Journal of Business Models (2024), Vol. 12, No. 1, pp.

83-101

Simulation-Based Business Model Innovation Process for

Business-to-Business Contexts
Christoph Ksouri-Gerwien1,* and Jens Poeppelbuss2

Abstract:
Innovating service-oriented business models in industrial business-to-business (B2B) contexts pres-
ents a complex and risky endeavor. Recently, System Dynamics (SD) modelling and simulation has
been suggested as a tool for prototyping and experimentation in business model innovation (BMI).
However, knowledge of how to best utilise SD in BMI is scarce. Therefore, our research objective was
to develop a new simulation-based approach for BMI, particularly for B2B contexts. We conducted
a two-and-a-half-year action design research study with two industrial firms, Alpha (start-up) and
Beta (incumbent firm). We developed and simulated new service-oriented business models as part
of the two BMI teams. Our study resulted in the simulation-based BMI process containing phases,
tools/techniques, and goals. Our findings demonstrate that SD, as a dynamic and visual modelling
language, facilitates collaborative and cognitive activities during BMI, such as communication, de-
sign, evaluation, and decision-making.

Introduction (BMI), i.e., developing and implementing a new BM

The business model (BM) of a firm describes the ra- or modifying an existing one (Foss and Saebi, 2017),
tionale of how it creates, delivers and captures value represents a challenging task for practitioners as
(Massa and Tucci, 2013; Osterwalder and Pigneur, it incorporates a certain level of complexity, un-
2010). The process of business model innovation certainty and risk (Taran et al., 2019). The industrial

Keywords: Business model simulation, System Dynamics, Servitization

Please cite this paper as: Ksouri-Gerwien, C., and Poeppelbuss, J. (2024), Simulation-Based Business Model Innovation Process for
Business-to-Business Contexts, Journal of Business Models, Vol. 12, No. 1, pp. 83-101

Chair for Industrial Sales and Service Engineering, Ruhr-Universität Bochum, Germany
1-2

*Corresponding author: [email protected]

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business-to-business (B2B) context, confronted by Early-phase BM prototypes aim to conceptualise

servitization as an industry-defining trend, consti- and communicate the BM’s core logic and elements
tutes a particularly challenging environment for BMI (Szopinski et al., 2022). They primarily rely on static
endeavours for various reasons. First, servitization modelling languages, such as canvases (Athanaso-
leads companies to transform their value propo- poulou and Reuver, 2020; Szopinski et al., 2022), and
sitions from products to customer solutions, i.e., qualitative evaluation methods, e.g., expert judg-
integrated and customised bundles of products, ment, multi-criteria or scenario analysis (Gilsing et
services and software (Kohtamäki et al., 2019). In- al., 2022). While these tools are generally valuable
tegrating these different components into bundles for designing new BMs, they are often inadequate for
raises the complexity of value propositions and comparing and deciding between different BM alter-
corresponding value creation structures. Second, natives (Athanasopoulou and Reuver, 2020). As the
firms need to partner with other firms in ecosys- BMI process proceeds toward implementation, BM
tems to purposefully integrate their competencies evaluation methods tend to become rather quanti-
and capabilities into such solutions (Kohtamäki et tatively oriented to enhance decision-making, with
al., 2019; Zott and Amit, 2010). Such partnerships spreadsheet-based business cases and cost-bene-
involve inter-organisational coordinative efforts fit calculations being common (Gilsing et al., 2022).
and risks. Third, customer relationships are less fo-
cussed on one-time investments and transfers of Beyond such standard calculations, Gilsing et al.
ownership but increasingly availability-, benefit-, or (2022) also see the potential for dynamic systems
outcome-oriented, e.g., considering pay-per-use or analysis and simulation analysis to support BM de-
subscription BMs, aiming at promoting long-term cision-making. In this regard, System Dynamics (SD)
participation and revenue sharing (Bock et al., 2023). is gaining growing attention in BM and BMI research.
This raises the complexity of economically sustain- SD is a computational modelling and simulation ap-
able value capture in the long term. proach to analyse complex systems and enhance
decision-making (Sterman, 2000). Since BMs can be
The academic literature provides several frame- considered as systems (Zott and Amit, 2010), SD has
works and tools to guide and support the BMI pro- already been used in recent years to model the inher-
cess (Athanasopoulou and Reuver, 2020; Wirtz and ent structures of BMs and simulate the outcomes in
Daiser, 2018). Following Wirtz and Daiser (2018), the various future scenarios (e.g., Abdelkafi and Täu-
BMI process contains the following main phases: (1.) scher, 2016; Cosenz et al., 2020; Moellers et al., 2019
analysis, (2.) ideation, (3.) feasibility, (4.) prototyp- to name a few). In these studies, SD has been illus-
ing, (5.) decision-making, (6.) implementation and trated as a suitable tool to quantitatively evaluate BMs
(7.) sustainability. The phases of prototyping and in different practical cases, e.g., Patagonia (Cosenz
decision-making are of utmost importance for firms et al., 2020), though without appreciably relating it
in particular, as the subsequent implementation of to the BMI context. Moellers et al. (2019) specifically
a new BM usually requires significant investments analyse the impact of SD on a manager’s cognition in
(Frankenberger et al., 2013). However, knowledge different BMI phases. However, as they focus on the
about BM prototyping and decision-making is still car manufacturer BMW with the firm-specific BMI
scarce (Wirtz and Daiser, 2018), and scholars call for process, the applicability to other practical contexts
new tools and methods to facilitate these activities remains limited (Moellers et al., 2019). Moreover, none
(Athanasopoulou and Reuver, 2020; Fruhwirth et al., of the previous studies is dedicated to the B2B con-
2020). text with its particularities. Against this background,
our research objective is to develop a new simulation-
McGrath (2010) suggests approaching BMI experi- based BMI process for B2B contexts that systemati-
mentally by prototyping and evaluating new BMs cally integrates SD modelling and simulation.
before the decision for a significant investment,
i.e., the BM implementation, is made. For this pur- To develop the simulation-based BMI process, we
pose, the literature provides several BMI tools. followed the action design research (ADR) method

