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What is the business life cycle (the five stages of business).

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The Business Life Cycle

The Business Life Cycle is a strategy roadmap that tracks a company's growth, maturity, and decline. The Business Life Cycle is split into five stages and provides strategic insights at each stage.

Stage One: Development and Startup

The first stage of any business life cycle is the development and startup stage. This critical phase lays the groundwork for the business's future journey , making it essential for potential investors and stakeholders to understand.

Conceptualization of the Business Idea

At the heart of any business lies a unique idea or solution . This is the seed that, when properly nurtured, grows into a successful enterprise. Entrepreneurs identify a gap in the market or an unmet need that their product or service can fulfill. The conceptualization process also involves thinking about how the product or service will differ from competitors. This phase is characterized by creativity, innovation, and risk-taking.

Take, for instance, the genesis of Airbnb. The founders, unable to afford their rent, identified a unique solution – turning their living room into a bed and breakfast for attendees of a local conference. This innovative concept laid the foundation for a multi-billion dollar business.

Planning and Feasibility Study

Once the idea is in place, the next step involves conducting a feasibility study and crafting a solid business plan. This includes market research to gauge demand, analyzing competition, establishing pricing, and mapping out operational needs. It helps determine whether the business idea can be viable in real-world scenarios.

In the case of Airbnb, the founders validated their concept by hosting three guests during the conference. The success of this 'prototype' gave them the confidence to proceed.

Role of Early-stage Financing

Financing plays a pivotal role in the startup stage. Businesses typically don't generate a profit at this point, making external financing necessary. Funding may come from a variety of sources including personal savings, family and friends, angel investors, or venture capitalists. This seed funding enables businesses to carry out their plans, develop their product or service, and bring it to market.

Airbnb initially bootstrapped their venture, but as their idea gained traction, they attracted funding from Y Combinator, a renowned startup accelerator, marking their official entry into the world of venture capital.

Risks and Challenges in the Development and Startup Stage

Despite the excitement and potential rewards, the startup stage presents numerous risks and challenges. The business model might be unproven, the market could be unpredictable, and the competition fierce. There's always the risk of running out of funds before the business can generate a sustainable income. Moreover, attracting customers and convincing them to trust a new brand can also be challenging.

Airbnb faced its share of challenges in its early days, from being an unknown entity in a well-established hotel industry to struggling to secure its initial users. However, their innovative marketing tactics and robust user experience helped them overcome these hurdles.

Case Study: Successful Business During the Startup Stage

Airbnb serves as a compelling case study of a successful business during the startup stage. Their unique idea coupled with their understanding of the market allowed them to disrupt the traditional lodging industry.

Airbnb's success during the startup stage was due to a combination of factors: a unique and scalable business idea, a comprehensive feasibility study, timely acquisition of early-stage financing, and the resilience to navigate initial risks and challenges. Their journey encapsulates the dynamic and multifaceted nature of the development and startup stage in the business life cycle.

Stage Two: Growth

As a business starts to find its feet, it enters the growth stage. The enterprise expands, market share increases, and profits start to accumulate. Sound cash flow management is crucial in this phase as the inflow and outflow of cash determine the survival and expansion of the company.

Consider the meteoric growth of Facebook. After it went public in 2012, Facebook had the capital to grow significantly, acquiring companies like Instagram and WhatsApp, and diversifying its revenue streams .

Stage Three: Maturity

Once a business has carved out a comfortable market position and exhibits stable recurring revenue, it has reached maturity. At this juncture, businesses must be inventive in exploring new opportunities for growth while effectively managing assets and resources.

For instance, Microsoft, a tech giant, reached maturity years ago but continues to innovate with ventures like Azure and Microsoft Teams . Microsoft’s ongoing success demonstrates the importance of strategic planning during the maturity stage.

Stage Four: Decline or Renewal

Not all businesses remain prosperous indefinitely. Whether due to market saturation, increased competition, or external factors, a business may face a decline. However, strategies like cost-cutting, diversification, and market penetration can help reverse the downward trend . Private equity firms can step in, providing the needed capital and expertise to restructure and revamp the business.

Take the example of LEGO, which faced a severe decline in the early 2000s . Through restructuring and a renewed focus on its core product, LEGO navigated through the decline, demonstrating an inspiring renewal story.

Stage Five: Exit or Succession

Eventually, all businesses reach a stage where original owners or stakeholders might choose to exit. Choosing the right exit strategy—be it acquisition, Initial Public Offering (IPO), or management buyout—is critical. This is where investment bankers excel, assisting in orchestrating the optimal exit.

Family-owned businesses, like Walmart, underscore the importance of succession planning . From Sam Walton, the founder, to his son Rob Walton, and now his grandson-in-law, Greg Penner, Walmart's leadership has smoothly transitioned through generations, maintaining a consistently strong market presence.

