership, and innovations 55 M2 Development Manager 57 M3 Product development manager 58 M4 Unit manager, Sales, and Energy Services 61 C2 A medium-sized company that operates in (rural) Eastern Finland M5 Risk Manager 52 M6 Business Director (2) 126 + 54 M7 Development Manager 84 M8 Business Unit Director (3) 84 + 60 + 59 C3 A medium-sized company that operates in Western Finland M9 Managing Director 76 M10 Development Director 66 M11 Development Engineer 64 M12 Development Manager (2) 91 + 63 RABETINO ET AL. 7 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License TABLE 3 Data sources. Data source Type of data Topics included in the data source Use in the analysis Interviews Case study: 16 Semi-structured interviews with case companies' employees (middle managers and Directors) working directly on business development tasks (Table 2) First round (2020–2021) Industry trends and disruptors and their impact on BMI (in each stage) Opportunity recognition (sources, triggers, actors, tensions and coping mechanisms, actions, processes, and practices) Business model identification and development (actors, tensions, coping mechanisms, actions, processes, routines, and practices) Business model implementation (tensions, coping mechanisms, capability gap, organizational alignment and changes, key learnings) Second round (2023) Organizational members' attitudes enable or harm innovation in each BMI stage Individual behaviors and (external/ internal) required interactions in each BMI stage Routinization of formal and informal interactions in the organization in each BMI stage Integration of new routinized practices in the existing operations and the role of old structures and processes during the integration in each BMI stage The company's vision, mission, values, and the market's competitive dynamics, regulations, and technological change influence people's attitudes in each BMI stage As the primary data source, the semi-structured interviews provide an opportunity to gather rich, in- depth information from crucial informants within each case, allowing you to explore individual perspectives, experiences, and insights related to BMI and its microfoundations Trends: 9 Semi-structured interviews with stakeholders from the Finnish power electricity ecosystem (Table 1), including policymakers and regulators Discussions about industry trends (e.g., technological, regulatory, and demand- related) supporting or harming business model innovation in the Finnish power electricity sector. In particular, challenges and opportunities concerning digitalization and the transition toward renewable energy sources, including new business models emerging in the industry Insights were vital in understanding industry megatrends and their impact on BMI in Finland's electricity sector. By gathering diverse stakeholder perspectives, we identified challenges and BMI opportunities, which inform companies' decision- making Project workshops Notes from four workshops involving project consortium members (two co-authors were part of the three-year project) Close interactions with C3 personnel Video records and notes from two C3 managers' presentations and interactions (acting as ‘live case’) in three editions of a master's course on business model development coordinated by one co-author. The same co-author delivered a four- hour (video-recorded) workshop on business models in the electricity sector to the company's key personnel (15 people enrolled) Market trends, company's interests concerning key areas for developing new business models, main barriers, and problems. Potential actions to overcome barriers and problems during the business model innovation process Notes from interactions with managers during courses were used as a tool for triangulation and to support our interpretation of the interview material 8 JOURNAL OF PRODUCT INNOVATION MANAGEMENT 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License and strategic choices and changes. In addition, from 2020 to 2022, C3 acted as a “live case” in three master's courses on business model development taught by one of the coauthors, where students analyzed the situation based on the company manager's presentation and developed innovation proposals for the company. The documents provided a historical context, offering a complete under- standing of each case's evolving landscape of BMI. While company documents were used in preparation for the interviews, notes from these documents, workshops, and interactions with managers during courses were used as tools for triangulation and to support our interpretation of the interview material (see Table 3). 3.4 | Data analysis Following iterative steps, the researchers analyzed the data via content and thematic pattern-matching methods (Yin, 1994) and thematic analysis, as Braun and Clarke (2006) described, to systematically identify the collected data's patterns, themes, and relationships. First, researchers carefully and repeatedly read the materials to familiarize themselves with them and highlight impor- tant aspects of BMI and the related microfoundations. Next, the researchers followed open coding to identify phrases and meaningful concepts via the data analysis software NVivo 14. Following Gibbs (2018), we started with a list of preset codes from earlier relevant studies concerning microfoundations (Chirumalla, 2021; Inigo et al., 2017; Khan et al., 2020; Mezger, 2014; Mousavi et al., 2019; Ringvold et al., 2023; Santa-Maria et al., 2021; Teece, 2007). Data from alternative sources (e.g., notes from workshops and course interactions with managers and companies' reports) were not coded. Nev- ertheless, information was added as notes in NVivo 14 to support our interpretation of the interview material. Later, the initial codes collapsed as the data emerged and were refined in different iterations during the coding process. Codes were subsequently grouped into broader themes, highlighting commonalities and variations across cases. These themes were refined through ongoing dis- cussions and iterative analysis. The primary author con- ducted the coding process individually to ensure the homogeneity of the criteria, and then another coauthor validated the coding. The whole team engaged in discuss- ing any discrepancies. Comparative analysis was con- ducted to identify overarching patterns and differences among the cases, allowing a deeper exploration of the ele- ments contributing to BMI. Following Gioia et al. (2013), we created the data structure, condensing the codes into first-order concepts that describe and preserve inter- viewees' NVivo quotes. The second-order themes appeared based on the authors' thematic analysis and were grouped to form the aggregate dimensions (see Figures A1–A3 in the Annex for further details). 3.5 | Trustworthiness and rigor Several steps were taken to increase the rigor, trustwor- thiness, and robustness of our research and guarantee the validity and reliability of the findings (Yin, 1994). The fol- lowing strategies were jointly implemented to strengthen the research quality and provide a solid foundation for the findings and conclusions. First, the research team ensured methodological transparency and traceability by meticulously recording research procedures (e.g., interview protocols, coding frameworks, and notes/ memos), which provided an audit trail for the validation of findings. One coauthor coded all the material for con- sistency assurance, whereas a second coauthor validated the coding (discrepancies were discussed among team members). Second, four business development team members (including the head) were interviewed at each case company, which allowed for cross-checking of the responses. Moreover, cross-verification of data from multiple sources through triangulation (Yin, 1994) was employed to increase reliability and mitigate the potential for TABLE 3 (Continued) Data source Type of data Topics included in the data source Use in the analysis Archival data Press releases, media articles, annual reports, other public documents, and companies' public presentations Market trends, business development actions, and future areas for business model innovation Documents were used in preparation for the interviews with each company, and the notes from these documents have also provided insightful information for triangulation and to support our interpretation of the interview material RABETINO ET AL. 9 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License singular interpretations or bias. Third, following an itera- tive feedback process, prolonged engagement enables trustful relationships, facilitating access to sensitive infor- mation and allowing participant checking (Lincoln & Guba, 1985) to review and validate the accuracy of our interpretations and findings and ensure that interpreta- tions align with the participants' perspectives. Misinter- pretations and discrepancies were addressed and discussed within the team and with the interviewee. Fourth, peer debriefing sessions and peer review/external validation involving multidisciplinary discussions with researchers with business and technical backgrounds not directly engaged in this research (including two confer- ence presentations) helped us assess the consistency of interpretations and insights. 4 | EXAMINING MACRO- AND MICROLEVEL RELATIONSHIPS IN BMI THROUGH THE MICROFOUNDATIONAL LENS In our three cases, BMI follows a generic three-stage pro- cess involving (1) initiation and ideation, including opportunity screening and generation and preliminary ideas with some informal preassessment or prioritization (Stage 1); (2) integration and development, involving idea assessment and specification, design, and piloting (Stage 2); and (3) implementation and integration, including reconfiguration of organizational resources and optimiza- tion and alignment of assets (Stage 3). Next, we present the key findings regarding the microfoundations of BMI in each stage of the innovation process, acknowledging them based on different levels from macro to micro: (1) supra- or meta-organizational facts, (2) structural and design components (Level 3), (3) processual and interac- tional components (Level 2), and (4) individual-level com- ponents (Level 1). Following Pratt's suggestions (Pratt, 2008, 2009), we provide the power quotes in the text, whereas the proof quotes are supplementary mate- rials available upon request. 