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(Sein et al., 2011). We conducted this study with two this purpose, we integrated processual knowledge
German firms, anonymised as Alpha and Beta, who from BMI (Frankenberger et al., 2013; Gassmann et
faced the challenge of BMI in the B2B context. Al- al., 2020; Osterwalder and Pigneur, 2010; Wirtz and
pha is a start-up (founded in 2017) offering a solution Daiser, 2018), Design Thinking (IDEO, 2012; Lewrick
comprised of hardware, software, and service com- et al., 2018) and SD modelling (Martinez-Moyano and
ponents to analyse manual work processes, mainly Richardson, 2013; Sterman, 2000). The generic BMI
in the logistics sector. Beta is a corporate power process of Wirtz and Daiser (2018) provided the basic
plant manufacturer seeking to innovate its strategic process structure, which we modified and adapted
spare parts business. Both firms intended to trans- with method elements from Design Thinking and SD
form their prior transactional and product-centric modelling (Henderson-Sellers et al., 2014). Design
BMs towards service-centric and relationship-based Thinking helped to infuse a user-centred and experi-
BMs, which we refer to as service-oriented BMs in mental approach into the process, and SD model-
the following. Concerning the market implementa- ling provided the primary approach for quantitative
tion of such a new service-oriented BM, both firms modelling and simulation. Primarily, we augmented
anticipated significant investments and business the generic BMI process with two new phases to ac-
risks, which they wanted to mitigate. In both cases, commodate quantitative evaluation through SD sim-
new BMs were successfully developed and evaluated ulation before implementation, i.e., the definition
using SD modelling and simulation before imple- phase and the quantitative simulation phase (plus a
mentation. We aggregated the learnings from both preparatory team-alignment phase).
cases into the simulation-based BMI process.
We used the simulation-based BMI process in the two
firms, first in Alpha and then in Beta, to further de-
velop the initial design and evaluate it. In each case,
Methodological approach we participated in the firm’s BMI team, developed
With this research, we pursued the dual mission of a new service-oriented BM, and prototyped it with
solving real-world problems – developing new ser- SD software (we used Silico). In the SD software, we
vice-oriented BMs for Alpha and Beta and evaluating conducted simulation experiments to evaluate the
them before market implementation – and simul- new BM and support decision-making regarding the
taneously contributing to the academic knowledge subsequent implementation (Table 1). We continu-
base by integrating SD simulation as a quantita- ously journaled and reflected on the research process
tive BM evaluation approach into the BMI process. to capture findings and evidence relevant to further
Therefore, we conducted a two-and-a-half-year ADR developing and evaluating the simulation-based BMI
project with Alpha and Beta from Q1 2020 until Q3 process (Sein et al., 2011). Due to the COVID-19 pan-
2022. ADR has already proven useful in achieving demic, most research activities, e.g., interviews,
similar objectives in BMI research, e.g., developing a workshops, and modelling, were conducted remotely
process framework for circular BMs (Santa-Maria et using Zoom and MS Teams for communication and
al., 2022) or business model development tools (Ebel Miro for collaboration.
et al., 2016).
Lastly, we evaluated the effectiveness and utility of
To guide the effective development of the simulation- the simulation-based BMI process by conducting
based BMI process, we first analysed the practical surveys and interviews with both firms’ BMI teams
and theoretical problems and aggregated them into (Sein et al., 2011). The evaluations took place after
the underlying “class of problems” (Sein et al., 2011, p. executing the new BMI phases that we included in
40), i.e., utilising SD to support quantitative evalua- the simulation-based BMI process. We evaluated the
tion and decision-making in B2B BMI. Thereafter, we definition phase with the BMI team of Alpha and the
built a “theory-ingrained” (Sein et al., 2011, p. 40) ini- quantitative simulation phase with the BMI team of
tial design of the simulation-based BMI process. For Beta.

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Table 1.

BMI phases and activities Operationalisation at Alpha Operationalisation at Beta

Phase 1: Preparation

Align BMI team with adequate BMI team: BMI core-team:

competencies, knowledge and Two researchers with BMI and SD Two researchers with BMI and SD
authority competencies. competencies.
Three founders with business Two functional experts with techni-
knowledge and authority. cal and business knowledge.
Two additional employees with BMI extended team:
specific knowledge in sales and One decision-maker, one market-
marketing. ing, and one probabilistic expert.