Understanding the business life cycle can guide financial and investment strategies at each stage. This knowledge proves invaluable for finance professionals, aiding in the evaluation of business potential and growth opportunities. Keep honing this understanding to thrive in the ever-changing business landscape.

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The business life cycle, comprising five stages, is a fundamental framework for understanding a company's journey from inception to maturity. It encompasses birth, growth, maturity, decline, and rebirth or reinvention. Each stage presents unique challenges and opportunities. For those interested in exploring innovative financial approaches, the link https://icoholder.com/en/defi provides insights into the world of decentralized finance (DeFi), which can play a pivotal role in various business stages.

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Business Life Cycle

It depicts the progression of a firm from its early start-up phase

What Is A Business Life Cycle?

• Phases Of Business Life Cycle
• Phase 1: Start-Up/Launch

Phase 2: Growth

• Phase 3: Shake-Out

Phase 4: Maturity

Phase 5: decline/life cycle extension.

A business cycle depicts the progression of a firm from its early start-up phase to its maturity over a period of time.

Every firm goes through these phases, but the exact duration of the stage cannot be determined. 

Each phase is identifiable by looking at certain variables like:

Management strategies and priorities change along with the phases of business cycles. 

While evaluating a company from an investment perspective, it is essential to identify at what stage of its business life cycle the company is in, as it will directly affect the forecast inputs.

Key Takeaways

Business cycle progresses through startup, growth, shake-out, maturity, and decline phases.

Each phase's characteristics, financials, and management strategies vary, impacting investment decisions

Phases of Business Life Cycle

The business cycle of any company can be categorized into five stages:

• Launch/Start-Up
• Life-Cycle Extension

Each stage has its unique characteristics and challenges, which can be used to identify at what stage the company currently stands at. 

The phases of the business life cycle are compared organizations to the life cycle of living organisms. 

A vital feature of the organizational life cycle is that there is no specific duration allotted to each phase of the corporate life cycle, unlike the life cycles of organisms.

This comparison originated as early as the 1890s by the economist Alfred Marshall. Almost 60 years later, American economist Kenneth E. Boulding also suggested that organizations pass through a life cycle largely similar to organisms.

After this, there has been constant research and development in identifying and interpreting an organizational life cycle. 

Understanding the organizational life cycles of a company can help us understand the management's thought process and make a better investment call. 

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Phase 1: Start-up/Launch

The start-up phase is the very initial stage of the firm. At this stage, the business can be in various positions financially.

For startups, creating a Minimum Viable Product (MVP) is essential to test the product idea's viability and gather feedback from early customers. Further, while developing it the MVP cost can significantly impact the startup's overall budget and can play a major role in the startup's success or failure.

There are a few common factors in all the start-up phases. First, the businesses have very high expenses, and most expenses are focused on operating and customer acquisition, like advertising.

Another factor is that most of the capital raised is equity capital, as the companies are not creditworthy enough for bank loans or only eligible for high-yield debt.

The firm is not profitable at this stage, and the cash flow is negative . 

There are a few ways to categorize the life cycle of the start-up/launch phase, as explained below.

Pre-Seed Funding Stage

The pre-seed funding round, also known as the pre-seed capital or pre-seed money, is the first instance of capital raising for a start-up. The amount required is relatively low as the business model is the only thing being developed.

At the pre-seed stage, the start-up has only raised non-institutional funding to fund its operations. At this stage, friends, family, and own equity is the only type of capital that has been infused into the firm.

Timing is essential at this stage. If the time taken is too much, the start-up will not survive in the long run.

The pace of the pre-seed funding depends on the start-up's initial expenses. At this stage, the company is still pre-revenue and focuses most of its cash on developing the product or idea.

The amount of pre-seed capital will decide the further goal of the firm. In the majority of the cases, the only investors in a pre-seed round are the founders themselves.

Seed Funding Stage

This is the first official stage of funding that the start-up raises. The term " seed funding " refers to sowing a seed to help grow the company. At this point, the company is too young to get debt funding.

At this point, start-ups usually dilute their equity in exchange for seed capital. Angel investors, Venture Capitalists (VCs), and equity-based crowdfunding are usually the types of investors funding this stage.

The seed-funding VC involves a higher level of risk than regular VC funding rounds as the company is still at a very early stage.

The proceeds from the seed round are used in:

• Product development
• Market research

This is essentially the R&D phase: trying to find the product-market fit and fine-tuning the product to the inputs obtained through market research and product testing. Funding is also spent on fine-tuning the business model.

This stage is also usually pre-revenue but depends on the industry, sector, the vision of the founders, and, most importantly, the available funding.

Early Stage

At the early stage, the firm finally has a product that it can roll into the market.

In this stage, the operating costs drastically increase as new expenses like more salaries and advertising start to add up.

At this stage, a start-up also needs strategic investors who do not just contribute equity but also bring value to the organization, like connections and expertise which will help them expand.