4.1 | Supra-organizational conditions and BMI Supra-organizational conditions, that is, those elements in the organization's institutional/competitive environ- ment that influence individual and organizational behav- iors, emerged in the data as vital for triggering and driving BMI. Notably, new disruptive technology (renew- ables and digitalization), regulation, and market dynam- ics have heavily changed the nature of competition, particularly in retail electricity. Thus, companies have moved from a stable environment that only called for fine-tuning business strategies and where digital technol- ogy aided efficiency and security to one in which inter- connected and often contradictory elements now appear concerning companies' external triggers and challenges. While the technology push (e.g., integration of renew- ables and digitalization) triggers the need to search for new opportunities in Stage 1, companies must simulta- neously address the uncertainty regarding what technol- ogy will dominate and become the industry standard. Thus, technological uncertainty makes evaluating poten- tial opportunities challenging in Stage 1 and may delay the business model specification and design efforts in Stage 2. While an ambiguous emerging regulation linked to renewables drives Stage 1, regulation ambiguity/delay (or the lack of regulation) makes estimating potential profitability difficult and hinders the creation of new business models in Stage 2. Clarifying potential forthcom- ing changes in legislation and their impact on companies' operations is critical when moving toward Stage 3 since it influences the market's operation. “… the next regulatory model will be imple- mented in 2024. So then, we aim at what we get to the regulatory model, the idea that this OPEX is also considered the same way as CAPEX today. So, companies can, for exam- ple, use flexibility or other services to have a choice, not only build more cables, which is the case today.” (E3) In addition, competitive pressures have increased from the industry's inside (competitors and customer empowerment) and outside (newcomers). These competi- tive pressures drive technology and BMI while facing moves from competitors and new entrants. “Competition could be anything; it does not need to be anything of what we just dis- cussed because that is now, but yes, from now on, it could be Google. Then, the ques- tion is, do we compete with Google or find a spot where we cooperate with Google and complement Google in some way.” (M12) Competitive pressures have also shaped the industry's evolution, pushing companies to look for new opportuni- ties in Stage 1, a trend reinforced by commoditization (where it is increasingly difficult to differentiate offer- ings). Thus, competitive pressure has pushed companies to design digitally enabled offerings comprising a range of new services. 10 JOURNAL OF PRODUCT INNOVATION MANAGEMENT 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License “… all consumption data from every single electricity meter and household will be trans- ferred to a huge data hub, and then it should be open data. So, if you are Company 1 [name removed] and want to get some clients of Company 2 [name removed], you can take the data from the data hub with the cus- tomers' permission and look at their con- sumption profile. Okay, we can give them the best option. It is just the streamline and opens the market more, making competitive bids easier.” (M10) The process is often characterized by isomorphism, in which competitors tend to specify similar solutions in Stage 2. “…the development ideas and products we have can also be found among competition. Of course, we do our tweaks and optimiza- tion variants of them too, you know, maxi- mize the benefits and so on or functionalities, but, so far, what has been handled by my team has mainly been new things for the company, but not necessarily new in the industry.” (M12) Finally, customer needs and interests act as another key BMI trigger. In a context described by increasing cus- tomer empowerment, there is an (a priori latent) demand-pull for new technology-enabled services requir- ing new business models. Thus, companies must explore and invest to avoid being left behind, acknowledging that technology will eventually become dominant due to the push of regulation. Hence, customer needs are a crucial driver, and when looking for opportunities in Stage 1, the attention of developers may be directed based on con- crete customer demands. However, tensions may emerge in Stage 2 since consumers may remain uninterested in many segments, notably households, due to insufficient incentives and motivation to buy those services since the benefits are unclear or the costs offset the perceived advantages. “So, raising the people's interest is the first problem; even if it is for free, it does not cost you anything to raise the people's interest and to make people understand what this is about and how important it is in the big pic- ture. It is hard to get people to understand, let alone if they would have to pay 1,000 euros plus the monthly fee.” (E5) 4.2 | Organizational influence on BMI: Structural and design components Organizational structural and design components (nota- bly strategy and structure) seem to act as both anteced- ents (enabling or disabling) and outcomes of BMI (when BMI is seen as an outcome, that is, a new BM configura- tion embedding design aspects). Our evidence reveals the influence in all three stages, although the power and scope of such influence vary in each case (see Table A1 in the Annex). The impact of organizational design's influence on idea unfolding and embodiment appears to be twofold in Stage 1. First, organizational strategy emerges as BMI's main internal driver following the trends in the sector (with customer demand being one strong situational mechanism, as discussed above). “These are strategic choices. We have digiti- zation, security of supply, interest groups, intelligent network, and partner ecosystem. This is all part of the strategy work we did, and we do that almost every year nowadays. These main topics did not change and did not change this year, for example. However, with these subtopics, because the focus chan- ged differently, for example, this new genera- tion of smart meters and how to benefit from those was before just a rollout project. That was our focus.” (M2) In particular, strategy as a steering and scoping tool becomes a directive force, a powerful situational mecha- nism that spills its impact downward, affecting people's behaviors at Level 1 and, in turn, organizational processes at Level 2. Thus, strategy drives attention and influences the search direction and scope. “… whenever we come up with a new idea, then we compare it to our strategy. What does our strategy say? Does it fit into the strategy? If yes, and if we should do it, and if it is crystal clear that this is good, then we start. If not, then we start with a feasibility study. What is the market? Does it make any sense?” (M10) Second, organizational structure design follows com- pany strategy and affects the degree of organizational flexibility/inertia, influencing BMI. Flatter structures and smaller teams increase flexibility by supporting lateral information flows and the combination of knowledge and innovation. However, the inherited corporate culture can create inertia if it prevents the change in traditional RABETINO ET AL. 11 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License structures initially designed for a once-conservative industry where BMI was historically uncommon. Inertia may particularly affect people who have been in the com- pany (or the industry) for a long time. “… the biggest tensions came from the mother company. You know, a lot of our grand ideas were more or less shot down, you know, we had the balloon flying, and then bang was shut down from the head office. If I say that is cruel, yeah, but that is our culture.” (M6) Under these circumstances, the TMT, notably the CEO, must guide emerging BMI plans (if they can over- come inertia forces or if they were recruited from other industries). They are vital in promoting a collaborative atmosphere, encouraging and supporting employees' exploration and experiential learning, and providing opportunities to try ideas that a priori seem less promis- ing or relevant (e.g., budgeting). Changing organizational structures may require new employees to fill previously non-existent roles. While the new organizational struc- tures will influence the direction and scope of the search, new recruits may act as both an action formation mecha- nism and a transformational mechanism (at Levels 1 and 2), especially when new innovative people come into developmental roles with fresh ideas and practices. The role of strategy as a guideline and situational mechanism remains relevant to fostering an innovation culture and achieving cultural readiness in Stage 2, whereas strategic alignment becomes critical and calls for three core actions. First, defining strategies and actions to fit industry trends is necessary, and a continuous strategy work process is needed. In the considered company cases, strategy results from a strategic process with increasingly shorter cycles and more periodical recaps than earlier and calls for a systemic approach (e.g., following road- maps). As stated above, new business models develop from strategy choices, which must be re-evaluated