How do business models evolve in practice?: a complex-adaptive perspective

Firms in the high-technology sector must navigate an environment that is dynamic and fast-moving. It is an environment that displays continual disequilibrium and witnesses regular shocks. In such a discordant environment, traditional top-down modes of strategic planning struggle to generate sufficient flexibility and speed of change necessary for a firm to maintain environmental fit over time. Instead, to coevolve with its environment a firm, and in particular, its business model(s) must adapt constantly. To achieve this, significant decision-making must necessarily be located in the operational layers of the firm. To understand how the resulting multitude of small decisions result in change(s) to the firm’s business model, I conduct a multiple method case study on Cisco as a kind of phenotype in the high-technology sector. Cisco is a firm whose business models have the capacity to change themselves in response to external stimuli. Through a strategy-as-practice lens, I establish that Cisco’s business models exhibit characteristics of complex adaptive systems and function analogously to them. I suggest the notion of a complex adaptive business model is theoretically located in evolutionary economics and emergent strategy instead of neoclassical economics and mainstream strategy. Consequently, I recommend the firm perceive itself as the facilitator and orchestrator of the business model rather than the controller of it. To guide the business model, I recommend the firm embrace an overall strategic framework that provides high-level rules and boundaries but otherwise allows the business model to develop freely. Such freedom has both positive and negative implications. For firms housing or seeking to establish a complex adaptive business model, I highlight the firm’s own high-level purpose must be clearly resolved and cultural and structural adjustments inside the firm be made.