Before this stage, all the funding was for:

• Operational
• R&D expenses

Still, the start-ups will require funds to roll out products into the market and other allied activities at this stage.

This is the most crucial stage for a start-up as inflows other than funding start to come in. An early-stage start-up is no longer pre-revenue.

At this stage, the founders must be prepared for aggressive marketing and expansion, and if this stage is successful, then only the start-up will be able to function as a business.

It is rare for the company to be profitable at this stage.

Growth Stage

The growth stage is when there is a certain level of product recognition and brand value. At this stage, the start-up still requires funding raised at very high valuations.

The firm will still require outside funding to fule large-scale CAPEX .

Series B and Serie C funding are raised at this stage.

1. Series B Funding: 

Series B round is done once the start-up has grown past its developmental stage. The product has some market visibility, and the company has no obligations to meet the market demand.

Series B funds are used to increase market presence and coverage through supply chains and marketing spending and to improve and expand the workforce.

2. Series C Funding:

At this stage, the start-up already has a successful product and established a user base with empirical growth.

The Series C funds are used for the expansion of the firm. Inorganic growth, like acquisitions, is usually funded by Series C capital. This is the most mature and capital-intensive stage for a start-up.

Usually, after this stage, the business stops being a start-up as they start showing profits and positive cash flows.

The growth phase of the business cycle is when companies start to become profitable, and small amounts of free cash flows begin to show.

The growth can be fielded by internal accruals or by raising debt. It all depends on the firm's profitability and the set capital structure . Usually, at this stage, it is a combination of both internal accruals and debt funding.

As the product/service starts to gain traction, the sales growth is very high and is usually followed by margin expansion. However, the growth in profits always lags behind the growth in sales.

It is counter-intuitive for a company in the growth stage to have a lot of free cash flow in hand, as most of the profits should be reinvested to fuel more growth.

The company balance sheet starts to look a little stronger but still has a lower net cash balance due to high investing cash outflows. As a result, the firm can appear weaker on the liquidity and current ratios.

Debt is usually used to fund significant CAPEX as they still need to spend a lot on advertising and hiring better talent. 

In growth, stage management is entirely focused on fueling growth.

Royal Caribbean Cruises ( RCL ) is a luxury tourism company providing holiday cruise services and is in the growth stage of its business cycle. 

RCL reinvests 100% of its profits, pays no dividends, and has a high level of debt; they have lower free cash flows.

Phase 3: Shake-out

The shake-out phase of the business cycle is also known as the consolidation phase. In the consolidation phase, the business becomes one of the market leaders and takes away market share from the smaller players.

At this stage, the free cash flow generation increases as the company become more efficient.

Debt levels start to go down significantly, but that entirely depends on the industry; e.g.,  a steel manufacturing company, even in its shake-out stage, will have a high debt because that is how the industry operates.

There still is a high level of sales growth, but the bottom line outgrows the top line. As the firm becomes more efficient, the margins start expanding while the expenses begin to decrease.

As more scale is achieved, brand recognition, an established efficient framework, and supply chains are established. The efficiency ratios like asset turns and inventory turnovers also improve drastically, making the balance sheet very strong.

As the company's balance sheet strengthens, the short-term and long-term debt gets better rated as they have more cash to service that debt.

If the company is publicly listed, multiple expansion also happens at this stage as a further effect of re-rating. Multiple expansion is when the valuation multiples like the Price-to-earnings (P/E), Price-to sales (P/S), and Price-to- book value (PB) start to swell up.

The multiples start to increase because buying volumes go up for higher-quality companies.

The profitability ratios like ROE and ROIC also start to grow, indicating the business is generating a higher return on its invested capital .

The dividend payout also starts to grow as the firm keeps generating more cash than its reinvestment needs.

The primary focus of the management at this stage is to fule growth but also, at the same time, focus on making its operations more efficient.

Amazon ( AMZN ) is an excellent example of a firm in its consolidation phase.

Even though Amazon is one of the biggest companies in the world, due to the sheer size and growth of the e-commerce industry and its new business vertical of Saas through  AWS , Amazon is still in the consolidation phase of its life cycle.

The maturity phase is very self-explanatory. Growth slows down, and the sales grow at a very steady level closer to the industry or economic growth rate.

The margins and free cash flow are at their highest. The major reason for the rapid growth in free cash flows is because the CAPEX stabilizes, which is a significant cash outflow.

The dividend payouts are at their highest, attracting many buyers. A mature firm usually trades at a premium multiple. 

At this stage, the growth cannot come from organic elements, so inorganic expansion like M&A is the only way for the firm to grow at a higher rate than the industry or economy . 

The majority of the capital allocation of a mature firm either happens in Mergers and Acquisitions or for enhancing shareholder value through buybacks and dividends.

Mature firms usually have low levels of debt, and the debt they have on their books is of the highest quality, usually AAA or AA rated.