peri- odically to ensure they fit trends and adopt corrective measures before they are too late. The case companies undertake routine strategic work every 2 or 3 years to establish thematic priorities. “…in our company, we renew our strategy in three-year cycles. We overlook the whole business and see them try to see the trends, possibilities, and threats, which we can now see as the basis of our strategy. We look at the whole business every three years, which is how it works.” (M5) However, the industry's dynamics require that key stakeholders hold several checkpoints and recap a year, which will shape processual and interactional compo- nents at Level 2 since this task is typically accomplished through workshops or periodic meetings. These gather- ings are commonly utilized for sensemaking, where ideas are selected and prioritized in Stage 1 and then shaped and further developed in Stage 2. Second, developing a joint commitment to a shared vision and agenda starts with strategic choices, which require clear and formal communication and participa- tory processes. Guiding artifacts, such as roadmaps, facili- tate this process. Third, organizational culture is crucial in promoting an innovative mindset and enabling indi- viduals to engage in trial-and-error and risk-taking. Indeed, evidence highlights the interaction between orga- nizational culture and individual mindsets and points to culture as a mechanism for making a difference at Level 2. “… but this kind of innovation culture, if you wanted to have it the fullest, you have this fail fast, but fail forward-thinking, so maybe in a way, we could have like one or two things that are really outside the box and go and see what is there.” (M1) Thus, organizational culture and its changes emerge as other situational mechanisms influencing individual mindsets (at Level 1), which, in turn, in our case compa- nies, typically act as action creation and transformational mechanisms leading to new practices that ultimately redefine organizational processes at Level 2. Accordingly, fostering an innovation mindset in these traditional com- panies working in a conservative industry is vital for seiz- ing new business models. In this context, providing opportunities for experimentation is essential. The TMT, notably the CEO, serves as a mediator and arbiter for emerging conflicts regarding ideas for BMI, observing strategic alignment. Finally, Stage 3 pertains to the organizational rede- sign required to integrate the emerging business models and encompasses three key components. First, it involves restructuring the organization and interlinking its func- tions. Thus, action concerning ensuring the interaction among organizational functions through flexible linking structures and appointing responsible people for new functions and tasks (e.g., creating new structures and processes and establishing channels for cross-unit inter- actions) is needed. It may also involve restructuring and “separate vs. integrate” decisions to achieve cultural readiness. 12 JOURNAL OF PRODUCT INNOVATION MANAGEMENT 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License “Some IT companies I know have separated the new innovative businesses from the exist- ing ones by doing it in a separate company. That is the one way to do it so you can have a different company culture. I also see a risk in acquiring a smaller company, a very inno- vative company, to a very conservative com- pany like you, which will kill their innovation in weeks.” (M9) Second, reconfiguring and leveraging resources involves adapting or changing existing systems, adopting new tech- nologies, and retraining personnel. Staff recruitment may constitute another mechanism (both situational and trans- formational) that contributes to changing people's mindsets at the individual level and achieving cultural readiness. Resource reconfiguration also means acquiring boundary- spanning resources through integrating complementary competencies and partnership management (e.g., establishing andmanaging alliances and partnerships). “We might need to purchase a new company with new resources, or some person must be retrained to cope with the reality.” (M12) “They are all related so that you would need for the new business; you would need the resources for the personal resources and the money and everything.” (M9) Third, the transformation needs the TMT's commit- ment and leadership to achieve change by enacting the vision, setting priorities, and accepting contradictions. The TMT may also become a source of inertia if it has been in the industry for a long time. Indeed, our cases show that leadership implies evangelizing tactics to spread beliefs and convert nonbelievers, collaborating tactics, and even involving collegial authority to remove obstacles. Leaders, especially CEOs, are crucial as change evangelists since the literature has shown that strategy- making is emotional and that cognitively sophisticated solutions are essential to balance efficiency and flexibility in dynamic environments. This implies the management team's ability to make quick and brave choices, avoiding being caught up in politics. “…we must accept that this situation is changing, and then we as leaders and man- agers must take care that the energy of the people is looking forward to the next steps and how we can utilize this possibility. How can we avoid those threats or those negative issues? How can we use this possibility? How can we make some new revenue or some- thing from this situation?” (M4) 4.3 | Processual and interactional components of BMI Distinctive elements can be identified for each stage by examining BMI processes, routines, practices, and inter- actions. The interviews revealed that while the organiza- tional strategy provides guidance, opportunity sensing and ideation initially involve different rehearsing idea- tion practices, many of which become transformational mechanisms. These practices are essential for opportu- nity screening, fostering interaction among corporate members, and initial attempts to aggregate and formal- ize praxis. First, concerning opportunity screening, idea- tion interactions and processes are informal at the beginning of Stage 1. However, as progress is made toward Stage 2, the level of formalization seems to increase. Key processes entail market intelligence- related organizational activities such as market monitor- ing and technology scanning, involving the interaction and follow-up of customer needs and benchmarking competitors and trends from the sector and adjacent industries. “We have looked into the different compa- nies, competition, and even different busi- ness areas, and that is, of course, where the strategy is to provide services not just for energy, such as electricity or district heating, but also for some related services. Of course, that also comes from other industries.” (M9) Second, opportunity recognition and initial ideation may occur at all organizational levels. Thus, companies must implement idea-creation processes across the orga- nization to foster open interactions, which must be con- crete but remain informal and open and be supported with specific instruments (e.g., customer interaction, dis- cussion forums, idea assessment, and tracking). Compa- nies generally utilize various idea-gathering practices to interact with and discuss potentially innovative ideas, often through workshops or messenger apps (e.g., WhatsApp) and an intranet (e.g., Teams) to follow up and keep them alive. Third, actual work still occurs in projects that demand formal higher-level processes guid- ing the steady systematization of informal practices. In our cases, they take the form of a project management model (milestone gates, flowchart, or similar) in its initial stages for aggregation and praxis formalization, which serves as a basis for decision-making concerning idea RABETINO ET AL. 13 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License preassessment and prioritization (with critical decisions made at the end of each milestone evaluation). “So, there is a path to how the ideas are passed forward, but you know it is not a machine where you put one at one end, you put ideas in, and at the other, you get inno- vations. You know it is more, I would say, rather a hippie style.” (M6) “… but systematic in the big picture might be missing like we do not have an annual struc- ture to sit down with tools and think about what is happening in the world in different businesses.” (M8) Next, Stage 2 systematizes the definition and business model development by routinizing value creation based on specific processes and interactions. First, the inter- viewees agreed on prioritizing ideas that must be treated as projects for detailed planning, considering the big pic- ture, following clear implementation rules, and fully for- malizing the earlier milestone gate model. This stage includes defining the value proposition for customers and the organization (involving multiple stakeholders) and setting the project scope. These tasks imply under- standing developmental requirements, structuring decision-making, and defining further assessment rules and KPIs at the core of the BMI process. “…once we have found an idea which we want to develop and look at, we have a gate milestone model which we then use for the idea's management or portfolio project man- agement. So obviously, Gates Zero concludes that whatever we want to develop cannot be handled as a task. It must follow the project gate model, and then we have, you know, G1, G2, G3, G4, and then the post-project evaluation gate. We follow these different steps and prepare project charter plan sched- ules. Make the proper gate decisions to go ahead with the next one. So, I would say that is the governing model; once we have identi- fied an idea, we want to work with.” (M12) As innovation will not be free of organizational tensions in rapidly changing