Equip team with adequate Cooperation agreement with Cooperation agreement with firm-
resources external funding defining action internal funding defining action
plan and responsibilities. plan and responsibilities.

Phase 2: Analysis

Analyse current business Numerous interviews with the Numerous interviews with BMI
model & business ecosystem founders, among others in the team, among others in the project
project initiation stage. initiation stage.

Analyse customer problems, Four internal interviews with Eight internal interviews with Beta’s
needs and causes sales people and project manag- employees, e.g., from engineer-
ers of Alpha to prepare inquiry ing, sales and finance, to elaborate
with customers. customer jobs, pains and gains.

Six laddering interviews with

customers of different customer
segments focussing on customer
jobs, pains and gains.

Table 1: BMI phases and activities operationalised in the cases of Alpha and Beta

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Table 1.

BMI phases and activities Operationalisation at Alpha Operationalisation at Beta

Phase 3: Definition

Define and prioritise customer Two half-day workshops* with Discussions with BMI team to de-
segments, define goals for BMI BMI team to consolidate the data fine customer segments, to decide
in customer segments, decide for for one focal segment and to define
one focal customer segment and two pilot use-cases for the new
define user stories. service-oriented BM.

Formulate dynamic hypothesis One half-day Workshop* with BMI One half-day Workshop* with BMI
of the problem team following the group-model- team formulating the dynamic hy-
building approach to define and pothesis and map the business eco-
map problem-variables and their system with the E3-value modelling
root causes. notation.

Map business ecosystem One half-day Workshop* with BMI

team to map the business eco-
system with the E3-value model-
ling notation.

Phase 4: Ideation

Generate new BM ideas One half-day Workshop* with BMI The idea of the new service-
team to generate new ideas to oriented BM already existed in the
enhance the value proposition mental models of Beta’s BMI team
following the 635 method (Le- members. Through discussions, we
wrick et al., 2018). conceptualised the idea, improving
One half-day Workshop* with BMI problem-solution-fit.
team to generate ideas for a new
revenue model based on BM pat-
terns (Gassmann et al., 2020).

Conceptualise ideas roughly, One half-day Workshop* with BMI

focussing on customer needs team to consolidate and priori-
and value proposition fit tise the generated ideas.

Table 1: BMI phases and activities operationalised in the cases of Alpha and Beta (Continued)

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Table 1.

BMI phases and activities Operationalisation at Alpha Operationalisation at Beta

Phase 5: Qualitative conceptualisation

Develop conceptual proto- Event** with approximately 20 Five interviews with customers
types, test prototypes and customers where poster proto- to test the new BM idea and get
gather qualitative data types were presented stating the feedback.
ideas and corresponding ques-
tions.
Three interviews with customers
to test the ideas and get feed-
back.

Develop comprehensive BM One half-day Workshop* with BMI Discussions of the BMI team to con-
concepts, decide whether to team to consolidate gathered solidate gathered data and decide
pursue or drop BM concepts data and prioritise ideas to pur- to pursue to simulation stage.
sue to simulation stage.

Phase 6: Quantitative simulation

Develop SD simulation mod- Numerous modelling sessions*** Numerous modelling sessions***

els, test model structure and over a three-month period with over a two-month period with the
behaviour the founders to model Alpha’s and BMI team to model Beta’s and the
the key customers’ value creation key customers’ value creation and
and capture structures. capture structures.

Gather quantitative data Five interviews with founders and Three interviews with Beta’s em-
employees from marketing and ployees, e.g., from marketing and
sales to discuss model structure probabilistics, to gather additional
and parameters. data.
Three interviews with customers One half-day Workshop** with BMI
to gather quantitative value crea- team to discuss model structure
tion and capture parameters with and parameters.
regard to Alpha’s value proposi-
tion.

Table 1: BMI phases and activities operationalised in the cases of Alpha and Beta (Continued)

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Table 1.

BMI phases and activities Operationalisation at Alpha Operationalisation at Beta

Conduct simulation experi- Two 2h-workshops* with BMI One 3h-workshop* with BMI team
ments, concretise BM concept team where simulation results where simulation results are
and make final decision are presented, discussed and presented, discussed and further
further experiments are con- experiments are conducted.
ducted. The decision-maker made the deci-
The founders made the decision sion to proceed the final BM to the
to proceed the final BM to the implementation stage.
implementation stage.

* Workshop was executed digitally via Miro (collaboration) and MS Teams or Zoom (communication), com-
prehensive pre- and post-processing included.
** Workshop is executed physically.
*** Modelling sessions were executed via Zoom (communication) using Silico (SD-modelling).