The major focus of the management is to keep their market share stable while growing at a sustainable rate.

Sherwin-Williams ( SHW ) is the world's most extensive paints & coatings company. It is an excellent example of how a mature company fuels growth. 

The majority of its capital is allocated towards buybacks and M&A, which is the only way for a mature firm to grow.

Please refer to the following article by Marcellus to understand how a firm grows in its mature vs. consolidation phase.  Sherwin Willams vs. Asain Paints

Walmart ( WMT ) will serve as an alternative example to Sherwin-Williams. Walmart cannot fuel inorganic growth with M&A as its business model is not structured to support acquisitions. 

The only way for Walmart to grow organically is if it chooses another geographical area with no presence or a lower level of market penetration.

This is the final phase of the business life cycle. At this stage, profits, cash flows, and sales of a business start declining as a company begins to lose its competitive advantage .

The company starts losing clients as its product becomes more commoditized or redundant due to changing trends.

If a company is listed at the decline stage, a PE rerating happens as it starts losing its competitive advantage and market share to its competitors.

The main focus of the management at this stage should be on changing the firm's positioning to adapt to the current scenario. Innovation is the critical element necessary for a life cycle extension to happen.

Innovation can usually come in several ways. It can be through product innovation, where the firm can either introduce a new product or change the existing product to fit the current market demand.

Nokia is right now at the decline stage of its business life cycle.

The reason for the decline of Nokia is that the management was unable to accept the changing environment; thus, the firm went into a decline phase, still struggling for life cycle extension.

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What are the 5 stages of a business life cycle?

Just as a seed must be planted before a tree can flourish, a business doesn't spring to life fully formed. There are generally five stages in a business entity life cycle , and each stage has differing and unique entity management needs.

The 5 stages of a business life cycle Stage 1: Seed and development

So, you've had a great idea for a business ' congratulations! You're officially at the seed stage. Now you need to plant that business seed and start to nurture it so that it can grow into a successful business. This first stage of the business entity lifecycle is sometimes called the seed stage and sometimes the development stage, depending on the sector and the industry. It's where you take your idea and start to assess whether it's worth developing into an actual business. A business plan soon follows once key target areas are identified and a strategy is developed. It's here that you ask yourself :

• Does this concept, product or idea fill a need in the market?
• Will it be accepted in the market?
• How do I establish a business structure?
• Will this idea yield me any profits?

Once you've analyzed the market and the concept and decided that it's still worth pursuing, your seed is in the ground and you move on to the next phase of business entities.

Stage 2: Startup

Businesses usually go one of two ways at the startup phase: They seek funding, either from a bank or another investor, or they decide to 'bootstrap' and work within their means initially. At any rate, startups must be incredibly resourceful and flexible regardless of funding ' it's a matter of iterating, testing and learning, and trying again, knowing that you are unlikely to have everything perfect from the outset. Startups must be committed to doing it over and over again until they get it right. Startup business entities face many challenges , including:

• Managing cash reserves
• Managing sales expectations
• Accounting management
• Establishing a customer base
• Establishing a market presence

It's also at this stage that you'll start to pay closer attention to entity management. You won't have many processes in place yet, but the beginnings of your governance and compliance function will start to appear. It's important to think about things like the appropriate entity type for your business, and the right jurisdiction in which to incorporate. In the US, many venture capital firms will require a startup to be incorporated in Delaware ; in the UK , one-person startups may work as a sole trader, while groups may incorporate a limited liability company.

Stage 3: Growth and establishment/survival

The growth phase is where our business solidifies its place in the market and its view on the world. Your business strategy will start to settle down more, though many at this stage of the business entity lifecycle will embark on a stage of aggressive and quick growth ' it all depends on the end goal for the business entity. It's also where entity management starts to get more intense, as the focus is turned inward, and the initial blocks of the growing company begin to build. Recruitment drives bring both experienced senior leaders and lower-level workers into the fold, and client relationships are strengthened. Your clients become advocates and help you to grow your business, too. There's an oft-quoted statistic that nine out of every 10 startups fail. To make sure your business entity is the one in 10 that succeeds, you'll require investment to grow and mature your business. It's likely you'll seek outside investment capital or build up a debt profile. Either way, entity management must be tight, whether it's to ensure any personal guarantees signed with banks don't negatively impact directors, or whether it's to track and manage the equity given to investors.

Stage 4: Expansion

Your business has become routine, and your confidence has grown. You've got great leaders and workers helping to build your business further, and your position in the industry is established. Now's the time to start thinking about the next phase: Expand further and keep growing, or maybe even plan for your exit. It's here that businesses often see rapid growth in both revenue and cash flow as they get more comfortable with how they do things, but it's important not to get complacent. Ensure compliance and governance is given the priority it needs in your business entity, and keep a robust corporate record ' investors, auditors and regulators could all ask to view your entity data at any minute. As you expand, keep in mind that just because your business worked in one jurisdiction does not mean that it will automatically work elsewhere. Each new office should be treated as a new startup, with the appropriate level of research and analysis undertaken to inform any expansion strategies.