contexts, encouraging, engaging in, and managing conflict appear essential when finding innovative business models that fit the strategy. Indeed, allowing some degree of tension seems to be ideal for moving the process forward. “… it is a kind of cultural conflict – and you know sometimes it creates, it really does cre- ate frustration, but on the other hand,it also kind of strengthens it blues us together.” (M6) Our findings suggest that managers must enable a psychologically safe environment for mature and open discussions, team up with people with different degrees of risk aversion, and use alternative problem-solving techniques (e.g., learning cafes). Second, the stage contains critical practices and inter- actions for structuring business model generation based on adopting a customer-centric approach. It also calls for cross-functional exchanges and interactions with external stakeholders (e.g., consultants and IT providers) and design thinking tools for collective sensemaking, brain- storming, and development (e.g., PowerPoint, Miro, or business model canvas). “Of course, we have used the business model canvas and had some consultants helping us. So yeah, I think it is about the organiza- tion's maturity, and when it increases, we can use most of those tools ourselves. There is no need for another outside consultant.” (M4) Third, activities and interactions for learning and scal- ing opportunities by prototyping and piloting are keys. “First, we make prototypes and look for what works. Based on that, we create MVP for our service. So, it is about collecting user infor- mation, structuring it, making a prototype, and testing it. This is our customer-based innovation model.” (M3) This step can include joint R&D projects, coopetition, and partnership with tech companies. The three cases involve testing ideas with customers to define the busi- ness model. Thus, developing innovative technologies with high costs and uncertain financial outcomes pushes midsized companies to seek technology partners and cooperate with competitors in technology development (coopetition) as a coping mechanism to balance risk and reward. Consequently, ecosystem-related interactions are essential for innovation. Notably, regulations and norms (as supra- organizational determinants) heavily influence market operations and, in turn, impact the potential for creating novel business models at this stage. Finally, Stage 3 involves creating readiness for agile and consistent business model integration and implies 14 JOURNAL OF PRODUCT INNOVATION MANAGEMENT 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License different critical elements. First, there is a need to bal- ance stability and change by implementing agile working and ambidextrous management and looking for continu- ous improvement. Second, two key actions to motivate people and push things forward are empowering respon- sible people based on team leadership and establishing clear roles and responsibilities. Third, as the interviewees highlighted, promoting organizational entrenchment based on building team spirit and an open and engaging atmosphere to redirect people's energy forward is critical. The alignment of corporate culture is crucial to moving these innovation processes forward because of inertia and change resistance. The interviewees emphasized the importance of internal cooperation, which was encour- aged by an open and knowledge-sharing culture. Infor- mants also pointed toward internal communication, openness, and information flow as practices to create team spirit, generate employee enthusiasm and satisfac- tion, and cope with resistance. “… it is about internal communication, and so the situation picture. In the company, we have one situation picture, share it, and talk about it. First, we must understand what is happening and accept that this situation is changing. Then we, as leaders and man- agers, must take care that the people's energy is looking forward to the next steps and how we can utilize this possibility.” (M4) 4.4 | Individual-level components: Agency and behavior in BMI Individual agency and behaviors are central in all BMI stages and drive action-formation mechanisms, defining how things are done at Level 2. In Stage 1, a pro- active approach to opportunity recognition is critical for idea sensing and involves different elements. First, an entrepreneurial mindset is essential for a proactive approach involving attitudes and behaviors such as long- term vision, risk acceptance, and out-of-the-box thinking. Second, a positive attitude is critical in neutralizing iner- tia from pessimistic thinking and promoting openness and a collaborative atmosphere for new opportunity iden- tification. It includes behaviors such as enthusiasm and seeing threats as opportunities. Third, experience-based intuition is a means of idea perception. While idea sug- gestions come from many sources, employees play a piv- otal role in perceiving which of them hold potential as genuine opportunities, highlighting the need to encour- age and stimulate employees' exploration and experien- tial learning and to try ideas that a priori seem less promising or relevant. Early involvement and assessment of emerging adjacent technologies and markets are criti- cal themes. However, it seems imperative to take the ini- tiative, explore, and learn from emerging things with unwritten rules, and even shape their development, care- fully considering threats and opportunities for BMI when possible. Our evidence highlights the importance of intui- tion based on prior experience in perceiving opportunities. “We lean more towards intuition. I cannot say that we have extensively trained our team in this regard. Let's say we go by gut feeling. We start with a superficial internet search to see if there is something deeper to investigate. If that looks interesting, then the intensity increases, and we reach out to someone who can help us go through it more thoroughly. But it is not formalized in any way.” (M8) Consequently, different cognition-based action- formation mechanisms are fundamental. Experience seems critical at all stages, particularly at the first two stages. Thus, new employees with diverse experiences enlighten opportunity recognition, acting as a means of mindset changes and sources of new ideas. Instead, three crucial situational mechanisms determine the focus of attention during the idea-sensing process: industry trends, company strategy, and customers' needs and desires. In this context, while employees act as initiators, middle managers serve as buffers, communicating and advancing ideas while looking for buy-in from the TMT. In Stage 2, successfully developing new business models depends on finding individuals with an innova- tive personal approach to business model crafting and development. This approach includes different individual characteristics. First, a creative mindset includes skills such as out-of-the-box thinking, innovation-minded indi- viduals, and market orientation. Second, a willingness to take risks involves stamina and stubbornness and enables individuals to challenge the status quo, defy organiza- tional norms, and carry out tasks without authorization when needed (sometimes jeopardizing old businesses). Third, such an approach is grounded in cognitive pro- cesses centered on experiential self-reflection under- pinned by learning, involving portfolio management and analogical thinking. Some simple organizational rules grounded in experience are also noted (e.g., minimum expected returns for whatever investment). Analogical reasoning is crucial. Netflix and Spotify were names men- tioned repeatedly. However, inspiration comes from the banking, telecommunications, and security industries. RABETINO ET AL. 15 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License Middle managers act as networkers, connecting exter- nal and internal stakeholders, promoting interactions, and intervening in challenging situations at the team level. “In some phases of the development, some- times we fear that now we have some chal- lenges, and we cannot solve them. Well, let's take a few steps back and rethink it. That is what I have learned.” (M11) In Stage 3, a growth-oriented approach (e.g., step-by- step with strategic thinking) and a business mindset (e.g., accepting challenges and engaging in responsible development and problem solving) are essential for implementing and integrating emerging business models. As change agents, middle managers are crucial in pro- moting organizational growth. “…we have to be in a way more realistic and recognize the causalities and the impacts between different development lines.” (M1) “I think my way is that let's just start doing and go step by step and by conscious evolu- tion. Maybe not revolution, but evolution and every day.” (M4) “So, looking at the big picture, not just sub- optimizing.” (M10) Table A1 in the Annex summarizes the key findings (including a detailed description of the key mechanisms). Complementarily, Table A2 shows each company's cases prevalence of the framework's aspects (e.g., second-order themes and aggregate dimensions). 