Table 1: BMI phases and activities operationalised in the cases of Alpha and Beta (Continued)

Key Insights authority and external academics responsible for

The main result of this research is a new BMI ap- BMI and SD competencies. The competencies for
proach emphasising BM design and evaluation using qualitative modelling of the current BM’s problems
SD modelling and simulation before market imple- and quantitative modelling and simulation of the
mentation: The simulation-based BMI process. The new BM in SD software were indispensable for the
simulation-based BMI process extends the estab- subsequent BMI phases.
lished BMI process derived from literature by three
additional phases, i.e., preparation, definition, and 3.2 Phase 3: Definition
quantitative simulation, including corresponding ac- The definition phase aims at merging the gathered
tivities, tools/techniques, and goals (Figure 1). In the data from the prior analysis phase, e.g., by conduct-
following, we describe the new phases and illustrate ing laddering interviews with customers (Reynolds
empirical findings from their execution in the two and Gutman, 2001), into a common understanding of
case companies, Alpha and Beta. the problem, context, and goal (IDEO, 2012). There-
fore, the BMI team jointly develops different qualita-
3.1 Phase 1: Preparation tive models. First, customer segments are defined
The goal of the preparation phase is to align a team by focusing on their needs, e.g., by elaborating on
with adequate attributes to execute the simulation- jobs to be done or pains and gains (Osterwalder et
based BMI process, i.e., BMI and SD competencies, al., 2014). Second, the BMI team formulates the so-
business knowledge, and the authority to make BM- called “dynamic hypothesis”, a graphical representa-
related decisions. The BMI teams in both cases of tion of the current BM’s problems and its root causes
Alpha and Beta consisted of the firms’ internal prac- (Martinez-Moyano and Richardson, 2013; Sterman,
titioners responsible for business knowledge and 2000). The dynamic hypothesis is developed in

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Phases Activities Tools/Techniques Goals

• Align BMI team with adequate competencies, • Project management techniques Adequate BMI team
knowledge, and authority (competencies, know-
Preparation
• Equip team with adequate resources ledge, and authority)

• Analyse current business model (if existent) • Interviews, observations Data basis to describe
• Analyse customer problems, needs and causes • Business model canvas the problem and the
• Analyse business ecosystem • Empathy map context
Analysis • Analyse environmental factors • Stakeholder map
• Market research

• Structure and consolidate findings • Workshops, e.g., group model building Common
• Define and prioritise customer segments • Causal loop diagram understanding of the
• Formulate dynamic hypothesis of the problem • Customer profiles (jobs, pains, gains) team about the
Definition • Map business ecosystem • Ecosystem model (E3-value) problem, context, and
• Define goals for BMI • How-might-we-question, user-stories goal

• Generate new BM ideas • Creative techniques Multiple BM ideas, on

• Conceptualise ideas roughly, focussing on • Brainstorming a rough concept level
customer needs and value proposition fit • 635-method focussing on customer
Ideation • Storytelling and visualisation needs and value
• Business model patterns proposition

e • Evaluate desirability and feasibility of ideas • Rapid prototyping techniques Small number of BM
sed • Develop conceptual prototypes • Canvasas, e.g., Business Model Canvas concepts with
el Qualitative • Test prototypes and gather qualitative data • Interactive prototypes, e.g., 3D-models validated desirability
conceptuali- • Develop comprehensive BM concepts • Storytelling and visualisation and feasibility
cess sation • Decide whether to pursue or drop BM concepts • Interviews, surveys, observations

• Develop SD simulation models • Stock-and-flow-diagram 1. Final BM concept

• Test model structure and behaviour • Structure and behaviour tests, e.g., ready for
• Gather quantitative data extreme condition tests implementation
Quantitative
• Conduct simulation experiments • What-if-scenarios 2. Final SD simulation
simulation
• Concretise BM concept and make final decision • Simulation and decision workshops model

• Formulate contracts • Project management techniques Operationalised and

• Develop implementation plan • Change management techniques market-validated BM
• Operationalise new BM in own organisation ready for roll-out
Implemen-
• Operationalise new BM with pilot customers
tation
• Finalise BM concept

• Roll-out new BM in the market • Environmental analysis 1. Rolled-out BM

• Control and manage new BM • Monitoring and controlling techniques 2. BM controlling and
• React to environmental changes • Simulation model management system
Mana-
• Foster organisational learning 3. Organisational
gement
learning system

- BMI phases derived from BMI literature

- BMI phases developed in this research

Figure 1: The simulation-based business model innovation process

group workshops where the team members discuss Akkermans, 2001). Lastly, the goals for the BMI are
their mental models and successively formulate a defined concerning the key customer segment(s),
shared understanding (Wilkerson et al., 2020). Third, e.g., via user stories (Lewrick et al., 2018).
the business ecosystem is described by utilising
the e3-value modelling notation, i.e., the BMI team To evaluate the definition phase, Alpha’s team mem-
elaborates on the actors, the activities they execute, bers assessed and described their understanding
and the value objects they exchange (Gordijn and of customer segments and needs, as well as the