Stage 5: Maturity and possible exit

A mature business doesn't have to be one that's hitting the headlines as the talk of the town. Sometimes, a mature business chugs along with sustainable profit growth and loyal employees reaching long service leave time. Many mature businesses have a strong cash position, which makes them an attractive target for mergers or acquisitions. The business may also reach a position where it devolves into spin-offs for other products or services, and grows into a wider subsidiary group. Business owners at this final stage of the business entity lifecycle are focused on:

• How long the business can maintain and manage the appropriate rate of cash flow
• Expanding the business
• Finding and executing an exit strategy

Whether exit or further expansion is the end goal, entity data again plays a pivotal role. Any exit will involve robust analysis of the company's position both internally and externally, and the entity managers must be ready to efficiently and effectively get the right information to the right people at the right time.

Manage the five stages of a business life cycle with technology

So, what are the five stages of a business life cycle? Whether you're at seed, startup, growth, expansion or exit, you'll need to have strong entity management and an ability to interrogate real-time entity data that you know is accurate and up to date. Entity management software can help your business throughout its lifecycle by:

• Storing entity information and documents in a highly secure format to create a single source of truth
• Creating organizational charts to highlight gaps in entity data
• Managing the ongoing accuracy of the corporate record using compliance calendars, reminders and workflows for better data
• Reporting on governance and compliance requirements and electronically filing statutory forms into global regulatory bodies
• Integrating data from multiple business units like legal, tax, finance, treasury and compliance to build a single system of record for all corporate governance

Diligent Entities , a secure, cloud-based entity management software, also closely integrates with the board portal and secure file-sharing platform to create the Governance Cloud , helping you to fulfill modern governance requirements and deliver the right information at the right time. Get in touch and request a demo to see how Diligent Entities can help you, no matter which stage of a business life cycle you are currently at.

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Business Life Cycle: Definition, Stages, Examples

What is the Business Life Cycle?

What are the stages of the business life cycle, stage 1: startup, stage 2: growth, stage 3: maturity, stage 4: decline/renewal, example of a business life cycle.

Business owners need to be aware of the different stages in a company’s life cycle, regardless of which stage they are currently in. Knowing the key stages of the business life cycle and which one your company is now going through can help you better plan for the future. So what exactly are these stages? How can you tell which one you’re in?

Generally speaking, there are four stages in a business’s life cycle: startup, growth, maturity, and decline/renewal. However, the duration of these stages varies, and there are different indicators and factors to consider. In this article, you will learn about the various stages of the business life cycle and the most common milestones of each stage.

The business life cycle refers to the stages a business goes through over time: startup, growth, maturity, and decline/renewal. These four stages represent the financial evolution of a successful business. Each stage has a different duration and features unique milestones and indicators.

You may sometimes see the business life cycle represented by more than four stages, as some of the more complex stages are split into two. For example, the initial or startup stage is frequently divided into the development and launch stages. As you will see in the next section, the business life cycle is similar to the product life cycle but applies at the company level.

All businesses start with an idea that is nurtured and developed into a business plan and, eventually, a working business. This cycle has four main stages: startup, growth, maturity, and decline/renewal. However, the first stage is very challenging, and many businesses don’t make it past it.

This failure to reach later stages is sometimes due to unpredictable circumstances, but it is often the result of unclear or unachievable goals. To avoid surprises, business owners should know what to expect at each stage of the business life cycle. This allows you to set realistic objectives, especially for the initial stages. Below, you have descriptions of each stage and what you should expect in terms of financial indicators.

The first stage is extremely challenging. As a business owner, the startup stage is usually characterized by featuring no money and no sleep. In other words, you will be putting a lot of time and effort into getting your business off the ground, knowing that profits are still a long way away and you need to get some funding. It’s important to remind yourself that this is normal in the first stage and not a reason to throw in the towel.

To improve your chances of success, make sure you dedicate enough time to researching your idea. Your market research should cover supply and demand to help you design a viable and attractive business plan and proposal. Your objectives should be specific, measurable, and achievable. Vague and over-ambitious goals will likely lead to disappointment and are unlikely to attract investors.

Once you have secured funding, it’s time to create and launch your business. Depending on your industry and business model, this can take a while and incur many one-off expenses, including the launch. By this point, you’ve spent quite a bit of money without making any, so this part is exciting and scary in equal measure.

After the launch, your primary focus becomes making sales and growing your customer base. Depending on the industry, breaking even can take a long time, so profits are still in the future. Marketing expenses are likely to be a significant proportion of your spending.

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The growth stage begins once the goals and milestones of the first stage have been accomplished. Not all companies have managed to break even by this stage, while others may already be making a profit. This very much depends on the industry you are in and the type of products and services you offer. Regardless, your main objective at this stage is to grow your sales and customer base. This doesn’t mean that growth is only an objective during this stage, but at this point, it’s your priority.