5 | DISCUSSION 5.1 | The BMI process Scholars have called for a better understanding of the intricacies of BMI (Foss & Saebi, 2017, 2018; Spanjol et al., 2024). In particular, innovation management scholars have recently highlighted the need to scrutinize the BMI process, examining its microfoundational aspects (Spanjol et al., 2024). In response to this call, we conducted a multiple case study using the Finnish power electricity sector as a research context. On this basis, we explore and discuss key drivers in each BMI stage (e.g., technology, customer insights, and legislation) and the role of organizational mindsets and culture, core practices, processes, and middle and top managers. In doing so, we examine the interaction mechanisms that drive the interplay between microfoundational elements at macro and micro levels along the three BMI stages (opportunity recognition/ideation, BM specification and design, and integration/implementation). In our case companies, the innovation process typi- cally resulted in business model adaptation and, only sometimes, in a fully fledged BMI (e.g., business models that are new for the industry). Local search leads to nar- row market-specific innovations (e.g., selling solar panels and apps for consumption monitoring). However, suc- cessful and more radical BMI require searching for and experimenting with broadening domain-expanding busi- ness logics involving complex technologies and business models with uncertain performance outcomes (Pisano, 2017). Our evidence suggests that companies seeking more radical BMI must move beyond local searches to respond to a changing environment. Recog- nizing the critical importance of the microfoundations of BMI may help companies better address the challenges of the BMI process. As we discuss next, our research identifies key microfoundational components and pro- cesses at different levels, including processes and prac- tices that activate internal and external stakeholders and organizational design elements. 5.2 | The microfoundations of BMI This research investigates how microfoundations for BMI, encompassing organizational design and processes as well as individual characteristics and behaviors, inter- act to drive BMI in industry incumbents. In doing so, we explore the primary mechanisms steering the interplay of granular, often overlooked, microfoundational elements determining BMI. Inspired by microfoundational insights into analytical levels (Felin et al., 2015), the discussion is organized into three levels and, following the BMI pro- cess literature (Gassmann et al., 2020; Morris et al., 2005), three analytical stages. Next, we discuss the generalities and specificities of the key findings presented in Figure 2 from top to bottom, emphasizing each stage's microfoundational components and the mechanisms defining their interplay between the macro and micro levels. First, supra-organizational conditions drive BMI at the macro level, particularly technology, regulation, and competition trends. Our findings resemble those of previ- ous studies. For instance, Saebi et al. (2017) conclude that external actors, new technologies, and regulatory and market forces are among the main BMI drivers. Thus, the environment is often a BMI driver (Spanjol et al., 2024) 16 JOURNAL OF PRODUCT INNOVATION MANAGEMENT 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License F IG U R E 2 M ic ro fo un da ti on s of B M I. RABETINO ET AL. 17 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License or antecedent (Witschel et al., 2022). Nevertheless, there are nuances and particularities. For instance, technology, regulation, and competition are vital determinants during Stages 1 and 2, whereas legislation becomes crucial for market operations, steering transformative efforts in Stage 3. Moreover, the role of customers as BMI drivers also has a paradoxical impact across stages. While poten- tial latent demand seems to push BMI during Stage 1, realizing it into actual sales is challenging because diffi- culties in building business cases eventually lead to unin- terested customers during the piloting in Stage 2. As earlier (conceptual or review) studies concluded, organizational strategy emerges as another situational mechanism (Andreini et al., 2022; Teece, 2007), and our findings add novel and empirical specificity to this insight. Existing research identifies a company's vision as a trigger and enabler of opportunity identification (Ringvold et al., 2023; Sniukas, 2020). Our findings sug- gest that the company's strategy is a strong situational mechanism in Stage 1 (Teece, 2007). However, it remains such a mechanism in Stage 2 since business models develop from strategy choices (Casadesus-Masanell & Ricart, 2010), and business model development requires strategizing and strategic alignment from all organiza- tional members. This research also confirms that organizational design at the macro level (hard and soft aspects, e.g., structure, culture, and leadership) sets conditions for individual behavior at the micro level. Indeed, recent studies suggest that organizational design elements act as situational mechanisms (Foss & Saebi, 2015; Leih et al., 2015), becoming antecedents (enabling or harming), moderators (driving relationships influencing new BM specifica- tions), or subjects to change during BMI (Foss & Saebi, 2015). While flatter organizational structures foster innova- tive behaviors in Stages 1 and 2, possibly at the cost of speed and execution, organization design changes define agility and speed of change in Stage 3. In this context, efforts are needed to achieve cultural readiness to support innovative behaviors and creative problem solving in Stages 1 and 2, respectively, and to break resistance to change in Stage 3 (e.g., aligning the whole organization to implement the transformation). Our conclusions align with earlier studies suggesting that organizational culture impacts strategic flexibility (Bock et al., 2012). As mecha- nisms, our findings point to setting incentives to promote desirable individual behaviors (as illustrated and dis- cussed below) and guaranteeing behavioral change in each stage, which is vital to measuring BMI success. The role of the TMT/CEO and middle management, including leadership, communication, and control methods, is critical in doing so in all BMI stages but presents some particularities and nuances. For example, while TMT leadership support was essential for promot- ing a creative culture in Stage 1, the reliance on tradi- tional organizational structures and routines created inertia (e.g., silos and poor communication) and hindered opportunity recognition due to path dependency. Primar- ily, the CEO acts as a guide, pivotal in setting the direc- tion, breaking inertia, promoting entrepreneurial behavior in an open environment, and balancing trade- offs through clear corporate objectives (Ringvold et al., 2023). Instead, middle managers act as buffers, advancing ideas and seeking the TMT's buy-in. This research suggests that when stability and risk aversion were historically prioritized, a balanced approach that combines strategic oversight, top-down leadership, and bottom-up innovation is essential to foster BMI in Stage 2. Such an approach calls for setting the proper mecha- nisms to avoid top-down directives clashing with bottom- up innovation efforts. Thus, TMT members, notably the CEO, act as mediators and arbiters of potential organiza- tional conflicts, whereas middle managers are networkers connecting internal and external stakeholders, promoting interactions, and mediating team disagreements. In Stage 3, as previous research concluded (Ringvold et al., 2023), our findings suggest that this transformation requires top-management commitment and leadership for change, which involves breaking with inertial forces rooted in conservative firms from a traditional sector. Thus, TMTs/CEOs act as evangelists, and communica- tion is critical and becomes a key mechanism affecting people's mindsets at the micro level. In this context, mid- dle managers are crucial as change agents, promoting cross-unit interactions and fostering business growth. Second, given the conditions for individual behavior, action formation mechanisms translate individual behav- ior and actions into collective interactions at the micro level, where particular attitudes and mindsets are needed at each stage. In Stage 1, employees are initiators, requir- ing particular mindsets for guiding behaviors and interac- tions (Ringvold et al., 2023). Nevertheless, while individual actors are pivotal in initiating and driving BMI by recognizing and developing novel ideas, they must be ready to challenge existing practices and norms. Some employees must act as innovation champions, take initia- tive, and interact with colleagues to promote new ideas. Often, the interactions begin informally, and many of these practices are legitimized over time. Indeed, our data suggest that opportunity recognition and ideation draw primarily on spontaneous initiatives steered by more entrepreneurial and initiative-taking members driven by intuition-based experience. Thus, new recruits may help, act as mindset setters, and bring potential innovation champions. 