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problems and root causes with the current BM be- still need to be quantified (Gilsing et al., 2022, p. 38).
fore and after the definition phase.[1] Moreover, they Finally, the decision has to be made whether to pro-
rated the transition of their interpersonal team un- ceed with the new BM to the implementation phase,
derstanding, i.e., the coherence of the individual which entails significant investment (Frankenberger
understandings within the BMI team, throughout the et al., 2013).
definition phase.[2]
The new BM is modelled and simulated with SD soft-
Alpha’s BMI team members stated their understand- ware, building on the SD modelling approach (Mar-
ing of customer segments and needs has developed tinez-Moyano and Richardson, 2013; Sterman, 2000).
from a moderate (3) to an in-depth level (5). One of To organise the variables and build a comprehensive
Alpha’s employees said his “knowledge significantly model structure, we used the actor-based modelling
deepened,” and one founder explained that “[the joint framework of Ksouri-Gerwien and Vorbohle (2023).
activities in the definition phase] actually revealed a The initial model formulation is based on the dy-
significant gap in our understanding of the daily cus- namic hypothesis and the ecosystem model from
tomer life.” Moreover, after the definition phase, the the definition phase, followed by an iterative data
participants developed a predominantly common (4) inquiry, modelling, and validation process. To gather
interpersonal team understanding of the customer the quantitative data necessary for modelling the
segments and needs – whereas they had assessed it value creation and capture structures, interviews
as partly common (3) before. Regarding the current with relevant stakeholders holding the respective
BM’s problems and root causes, the BMI team mem- knowledge, e.g., decision-makers, employees, and
bers developed their previous moderate (3) indi- customers have to be conducted (Table 1). In the
vidual understanding towards an advanced level (4). case of Beta, the two primary informants attended
One of Alpha’s founders explained, “I became aware joint modelling sessions every week for about two
of our buying centre issues in a completely different months. Data inquiry and modelling steps alternated
manner,” while another stated that “we identified new until the model produced meaningful results. During
problem areas and broadened our perspectives.” In this process, the model structure and behaviour are
terms of interpersonal team understanding, the par- validated with various tests, e.g., extreme-condition
ticipants indicated that they developed a predomi- test, and by applying real-world data. The resulting
nantly common (4) team understanding regarding simulation model in the case of Alpha consisted of
the current BM’s problems and root causes. In con- 246 model elements (Figure 2) and 135 in the case of
trast, they had previously assessed it as little com- Beta.
mon (2).
Following the model building, the BMI team con-
3.3 Phase 6: Quantitative simulation ducts simulation experiments to evaluate the new
After phase five, i.e., the qualitative conceptualisa- BM. Therefore, questions and hypotheses are for-
tion, which aims at conceptualising the new BM and mulated regarding the new BM, which are to be an-
evaluating its desirability and technical feasibility, swered with the simulation model. In both cases of
the following quantitative simulation phase aims at Alpha and Beta, questions were mainly related to
further developing the new BM towards a ready-to- profit and customer count, e.g., “How many custom-
implement status and evaluating its financial vi- ers do we need to be profitable?” (Alpha) or “How long
ability (Gassmann et al., 2020; Lewrick et al., 2018). is the amortisation period?” (Beta). To answer these
Therefore, the conceptual thoughts from the previ- questions, we reduced the complexity of the overall
ous phase regarding value creation and value capture model to a cognitively manageable number of vari-
ables. Therefore, we defined three types of variables
1
Levels of individual understanding: 1 = non-existent, 2 = little,
relevant for BM evaluation: (1) Performance vari-
3 = moderate, 4 = advanced, 5 = in-depth ables (outputs) represent the model answers to the
2
Levels of interpersonal coherence: 1 = not at all, 2 = little, 3 = posed questions, e.g., accumulated profit over time.
partially, 4 = predominant, 5 = complete (2.) Scenario variables (external inputs) affect the

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performance variables externally and cannot be in- BM design, e.g., price. The simulation experiments
fluenced by the own BM, e.g., customer usage inten- were conducted in workshop settings, where the
sity. What-if scenarios, e.g., worst-, moderate- and BMI team manipulated control variables dynamical-
best-case scenarios, were defined for these scenar- ly, e.g., via sliders, applied different scenarios, and
io variables to test the new BM under different con- observed the BM performance. Figure 2 illustrates
ditions. (3.) Control variables (internal inputs) affect the interface for simulation experiments in the Silico
the performance variables internally through the software and Alpha’s overall model structure. Lastly,

Overview of the simulation model (Alpha)

Activities & Resources

(department-wise)
Activities & Resources
Sales

Alpha‘s Customer success

customers‘ BM Revenues Costs
Customer segment
(segment)
scaling
Software
Alpha‘s
BM
Net benefit

Hardware

Reciprocal influence, e. g.
Net
customer usage behavior, Revenues Costs
benefit
exchange of value proposition,
money or data

Simulation experiment interface

Control
variables
(sliders) Performance
variables
(graphs)

Scenario
variables
(scenarios)

Figure 2. Overview of the simulation model and simulation experiment interface in the case of Alpha (software silico)

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the decision-makers of Alpha and Beta made the fi- The decision-maker, moreover, emphasised the use-
nal decision to proceed with the new BM to the im- fulness of rapid experimentations with scenario and
plementation stage. control variables to explore the system’s thresholds,
e.g., regarding the profitability of the new BM. Beta’s
To evaluate the quantitative simulation phase, we in- probabilistic expert highlighted the advantages of
terviewed Beta’s BMI team members regarding (1.) the being able to experiment with highly uncertain pa-
further development of the new BM towards a ready- rameters or parameters with insufficient data basis
to-implement status, (2.) the evaluation of the new to assess the “sensitivity of the commercial model.”
BM, and (3.) the decision-making support provided by As a consequence of the simulation experiments,
the simulation. The BMI team members were asked the decision-maker developed a “good feeling” for
to describe the maturity of the new BM before and the new BM, which grounded his decision-making to
after the quantitative simulation phase and rate it on proceed with the BM’s innovation process:
a scale from 1 (initial rare idea) to 10 (ready-to-imple-
ment BM). On average, the participants stated that “Because of the model’s flexibility, you can
the new BM had developed from level 3, i.e., “a rough simulate what happens relatively quickly and
idea” (functional expert 1, Beta) and “an idea without a approach different scenarios to see when the
business model” (decision-maker, Beta), towards level whole thing tips over, when it no longer pays off,
7, i.e., a fully conceptualised and quantified business and when we might be in danger of no longer be-
model. To reach the BM’s implementation readiness ing able to serve our customers. And that is what
and approach the market, mainly contractual issues is meant by developing a good feeling for it [the
still needed to be resolved: new BM].” (decision-maker, Beta)