In other words, your sales and your customer base are growing. If you hadn’t already, you’ll reach the break-even point and start seeing some profits. In many cases, it is at this point that the business owner can start drawing a salary. If your product or service is doing well, it’s an excellent time to seek more funding to expand your offer or your operations. If you offer multiple products or services, it’s also a great time to evaluate their performance and decide on their profitability.

This is the most stable stage, as you have some brand recognition and an established customer base. This doesn’t mean that growth stops, but it does slow down. You’re doing well in terms of both sales and profits, and your senior employees have some tenure, so they can handle day-to-day operations. As a business owner, you have more time to focus on improving performance and planning for the future.

In fact, the future should be one of your main concerns. In large part, this planning for the future is what will determine whether the next stage is decline or renewal. If you wait until there are clear signs of decline, it may be extremely difficult to reverse it. On the other hand, you may be more interested in selling the business than renewing it, which will also require planning.

As mentioned above, a company can renew itself through different strategies. However, it’s almost always down to changing your product or service offer and can involve some rebranding and remarketing of your business. This is sometimes possible when the company is already in decline, but the more you delay, the harder it will be.

Some business owners prefer to sell the company rather than reinvest in renewal. In that case, you will need to evaluate your company’s worth and prepare the required financial statements and documentation. Finding buyers and negotiating the terms of the sale can be an extended process. If you take too long to decide whether to sell or reinvent your business, you may not get to decide at all. Sales and profits may dwindle to the point where you can’t find any buyers.

However, by knowing and understanding these stages ahead of time, your odds of success have already increased a little. If you do your research and plan carefully but flexibly, you can improve your chances by a lot more.

Discover what Cohorts and Customer Retention are, examples of each, and what good retention or cohort should look like.

You can find examples of the business life cycle stages in any industry. Of course, the evolution is easier to understand in hindsight and even more so as an objective third party. In other words, make sure you do some research to find examples of companies similar to yours since it could provide valuable insights.

When it comes to huge companies like Blockbuster Video, you have a lot of information available. In fact, you have detailed reports published by financial institutions. You can see how the company progressed through each stage. Founded in 1985, the company had a short startup period before it saw significant growth, then massive growth. At its peak, Blockbuster had over 9000 stores around the world. However, around this same time, Netflix and similar companies came into the picture, forcing Blockbuster into a decline. Despite many attempts to renew, the company could not recover and filed for bankruptcy protection in 2010.

As you have seen, there are four main stages in a business life cycle. However, since they are different in terms of duration, complexity, and milestones, some of these stages are sometimes broken down further for a total of more than five stages. For instance, the startup stage requires specific steps in terms of developing the idea, acquiring funding, and launching the business.

Regardless of how many stages you feel more comfortable working with, you will need different types of software to help you pull this off. Fortunately, you have great tools available to help you execute and manage your business. Accurately recording and analyzing your financial data is extremely important, and tools like Google Sheets or Microsoft Excel are of great help.

As your business grows, managing your data can become time-consuming and repetitive. Using a tool like Layer, you can effortlessly synchronize your data across multiple formats and locations. Additionally, you can automate repetitive tasks and schedule updates, saving valuable time. You can easily manage access to your data, assign tasks and monitor progress, and automatically share reports with your team and other interested parties.

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What Is The Business Model Life Cycle? (Things You Should Know)

The business model life cycle consists of several different stages. These stages are directly reflected in the business as a whole. So, knowing the life cycle of the business model and the requirements of each step prepares you to make the right decisions for your business.

The business model life cycle refers to the various stages that a business model goes through from inception to end. The business model life cycle consists of four stages: startup, growth, maturity, and renewal. These stages differ from each other completely.

The business model life cycle stages:

Start-up stage

Growth stage, maturity stage.

• Renewal stag e

Each stage of the business model requires different strategies and tactics. Experiments confirmed that the main reason companies fail is the failure to consider each stage’s requirements. Therefore, this article will show you the business model life cycle stages step by step to be knowledgeable enough to lead your business. Let’s get started.

Table of Contents

What is the business model?

A business model describes the strategies and tactics a company pursues to achieve its goals. Therefore, it explains how the company creates a product/service, communicates with its customers to provide this service, makes a profit, etc.

The business model canvas is used as a tool to describe the business model, as shown in the image below.

Use and Download the Business Model Canvas template here.

Moreover, to learn more about the business model and describe it, you can read the “ How To Describe Your Business Model ” article.

We suggest attending the  Free Training  course  How to Build a Startup for more details on this subject and related topics.

The importance of studying the life cycle of the business model

According to a report by research firm “Genome”, 90% of startups fail primarily because of self-destruction, due to their founders’ bad choices, not because of bad luck or market conditions beyond their control.