18 JOURNAL OF PRODUCT INNOVATION MANAGEMENT 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License Additionally, during the developmental stage, peo- ple's cognition and behaviors (e.g., creative mindset, risk- taking, and self-reflection) are crucial to business model crafting and development and become action-formation mechanisms that impact individual interactions (Helfat & Peteraf, 2015; Lenka et al., 2018). Instead, orga- nizational transformation demands individuals with growth-oriented and business-oriented mindsets for new business model integration and implementation, as these cognitive characteristics act as action-formation mecha- nisms and impact interactions, managerial practices, and processes (Ott & Eisenhardt, 2020). Indeed, cultivating a growth and business-minded attitude with a positive out- look seems critical in creating organizational readiness for an agile and consistent integration process, which also needs empowering, responsible, and accountable individuals. In this context, middle managers are crucial as change agents, promoting cross-unit interactions and fostering business growth. Third, BMI as a collective organizational outcome emerges from aggregating individual actions through transformational mechanisms impacting organizational processes and practices and determining BMI as the cumulative effect during the three BMI stages at the level involving processual and interactional components. As shown in Figure 2, these components in our company cases include, in each BMI stage, individual characteris- tics (e.g., affective, cognitive, and behavioral skills and expertise), leadership styles that lead to different roles for middle and top managers, and organizational processes underpinning sensing, seizing, and reconfiguring capabil- ities. For example, processes concerning sensing and sen- semaking, learning and knowledge sharing, strategizing, value creation, coordination, and integration matter greatly to BMI, as suggested by prior studies (Andreini et al., 2022; Teece, 2007) and as we clarify and exemplify below. Once routinized, these microfoundational aspects result in dynamic capabilities over time (Helfat & Peteraf, 2015; Teece, 2007; Zollo & Winter, 2002). Indeed, the conventional dynamic capability microfoundations of sensing, seizing, and reconfiguring (Teece, 2010, 2018) closely resemble the three BMI stages we identify. Our findings also support Smith et al.'s (2010) conclusion that routines must be in place to address paradoxical demands such as exploration and exploitation, learning and perfor- mance, and stability and agility. However, particularities and nuances exist across BMI stages. For instance, the processual and interactional com- ponents include processes for rehearsing ideation practices for opportunity screening at Stage 1. Our findings show that interactions often begin informally (being almost praxis), and many of these practices are legitimized over time. Nevertheless, early efforts must seek to aggregate, systematize, and formalize practices (e.g., creating periodi- cal forums) since sensing may occur at all organizational levels (Teece & Linden, 2017). Success depends on enabling cross-organizational, open, and transparent inter- actions in this context. In Stage 2, practices become routin- ized as ideas progress from assessment to planning and become formal projects. As concluded in earlier studies, value-creation processes are critical (Andreini et al., 2022) and call for steering methodologies, such as project man- agement methods (Sniukas, 2020). Our evidence suggests that process systematization in our cases was typically per- formed through aggregation based on higher-level formal processes, often following standard project management step-by-step models that treat BMI as product or service development. Moreover, our findings also support earlier studies' conclusions, suggesting that collective sensemaking and organizational learning are among the five crucial capabil- ities of BMI (Loon et al., 2020; Ott & Eisenhardt, 2020). In our cases, structuring business model development involves particular artifacts (e.g., using the business model canvas) to aid in brainstorming and sensemaking (Bapuji et al., 2012; Laasch, 2019). Moreover, learning and knowl- edge shaping from iteration with different stakeholders through piloting and prototyping are also critical pro- cesses, as suggested by earlier studies (Andreini et al., 2022; Geissdoerfer et al., 2022; Ringvold et al., 2023). These processes include coopetition and cocreation among different internal and external stakeholders. Finally, processes for creating readiness for agile and consistent business model integration are at the core of Stage 3, which requires agile and ambidextrous change management practices and control mechanisms (e.g., feedback loops and monitoring) to ensure resource synergies, capability leveraging, integration, and smooth operational alignment and adoption of new business models. Additionally, processes for adapting, changing, and integrating systems and reconfiguring resources are needed and must be internally or externally sourced. Indeed, this transformation calls for establishing roles and empowering responsible and accountable individuals. Adequate information channels to secure information flows are crucial to ensuring successful transformation. 6 | IMPLICATIONS Research into the microfoundations of BMI remains limited and scattered (Palmié et al., 2023; Ringvold et al., 2023; Spanjol et al., 2024). Additionally, most such research rests on the dynamic capabilities framework of Teece (2007), but other relevant microfoundations of BMI are not captured by this framework. In this RABETINO ET AL. 19 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License research, we examined BMI processes in several estab- lished companies in a traditional industry to gain insight into the microfoundations of BMI, which play out across different levels within an organization and across different stages. While not contradicting existing research, our findings add new insights and nuances to understanding BMI. 6.1 | Implications for research Our research contributes primarily to BMI research (Foss & Saebi, 2017, 2018) and to two related research streams (Kurtmollaiev, 2020): the microfounda- tion movement in strategy and organization theory (Abell et al., 2008; Felin et al., 2012; Felin et al., 2015) and the microfoundations of dynamic capabilities (Schilke et al., 2018; Teece, 2007). First, our research provides evidence on microfoun- dations at different levels, complementing existing research on the microfoundations of BMI and expanding the still limited empirical evidence (Palmié et al., 2023). Most existing research has focused primarily on micro- foundations with dynamic capabilities. There is less evi- dence regarding the framework proposed by the microfoundations movement in strategy and organiza- tion theory. Research remains uncommon beyond con- ceptual works or reviews (Schilke et al., 2018), with only a few empirical exceptions (Mancuso et al., 2024; Ringvold et al., 2023; Sniukas, 2020; Zahoor et al., 2024). To date, Sniukas (2020) and, in particular, Ringvold et al. (2023) represent the only sustained attempts to understand the microfoundations of BMI following the microfoundation movement in strategy and organiza- tion theory (Felin et al., 2012; Felin et al., 2015). Our research complements earlier studies by approaching the phenomenon in a different context, that is, tradi- tional companies in a conservative industry. This research extends earlier studies, notably offering detailed evidence concerning the interplay between microfoundational components at various levels. In doing so, it outlines the interactions between microfoun- dations and often discusses unexplored action-forming (e.g., mindset and experience), transformational bottom- up emergence (e.g., interactions and practices), and situ- ational mechanisms (e.g., strategy and customer require- ments). Moreover, this article presents evidence about the role of middle managers in each stage of BMI beyond the crucial role of initiators and forerunners (Ott & Eisenhardt, 2020; Ringvold et al., 2023). Second, the research adds to the microfoundations of the dynamic capabilities research stream by connecting Teece's (2007) approach and the microfoundation movement (Felin et al., 2015). We have argued that each of the BMI stages we have identified draws on one of the clusters of dynamic capabilities proposed by Teece (2007) (sensing in Stage 1, seizing in Stage 2, and reconfiguring in Stage 3), providing evidence for these microfounda- tions and related practices in a new context (which mate- rializes at the second and third levels in Figure 2). Moreover, our research also moves toward the microle- vel, shedding some light on the critical individual-level components proposed by Helfat and Peteraf (2015) when discussing dynamic managerial capabilities. Specifically, our research illustrates how situational mechanisms (e.g., industry trends, firm strategy, and customer demands) focus attention and set limits for new opportu- nities searching in Stage 1. Additionally, our findings highlight the crucial role of self-reflection guided by experience in Stage 2 concerning problem solving and reasoning. Finally, as suggested by earlier studies (e.g., Ringvold et al., 2023), communication also plays a pivotal role in our findings as a tool to provide feedback, enact the vision, and promote organizational commit- ment and entrenchment in Stage 3. 6.2 | Managerial implications Our research also offers a framework that can guide the understanding of the above requirements and may com- plement other tools already used during BMI (Gassmann et al., 2020; Osterwalder & Pigneur, 2010). Findings may help managers answer questions such as “What does BMI mean regarding strategy work?,” “What practices should be required in BMI?,” and “How should our HR profiles, organizational processes, and practices be altered to find dynamic consistency according to our strategy?” Next, we offer practical implications and direc- tions for managers to find these answers and promote and implement BMI. Individuals at all organizational levels, including front-line employees and middle and top managers, are instrumental in initiating, developing, and implementing innovative ideas and driving BMI. Senior leaders must foster a creative culture in their workforce, eliminating rigid business cases (Ringvold et al., 2023) and building a secure environment where innovation is encouraged by setting the right incentives. Mechanisms, such as estab- lishing internal innovation or idea incubation programs to provide employees with the resources and autonomy to explore new opportunities, are needed to promote cre- ative behavior. For example, developing adequate HR practices and incentives is crucial because BMI requires individuals with specific mindsets and teams with certain characteristics (Loon et al., 2020). 