“I think the commercialisation still has to be Beta’s BMI team appreciated the communicability of
made, the contractual issues have to be clari- the simulation model and the simulation results. The
fied, and the acceptance in the market also has probabilistic expert explained: “To demonstrate, to
to be tested.” (decision-maker, Beta) show people, and to create acceptance, this [simula-
tion model visually formulated in the Silico software]
Beta’s BMI team members indicated that SD mod- is very good.” The graphical user interface (Figure 2)
elling and simulation were more sophisticated to facilitates joint discussions and further model de-
evaluate a new BM than their common approach, velopment within the BMI team – including persons
i.e., spreadsheet calculations with MS Excel. They without prior SD experience. The utility of the new
agreed that evaluating a BM with spreadsheets is approach, i.e., modelling and simulating the new
possible since one was an “Excel crack” (functional BM with SD, outweighs its costs, as functional ex-
expert 2, Beta) or an “Excel super programmer” (deci- pert 1 stated: “price-performance ratio is top, great.”
sion-maker, Beta). However, the decision-maker ex- Lastly, the decision-maker saw further potential for
plained why he thought that SD is the better option the new approach at Beta. Among other use cases,
to evaluate a BM compared to MS Excel: he emphasised that the simulation model could be
used as an instrument for managing the new BM in
“The risks and the business benefits are not easy the long term:
to calculate because we are not operating in lin-
ear conditions. Since many, many variables have “For this [the new service-oriented BM], we need
an influence on the business model […] and are constant risk management. And in my opinion,
partly dependent on each other, this just could we create this risk management by constantly
not be calculated via common simple Excel so- adapting this simulation model dynamically.
lutions, or such calculation methods [invest and [...] Otherwise, we’ll end up managing it in Excel
cost calculations] just would not do justice to spreadsheets again, with all the disadvantages.”
the complexity of the problem.” (decision-mak- (decision-maker, Beta)
er, Beta)

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Discussion and Conclusions fundamental input for the subsequent quantitative

In this research, we developed the simulation-based simulation phase.
BMI process that integrates quantitative BM design
and evaluation using SD modelling and simulation The BM design sub-process of the simulation-based
into BMI before the market implementation of a new BMI process spans from ideation through qualita-
BM. We applied the process at two firms in the in- tive conceptualisation and quantitative simulation
dustrial B2B context, Alpha and Beta, where we to implementation. Along the design process, the
successfully developed and evaluated new service- dominant course of action can be described as it-
oriented BMs. We contribute to the BMI knowledge erative prototyping, experimentation, and learning
base by shedding light on how SD modelling and (Gassmann et al., 2020; McGrath, 2010). BM designs,
simulation can provide a methodical advancement prototypes, and experiments evolve from a rather
for BM design and, in particular, for the rarely in- qualitative and abstract to a more quantitative and
vestigated BMI phases of prototyping and decision- realistic matter (Gassmann et al., 2020; Gilsing et al.,
making (Wirtz and Daiser, 2018). We see the potential 2022). The quantitative simulation phase – the heart
to generalise the findings from our ADR study as fol- of the simulation-based BMI process – augments
lows (Sein et al., 2011). the BM design process by incorporating quantitative
SD modelling for BM prototyping and SD simulation
The effective execution of the simulation-based for BM experimentation. It fits seamlessly into the
BMI process requires a combination of BMI exper- BM design’s dominant course of action and bridges
tise, sound business knowledge, authority, and SD qualitative BM conceptualisations, such as canvas-
competencies among the BMI team members. The es, and real-world implementations. As the quanti-
SD competencies manifest in the effective, collab- tative simulation phase takes place before market
orative formulation of qualitative and quantitative implementation, extensive experimentation and
models, which provide the basis for the two new BMI learning with new BMs is achieved while simultane-
phases definition and quantitative simulation. Con- ously containing costs, as emphasised by McGrath
sistent with Ebel et al. (2016), we also added a prepa- (2010). This challenges Frankenberger et al. (2013),
ration phase to form an adequate team constellation who argue that a new BM must be fully implemented
in the first place. before it can be tested to some degree.