Each stage of the business model has its requirements. Therefore, your understanding of these stages and their requirements helps you make the right decisions and choices that fit the business model stage.

Understanding your business model’s stage helps you overcome difficulties because you know the potential problems and obstacles you might face at each step before you move on.

Finally, understanding your business model life cycle is key to ensuring the success of your business and not making the wrong decisions that could lead to your business failing and leaving the market.

Business model life cycle

The business model has four main stages: startup, growth, maturity, and renewal. The following paragraphs will discuss the nature of these stages and their specific requirements.

You can see that the life cycle of the business model is similar to the life cycle of companies and products. This is because they are closely associated with each other. The business model life cycle dominates companies’ and products’ life cycles.

The business model at this stage is the founder of the company’s assumptions and guesses. These assumptions are unproven.

Since the initial business model is based on the assumptions and guesses made by the company’s founders, the priorities are to obtain a business model based on facts and reflect the reality of the market. This is done by testing assumptions and adjusting them to market reality. Therefore, this stage is called “searching for a business model”.

At this stage, spending should be minimized as much as possible. The focus should be on preparing experiments to test and validate the business model until a suitable business model is obtained.

The most important questions the company is looking for answers to during this stage are:

• How do you produce products?
• Does the product meet customer desire and expectations?
• What is the procedure to get, keep, and grow customers?
• Can you get enough customers to scale-up the business?

This stage has its tools and methods. One of the essential methods used at this stage is the Lean Startup methodology.

This methodology aims at getting to the suitable business model as quickly as possible and at the lowest cost.  For more information on the Lean startup methodology, you can refer to the “How Startup Works and Run Startup” article.

Usually, the founders of companies manage this stage because of their ability to make critical and rapid decisions to build a business model.

When the company obtains the appropriate business model, the startup stage ends, and the quest for growth begins.

Also, you can evaluate your business model if it is suitable or not by using the business model metrics. To learn more about these metrics, see the “ Business Model Metrics ” article.

The concern of companies in the growth stage is how to obtain adequate funding to reach optimal production levels that make profits.

Therefore, in the growth stage, the company is looking to expand its customer base and raise production to reach the required production levels.

Also, at this stage, a company manager is appointed to build the organizational structure suitable for the growing stage requirements.

Moreover, the nature of this stage is a rapid transition stage associated with obtaining financing for growth. Companies that do not receive funding may be suspended at this stage until they exit the market.

At this stage, the business model may need minor adjustments to match the size of production and marketing to which the company aspires. These amendments are only in the form of improvements in procedures and the addition of necessary activities.

No substantial changes should be made to the business model because this requires the company to return to the previous stage and conduct the necessary tests to ensure the correctness of these changes.

The business model at this stage is at its best. It has stabilized the company so that it can overcome most challenges.

Also, at this stage, the company has the market experience and has enough profit to continue. Fears of failure and collapse have become a thing of the past.

Due to the stability of the business model, the company focuses on building an administrative system based on the business model and market requirements. For example:

• The company focuses its attention on stabilizing its market position by monitoring market development and competitors’ movements, monitoring growth opportunities, and dealing with market threats.
• The company is developing its management system in line with the growth that has taken place, as well as using more professional management methods, such as budgets and strategic planning.

The development of the management system and business process aims to enable the company to deal optimally with promising market opportunities and overcome the stage’s threats to ensure continued long-term success.

Renewal stage

At this stage, the business model has become obsolete and has not been able to cope with market changes and customer tastes fluctuations.

The company’s business model has not overcome the most innovative companies on the market, and the company is gradually losing its customers.

A classic example is usually cited in this case: the typewriter producer that once prevailed; when the computer appeared, customers tended to use it for printing instead of a typewriter. Any company working in this area, unable to switch to producing a different product in time, faced severe collapse and downtime.

Companies at this stage have two options: to fail and get out of the market or renew their business model by inventing new methods and products.

If the company can renew itself and invent a new business model, it will return to the beginning of a new life cycle. This is why it is called the “renewal phase.”

The business model represents the company’s heart; therefore, there is a direct impact and a great match between its life cycle and the company’s life cycle.

Also, each stage of the business model has its requirements, and your knowledge of these stages and needs helps you make the right decisions and choices.

The business model goes through four main stages during its lifetime:

Startup stage: The business model consists of the assumptions and expectations of the company’s founders. These assumptions need to be tested. Therefore, this stage is called “searching for a business model”.

Growth stage: After testing the business model and making sure it is the correct one, at this stage, the company aims to reach the optimum levels of production to make profits. The business model, at this stage, may need some improvements to suit the scale of growth required, but no substantial changes should be made.

Maturity stage: The business model at this stage is at its best. Moreover, it has achieved a degree of stability to overcome the most sudden and unexpected circumstances.