20 JOURNAL OF PRODUCT INNOVATION MANAGEMENT 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License Understanding the individuals' profiles that drive BMI is vital for their management to develop them. In addition to hiring innovation champions, training focused on inno- vative thinking and management can provide employees with skills to challenge the status quo and think outside the box. Of course, upskilling and reskilling activities may be supported by suitable recognition and reward systems that formally acknowledge contributions to BMI to incen- tivize and motivate people to imitate such behavior. Individual behavior and interactions define key pro- cesses for BMI, such as sensemaking, value creation, learn- ing and knowledge sharing, and strategizing processes (Andreini et al., 2022). Understanding the processes and practices that can lead to BMI is vital for management to implement them. Strategizing is essential, as a steering mechanism and flexible structures support the implementa- tion of key processes. Interaction and collective processes are critical across BMI stages. Managers must break down organizational silos, eliminate communication barriers, go beyond prevailing informal practices, establish communica- tion channels and forums to support open communication and knowledge sharing, and promote cross-functional col- laboration. Cross-organizational project teams can also facilitate idea exchange and business model development activities. Empowering employees on these teams to work autonomously by endowing them with some budget and decision-making freedom seems to be a critical success fac- tor. Managers trying to innovate must promote the adop- tion of agile methodologies, which allow quick prototyping, testing, and refining of new business models. Thus, organi- zations can respond faster to market or regulatory changes. Senior managers must frame and adequately commu- nicate a clear long-term vision and agenda that aligns with the organization's strategic objectives while ensur- ing that all employees understand their position in BMI's ongoing strategic activities. Leaders are vital to stimulat- ing innovation and cooperation, and effective leadership styles can foster an environment where creative processes thrive. Managers must adopt flexible organizational structures that allow agility and responsiveness to new opportunities while preserving controls to balance inno- vation with operational stability. Radical business model development may require dedicated resources, differenti- ated governance structures, and longer development and implementation schedules. Additionally, it could involve new specialized cross-unit innovation teams, even ad hoc teams, which should be free to pursue disruptive ideas without being constrained by existing processes and bud- gets. Finally, BMI should be seen as an ongoing process and continuously promoted through participation in innovation ecosystems that serve as a means for new ideas, technologies, and business model propagation and provide a relatively safe environment that enables rapid testing and scaling up. Thus, managers must look for joint innovation opportunities, including collaboration and partnerships supporting the company's strategic goals. Indeed, proactively engaging with external stake- holders may ensure the viability of new business models. Examples include co-creation with customers, communi- cation with regulators, and participation in industry forums to support BMI. Moreover, not only does past research support our implications, but in complex transi- tions, Aagaard and Vanhaverbeke (2024) suggest that BMI requires a cross-disciplinary and multi-stakeholder approach to open innovation in somewhat open ecosystems. 7 | LIMITATIONS AND FUTURE RESEARCH This research draws on a qualitative multiple-case study. A key limitation is that we considered cases where the companies successfully found new business models, such that our findings may suffer from survivorship bias. Studying companies that fail can yield insightful findings. As with every case study, this study does not seek statisti- cal generalization but is used as a methodological instru- ment for generating theory (Yin, 1994). Nevertheless, we argue that some highly cautious contingent generaliza- tion is possible (Pratt, 2009). Thus, our findings may be relevant to other firms transitioning to BMI, especially traditional manufacturers disrupted by digitalization. Our findings and analysis represent potentially falsifi- able insight into the microfoundations of BMI, and a quantitative approach is, therefore, applicable in princi- ple. Thus, our research may suggest new hypotheses about the microfoundational underpinning of BMI, which we would like to test in future research. One potential problem is that datasets that allow measure- ment of the BMI construct are few, and measurement scales are virtually nonexistent (see Saebi et al., 2019). Given this problem of missing data infrastructure, another way forward is to continue conducting small-N BMI research (Foss, 2021). This would entail researching the microfoundation dimensions of BMI in industries other than the one we considered here. Such research would also allow for more fine-grained and illuminating comparisons across cases and findings concerning such issues as the relative importance of different microfoun- dational drivers of BMI and how exactly microfounda- tional factors are causally involved in BMI across different firms and industries. Finally, we followed a positivist approach when planning and implementing the case study (Eisenhardt & Graebner, 2007; Yin, 1994), which calls for RABETINO ET AL. 21 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License decontextualizing our findings (Welch et al., 2011). Nev- ertheless, we recognize that the context is essential in our research and may even be part of the explanation. Moreover, microfoundational explanations rely on a lay- ered social ontology to derive mechanistic explanations (Foss, 2021). Consequently, approaching the microfoun- dations of BMI using a critical realist lens is an option for future studies. ACKNOWLEDGMENTS The authors declare that the following funding was received in support of the research: the FLEXIMAR Pro- ject (novel marketplace for energy flexibility) through Business Finland under Grant 6988/31/2018 and partly by the Finnish companies. CONFLICT OF INTEREST STATEMENT The authors declare no conflicts of interest. DATA AVAILABILITY STATEMENT The data that support the findings of this study are avail- able from the corresponding author upon request. ETHICS STATEMENT The authors have read and agreed to the Committee on Publication Ethics (COPE) international standards for authors. ORCID Rodrigo Rabetino https://orcid.org/0000-0001-8567- 2559 Marko Kohtamäki https://orcid.org/0000-0003-2094- 7974 Nicolai J. 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Zott, Christoph, and Raphael Amit. 2010. “Business Model Design: An Activity System Perspective.” Long Range Planning 43(2–3): 216–226. RABETINO ET AL. 25 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License AUTHOR BIOGRAPHIES Rodrigo Rabetino is a Professor of Strategic Manage- ment at the School of Management at the University of Vaasa. His current research activities concern servi- tization and product-service systems, business model innovation, and strategy as practice. Marko Kohtamäki is a Professor of Strategy, a direc- tor of the “Strategic Business Development” (SBD) research group at the University of Vaasa, and a Visit- ing Professor at Luleå University of Technology (Sweden). Prof. Kohtamäki is interested in digital ser- vitization, product-service-software innovation, orga- nizational change, strategic practices, and strategic alliances. Nicolai J. Foss is a Professor of Strategy at the Copenhagen Business School. His widely published and cited research deals with the intersections of strategy, entrepreneurship and organizational theory. Nayeem Rahman is an energy transition researcher at the University of Vaasa. He focuses on energy markets, specializing in demand-side flexibility, energy platforms, and business models. Tuomas Huikkola is an Associate Professor at the School of Management at the University of Vaasa. His research focuses on studying incumbent firm's strate- gic practices and routines that facilitate firms' strate- gic renewal through sustainable business model innovation. How to cite this article: Rabetino, Rodrigo, Marko Kohtamäki, Nicolai J. Foss, Nayeem Rahman, and Tuomas Huikkola. 2025. “Microfoundations for Business Model Innovation: Exploring the Interplay between Individuals, Practices, and Organizational Design.” Journal of Product Innovation Management 1–33. https://doi. org/10.1111/jpim.12784 26 JOURNAL OF PRODUCT INNOVATION MANAGEMENT 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License APPENDIX A FIGURE A1 Data structure. Individual-level components (Level 1) in each BMI stage. RABETINO ET AL. 27 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License FIGURE A2 Data structure. Processual and interactional components (Level 2) in each BMI stage. 