The definition phase enabled Alpha’s BMI team The quantitative simulation phase encompasses it-
members to develop a more profound and predomi- erative modelling and simulation activities. In both
nantly coherent problem understanding, e.g., re- practical cases, we observed that the quantitative
garding customer needs and the current BM. The modelling process of a new BM already provided
evaluation results indicate that the definition phase significant insights that helped sharpen vague BM
accomplishes its goal of developing the BMI team characteristics and unnoticed contradictions from
members’ mental models and merging them into a the conceptual phase, even before the model was
common team understanding. This common team simulation-ready, which is consistent with Sterman
understanding is critical for an effective subsequent (2000). SD modelling, i.e., the collaborative activity
BM design process (Ebel et al., 2016). In particular, of building a formalised simulation model utilising SD
the dynamic hypothesis synthesises the firm’s and software, explicates the mental models and implicit
the customers’ perceived problems with the cur- ideas of the BMI team members during the develop-
rent BM into a systemic picture and reveals the root ment of the new BM. Modelling transforms the new
causes. In both practical cases, this led to ideas ad- BM from a cognitive and linguistic scheme into a for-
dressing the causes of problems, not just symptoms. mal, conceptual representation (Massa et al., 2017),
Moreover, from the perspective of the SD modeller, with SD providing the modelling language (Szopinski
the qualitative models, in particular the dynamic hy- et al., 2022). The resulting SD model (Figure 2) visu-
pothesis and the e3-value ecosystem model, provide ally represents the new BM during its development
and serves as a communication device for the BMI

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team (Szopinski et al., 2022). Due to its formalised data. This allows the evaluation of a new BM’s sensi-
and visual nature, the simulation model reduces a tivity and robustness against external uncertainties,
BM’s “sheer complexity” (Foss and Saebi, 2017, p. 213), thus building more resilient BMs (Montemari and
lowers the cognitive barriers for the BMI team mem- Gatti, 2022). In both practical cases, simulation ex-
bers and supports them in accomplishing cognitive periments considering worst-, moderate- and best-
design-related tasks, e.g., designing and evaluating case scenarios (Figure 2) and the simulation-based
the BM elements and interdependencies (Massa et comparative evaluation with the actual BM had be-
al., 2017; Massa and Hacklin, 2020). As a result, both come the keystone of the decision-making process
BMI teams were able to clarify “how value is concrete- on whether to proceed to the implementation phase
ly created and captured by the stakeholders” (Gilsing with a new BM. Since SD modelling and simulation
et al., 2022, p. 38) and developed their BM ideas into facilitate comprehensive BM evaluation and support
thoroughly conceptualised and quantified BMs. This decision-making, it addresses the call by Fruhwirth
progress was primarily achieved through extensive et al. (2020) for tool support on convergent thinking
discussions between the BMI team members about activities in BMI and can be considered as “future
the BM design, which were facilitated by the simu- business model tooling” (Athanasopoulou and Reu-
lation models. Thus, we support the proposition of ver, 2020, p. 505).
Moellers et al. (2019, p. 397) that “System Dynamics
facilitates shared understanding […] by providing a Quantitative SD modelling and simulation are par-
neutral and consistent frame for discussion.” ticularly valuable for BM design compared to spread-
sheets, e.g., MS Excel, which was the quasi-standard
The simulation experiments at Alpha and Beta were to quantitatively evaluate almost everything at Alpha
performed in customised simulation interfaces via and Beta as well as in the industry in general (Gils-
the Silico software (Figure 2). These simulation in- ing et al., 2022; Grossman et al., 2007). Compared
terfaces provide twofold value for quantitative BM to spreadsheets, SD is a dynamic and visual model-
evaluation before market implementation. First, they ling language, providing semantics and syntax, i.e.,
reduce the complexity of the simulation model (> 100 interacting stocks, flows, and variables, to repre-
parameters) to a cognitively manageable number of sent a BM visually (Szopinski et al., 2022). Therefore,
parameters, i.e., performance variables (outputs), SD can reduce the inherent complexity of a BM and
scenario variables (external inputs), and control facilitate cognitive tasks during BM design, such
variables (internal inputs). Therefore, it is possible as designing, evaluating, and decision-making (as
to convert the complex model structure into a suit- previously elaborated). Furthermore, SD simulation
able narrative for presenting the new BM to people models and interfaces provide an effective means
not directly involved in the BM design process, such of demonstrating, communicating, and developing
as the decision-maker in the case of Beta. This is BMs, thus emphasising the team character of BMI.
in line with Moellers et al. (2019, p. 399) who empha- Therefore, we consider SD a more appropriate ap-
sised that “the communication of insights from the proach to BM design than spreadsheets.
System Dynamics model to managers not involved in
the modelling can be improved through the integra- Lastly, we integrated relevant aspects of the cus-
tion of established metrics and terms and complexity tomers’ BM, i.e., their value creation and capture
reduction in visual interfaces.” In this regard, the sim- structures, in the simulation model by following an
ulation model and the simulation interfaces serve as actor-based modelling approach (Ksouri-Gerwien
boundary objects, allowing for sophisticated com- and Vorbohle, 2023). This led to increased transpar-
munication and demonstration of the new BM to a ency of the customers’ perspectives on the newly
variety of audiences during BM design (Doganova developed BM and enabled the incorporation of
and Eyquem-Renault, 2009). Second, the simulation customer orientation early in the BM design and
model, particularly the simulation interface, enables decision-making process. In doing so, Alpha ap-
the BMI team to flexibly experiment with parameters proached value-based pricing by considering the
that are highly uncertain or based on insufficient customers’ costs and revenues and modified their

