Business Model Innovation through Trial-and-Error Learning The Naturhouse Case

How does an established organization innovate its business model, which is still contributing revenues and profits, but whose future effectiveness is likely to be undermined by changes in its external environment? We study the antecedents and drivers of business model innovation in a Spanish dietary products business threatened by economic recession and heightened competition resulting from liberalization. We document the evolution of the firm's new retail-market business model in two distinct phases: 1) a five-year phase of experiment and exploration followed by 2) a high-growth exploitation phase when the firm outperformed its competitors by a wide margin and internationalized successfully, in spite of its products and final end customers remaining basically unchanged. The study, which takes a dynamic perspective, is situated in the organizational learning literature, and emphasizes the importance of trial-and-error learning for business model innovation. We also highlight the impact of the different types of learning that take place in these two phases, as well as the knowledge-transfer mechanisms from individuals to the organization and vice-versa. (C) 2010 Elsevier Ltd. All rights reserved.