28 JOURNAL OF PRODUCT INNOVATION MANAGEMENT 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License FIGURE A3 Data structure. Structural and design components (Level 3) in each BMI stage. RABETINO ET AL. 29 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License TABLE A1 Microfoundations of BMI: A summary of the key findings. Level/stage Stage 1 Stage 2 Stage 3 Structural and design-level components (Level 3) Key elements 1. Organizational strategy as driver and filter is a steering and scoping instrument 2. Organizational structure and culture are strong innovation determinants defining flexibility and inertia, influencing individuals' perceptual filtering and cognitive framing 3. TMT is essential to promoting individual innovative behavior via incentive setting Main mechanisms 1. Industry trends, strategy, and customers' needs drive individuals' attention and influence the search direction and scope at Level 1 2. Flatter and culturally ready organizations foster an innovative attitude. The CEO (and TMT) acts as a guide and compass to create an innovative culture and support experiential learning Key elements 1. Formulating a strategy to fit industry trends is a guideline for developing new business models 2. Developing a commitment to the vision and strategic alignment, where participation and communication are essential 3. Fostering an innovative culture to promote trial-and-error and risk-taking-driven behaviors and providing opportunities for exploration and experimentation Main mechanisms 1. Legislation, technology, and customer needs are scoping mechanisms for business model development 2. Strategy acts as a steering and scoping mechanism. It sets the shared vision and the developmental agenda and actions 3. Organizational culture influences individuals' mindsets (at Level 1), determining innovative behaviors and creative problem-solving 4. TMT serves as a mediator and arbiter for emerging conflicts regarding ideas for BMI, observing strategic alignment 5. Distributing clear and formal communication Key elements 1. Restructuring the organization and interlinking its functions to ensure organizational interactions 2. Reconfiguring and leveraging resources 3. TMT's commitment and leadership to achieving change by enacting the vision, setting priorities, and accepting contradictions Main mechanisms 1. Prevailing organizational culture (e.g., cultural readiness) and structure define agility and speed to respond to changes 2. Recruiting new staff is often needed to resource new tasks and positions and will impact behaviors and interactions at Level 1 and drive cultural shifts 3. The CEO (and TMT) act as change evangelists (crafting change narratives); communication is critical and affects people's mindset (at Level 1) Processual and Interactional- level components (Level 2) Key elements 1. Opportunity screening to benchmark competitors and adjacent industries and formal customer interactions to observe their needs 2. Fostering interactions for idea generation 3. Aggregation and formalization of praxis Main mechanisms 1. Employing formal and (mainly) informal market intelligence activities, practices, data/analytics, and tools for opportunity recognition to identify and interpret environmental signals (trends and patterns) and develop new ideas 2. Organizing open cross-organization channels and periodical gatherings for ideation and sensemaking, where Key elements 1. Treating ideas as projects for detailed execution planning includes idea prioritization and following clear implementation rules 2. Structuring business model generation to routinize business model development based on a customer-centric approach 3. Learning and seeking scaling opportunities Main mechanisms 1. Using project portfolio management tools (gate models, KPIs, milestones, roles, and project teams) and decision- making frameworks, including artifacts, such as roadmaps and business model canvases, to Key elements 1. Balance stability and change 2. Empowering responsible people based on team leadership 3. Promoting organizational entrenchment by building team spirit and an open, engaging atmosphere to redirect people's energy. Openness and knowledge-sharing culture, internal communication, and information-flowing practices are needed to create team spirit, generate employee enthusiasm and satisfaction, and cope with resistance Main mechanisms 1. Implement agile working and ambidextrous (change) management practices and 30 JOURNAL OF PRODUCT INNOVATION MANAGEMENT 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License TABLE A1 (Continued) Level/stage Stage 1 Stage 2 Stage 3 ideas are pre-selected, assessed, and prioritized 3. Introducing stages models for idea aggregation and praxis systematization facilitate the business modeling process 2. Organizing cross-functional participatory periodical gatherings and channels with external facilitators and design- thinking tools for collective sensemaking and brainstorming, where people collectively interpret opportunities and conditions (and their business implications) and, consequently, ideas are twisted and further developed 3. Participating in joint R&D projects, coopetition, and partnering with tech companies for ecosystem building, learning (process improvement), complementing capabilities, and scaling opportunities via testing, prototyping, and piloting (including some business model experimentation and co-creation with users) control mechanisms, and seek continuous improvement (e.g., feedback loops and monitoring) to ensure resource synergies, capability leveraging and integration, and the smooth operational alignment and adoption of new business models 2. Adapting or changing existing systems, adopting new technologies, and retraining personnel. The task also involves acquiring resources through integrating complementary competencies and partnership management 3. Establishing clear roles and responsibilities 4. Providing adequate internal communication, promoting openness and information flow to create team spirit, generate employee enthusiasm and satisfaction, and cope with resistance at Level 1 Individual- level components (Level 1) Key elements 1. Entrepreneurial mindset, risk acceptance, and long-term view 2. A positive attitude and proactive approach are needed to neutralize inertia from pessimistic thinking and promote openness and a collaborative atmosphere for new opportunity identification 3. Experience-based intuition acts as an idea perception enabler based on experience, intuition, and perception of business potential. Experiential learning and networking in different forums and groups (e.g., fairs or specific industry events) and with various stakeholders are essential Main mechanisms 1. Promoting intrapreneurship, exploration, experiential learning, open openness, and a collaborative atmosphere 2. Employees act as initiators (particularly innovation champions). Middle managers are a buffer, communicating and advancing ideas while seeking the TMT's buy-in. New employees come with fresh opportunity-sensing practices and business ideas Key elements 1. Innovative individuals with creative mindsets, strong market orientation, and out-of-the-box thinking are crucial behaviors and characteristics 2. A willingness to take risks involves stamina and stubbornness and enables individuals to challenge the status quo, defy organizational norms, and carry on tasks without authorization when needed (sometimes jeopardizing old businesses) 3. Self-reflection is guided by experience, following analogical thinking, and some simple rules where individual learning is crucial Main mechanisms 1. Promoting risk-taking and market orientation behaviors based on clear incentives to influence business model development 2. Middle managers act as networkers, connecting external and internal stakeholders, promoting interactions, and Key elements 1. A growth-oriented approach (e.g., step-by-step with strategic thinking) is a crucial attitude 2. Business mindset, acceptance of challenges, and engaging in responsible and positive problem-solving Main mechanisms 1. Using incentives to guarantee behavioral change (e.g., accepting and adapting to new roles and processes) and commitment to change to ensure the effectiveness of the reconfiguring efforts and adoption of new models 2. As change agents or enablers, middle managers are crucial in promoting organizational growth (Continues) RABETINO ET AL. 31 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License TABLE A2 Prevalence of the framework's aspects by company case. Dimension Elements Case 1 (M1– M4) Case 2 (M5– M8) Case 3 (M9– M12) Individual-level components (Level 1) A proactive approach to opportunity recognition and idea sensing (Stage 1) Experience-based intuition as an idea perception means + +++ ++ Entrepreneurial mindset +++ +++ +++ Positive behavior +++ +++ +++ Innovative approach to business model crafting and development (Stage 2) Creative mindset + + +++ Risk-taking approach + +++ ++ Self-reflection guided by experience + +++ +++ Growth-oriented approach for BM implementation and integration (Stage 3) Growth mindset +++ + +++ Positive business mindset ++ ++ +++ Processual and interactional components (Leve 2) Rehearsing ideation practices (Stage 1) Opportunity screening + +++ +++ Aggregating and formalizing praxis + +++ + Fostering open interactions for idea generation +++ +++ +++ Routinizing value creation in BMI (Stage 2) Treating ideas as projects for detailed planning +++ +++ +++ Structuring business model generation +++ +++ +++ Learning by interacting and piloting ++ + ++ Creating readiness for agile and consistent BM integration (Stage 3) Empowering responsible people for change + + +++ Promoting organizational entrenchment + +++ ++ Balancing stability and agile change + + ++ Structural and design components (Level Organizational design's influence on idea unfolding and embodiment (Stage 1) Organizational strategy as an attention driver and filter ++ +++ +++ Organizational structure and culture as innovation determinants + + ++ Strategic Alignment for BMI (Stage 2) Building commitment to vision and agenda + + + Defining strategies and actions to fit industry trends +++ +++ +++ Fostering an innovation mindset + +++ ++ TABLE A1 (Continued) Level/stage Stage 1 Stage 2 Stage 3 3. Internal communication, effectively using IT tools to follow up and keep opportunity-related ideas alive mediating in conflictive situations at the team level 32 JOURNAL OF PRODUCT INNOVATION MANAGEMENT 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License TABLE A2 (Continued) Dimension Elements Case 1 (M1– M4) Case 2 (M5– M8) Case 3 (M9– M12) Organizational redesign for BM integration (Stage 3) Restructuring the organization and linking organizational functions ++ + +++ Reconfiguring and leveraging resources +++ + +++ Top management commitment and leadership for change + ++ +++ RABETINO ET AL. 33 15405885, 0, Downloaded from https://onlinelibrary.wiley.com/doi/10.1111/jpim.12784 by University Of Vaasa, Wiley Online Library on [29/04/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License