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Preparation phase Quantitative simulation phase

• BMI is an interdisciplinary and, • System Dynamics as a formal and visual modeling language is capable of reducing the inherent complexity of a BM
at times, inter-organisational and facilitates cognitive tasks during BM design, e.g., designing, evaluating, and decision-making.
team approach. • SD simulation models and interfaces enable
• The preparation phase aims at • extensive discussions between BMI team members on the BM design and support its further development,
aligning an appropriate • a BM to be demonstrated and communicated to people not involved in the design process (decision-makers),
constellation of BMI expertise, • BM experimentation with multiple scenarios and even uncertain parameters before market implementation.
business knowledge, authority, • Simulation-based BM experimentation supports decision-making during BM design by allowing decision-makers to
and SD competencies among develop a "good feeling" for a new BM.
the BMI team members. • Incorporating customers into the simulation model provides valuable insights for BM design and decision-making.

Qualitative
Quantitative Implemen-
Preparation Analysis Definition Ideation concept- Management
simulation tation
ualisation

Definition phase Implementation and management phases (expected)

• Creating qualitative models, e.g., the dynamic hypothesis, in group • The simulation results provide quantitative data that can be used to
workshops enables the development of a common and in-depth team prepare contract development (particularly relevant in B2B contexts).
understanding (shared mental models). • The quantitative measures of the customers’ value capture can be used to
• The dynamic hypothesis facilitates BM idea generation, addressing the convince pilot customers through business cases.
causes of problems, not just symptoms. • The simulation model can be considered as a digital twin, allowing for
• The dynamic hypothesis and the E3-Value ecosystem model provide longitudinal management of the new BM in the market.
fundamental inputs for the subsequent quantitative simulation phase.

Figure 3. Summary of findings where the simulation-based BMI process contributes to BMI
Figure 3 – Summary of findings where the simulation-based BMI process contributes to BMI

sales strategy by communicating the customers’ ex- two BMI phases, i.e., implementation and manage-
pected value. Considering that solutions are “sold to ment, in this study, as these will require a lot of addi-
the top managers through business cases” (Huikkola tional time. However, Beta’s decision-maker already
et al., 2022, p. 10), we expect this change to be ben- indicated that the simulation model can be used as
eficial for convincing pilot customers in the imple- a digital twin and, thus, as a management tool for
mentation phase. Moreover, since the B2B context the new BM in the long term. Future research should
requires contracts with clear terms and conditions, investigate the impact of SD modelling and simula-
the quantitative measures resulting from the quan- tion on these future phases. Moreover, we carried
titative simulation phase prepare the subsequent out both BMI iterations of our ADR study with firms
contract formulation – which we included as the first with existing BMs as their benchmark. In both cases,
activity of the implementation phase into the sim- customers and data existed to support SD model
ulation-based BMI process (Figure 1). Figure 3 sum- development and to feed it with input data. Hence,
marises the findings of where the simulation-based whether the presented simulation-based BMI pro-
BMI process contributes to BMI. cess is also an effective approach for developing a
BM totally from scratch remains unanswered. Still,
This research does not come without limitations. we expect that even assumption-based modelling
We, as researchers, accompanied the BMI pro- can provide insights relevant to BM design (Sterman,
cesses at Alpha and Beta until the implementation 2000) and prepare BMI teams for real-world data in-
phase. Hence, our study ended after the quantita- quiry. Lastly, the evaluation results concern specific
tive simulation phase when the final decision to cases of Alpha and Beta and cannot be generalised.
proceed further with the new BM to the implemen-
tation phase was made by both companies. Hence, Finally, we see potential for future research that de-
we were not able to empirically investigate the last parts from our findings. Alpha and Beta focussed

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on customer orientation and financial metrics as

their BMI objectives. Adopting our simulation-based
BMI process to consider the sustainability and eco-
friendliness of BMs could provide an additional
meaningful way of using SD modelling and simula-
tion for BMI (Gilsing et al., 2022; Santa-Maria et al.,
2022). Since sustainability parameters such as CO2
emissions are measurable and can be allocated to
value-creation activities and required resources,
such an approach would enable the consideration
of sustainability aspects in BM design and decision-
making similar to the customer and financial focus in
this study. It might also be worthwhile to extend SD
modelling with further simulation approaches, such
as agent-based modelling, to increase simulation
performance.

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About the Authors

Dr. Christoph Ksouri-Gerwien is a postdoctoral researcher at the Chair for

Industrial Sales and Service Engineering at Ruhr-Universität Bochum, Germany.
His application-oriented research focusses on the innovation of service-oriented
business models using design thinking and systems thinking, particularly the
simulation of business models with System Dynamics.

Dr. Jens Poeppelbuss is Full Professor of Industrial Sales and Service Engineering
in the Faculty of Mechanical Engineering at Ruhr-Universität Bochum, Germany.
His research focusses on service and business model innovation in manufacturing
and capital goods industries. He has published in international journals and
presented his works at conferences in the Information Systems and Services
Marketing disciplines. He is the spokesman of the service management section
(WK DLM) in the German Academic Association of Business Research (VHB).

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