Renewal stage: At this stage, the business model is obsolete and has not been able to keep pace with market changes. The company has two options: to fail and get out of the market or renew its business model by inventing new methods and products.

Each stage of the business model requires different strategies and tactics. So, knowing the life cycle of the business model and the requirements of each step prepares you to make the right decisions for your business and prevent your business from failer.

Related Articles:

• How To Describe Your Business Model ?
• What Are The Business Model Metrics? How Do You Evaluate Any Business Model?
• Customer Development Vs. Marketing
• 5 Reasons Why Customer Development Must Be Done By Founders?
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• When To Use the Business Model Canvas?
• Why Do You Need The Product Market Fit?

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Understanding the Business Life Cycle

In this guide, we’ll be taking you through the life cycle of a business from launch to maturity and whatever comes after. We’ll examine the four phases of business growth:

By the time we reach the mysterious fifth stage, you’ll have a blueprint for success for your business.

The Purpose of the Business Life Cycle

Although all businesses are inherently unique, they often follow a similar trajectory. In fact, if you plot a business’ journey from conception to present on a timeline, you’ll usually see five distinct phases. It’s similar to how people grow and mature; the business life cycle shows businesses maturing from infancy through adolescence to adulthood and eventually, old age.

According to the Startup Genome Report, 90% of small businesses fail. To be clear, almost all businesses start as small businesses before processing through the stages of business growth. And when a business does fail, it doesn’t usually happen right away.

Why? It often boils down to poor planning, preparation, and decision-making.

The business life cycle may have originated as an analytics tool, but it’s increasingly used as a business blueprint. Since it outlines the trajectory of a business, entrepreneurs can use the business life cycle to build stronger, healthier businesses.

The 4 Phases of Business Growth

Of the five business cycle phases, the first four relate to starting, growing, and sustaining a business. Those four stages also make up the majority of the life of a business. Don’t worry, we’ll cover the fifth stage a little later.

The stages of business growth have been labeled and re-labeled many times. However, the most straightforward, accurate model consists of these four stages: launch, growth, shake-up, and maturity.

Phase 1: Launch

Before it grows and matures, a business must be launched. This requires an investment of resources to get the business off the ground. However, revenue is low because the business is new and doesn’t have an established base of customers. This makes launch the least profitable time for a business. It’s often considered the riskiest of all phases , too.

The most important thing to remember about the launch phase is that it shouldn’t be rushed. Putting time and effort into a launch is how you build a strong business.

Additionally, keep sustainability in mind. Hiring is a prime example. Aim for a sustainable balance with your hiring. If you’re overstaffed, the unnecessary payroll eats into your revenue; if you’re understaffed, your business is less productive.

Launch can be further broken into two distinct sub-phases: development and startup.

Development

Development refers to the initial idea and the research that follows. For most failed businesses, the problems can be traced back to insufficient development. No matter how much you may like your idea, you need to know whether it’s actually worth pursuing. In other words, is the idea profitable ?

After verifying the idea is worth pursuing, you can begin preparing for launch. For ecommerce, this means you need a website, which in turn, means finding a web host and hosting plan. Make sure the website can accommodate the amount of traffic you expect to get.

From there, you’ll need to set up WordPress, design the frontend, and set up WooCommerce . Depending on the site, this can require considerable resources, or it could be as easy as installing a theme.

If you’re not using a managed hosting solution, the site will also need to be extensively tested. A major post-launch crash would really hurt the reputation and stability of a brand new business.

Keep in mind that these are all things that need to be ironed out before you even begin to think about marketing, social media, and the actual launch.

Once you’ve done the research, finished your testing, and gotten everything ready, it’s time to launch. In other words, you’re ready to make your ecommerce site available to the public.

Phase 2: Growth

If it’s a newborn at launch, then a business is an adolescent during the growth phase. At this point, the business is establishing an identity. In other words, the business owner is figuring out what works and what doesn’t work for the business.

After minimal returns in the launch phase, the growth phase sees revenue increasing steadily. This allows pricing to remain level (or possibly even decrease) as the business pushes past the break-even point . With the business now profitable, the owner starts looking for opportunities to grow the business. The goal is to further boost revenue and more specifically, profits.

So how do you boost profits during the growth phase? Typically, business owners focus on three important components: marketing, sales, and scaling.

Marketing is arguably the most important ingredient for growth. The idea is that with climbing revenue as proof of concept, marketing will increase reach and bring in more business.

Additionally, since overall revenue is higher, business owners can afford continuous marketing. Key advertising platforms like Google Ads and Facebook Ad Manager can bring in even more business, so revenue continues to increase.

In addition to marketing, sales is another major focus during the growth stage of the business growth cycle. It’s even common for businesses to establish designated sales teams during this stage of growth.

With a growing focus on sales, businesses transition from a passive business strategy to being more proactive.

In terms of business, scaling refers to increasing the capability and capacity for growth. Every business owner wants to see his or her business become a success. However, a business needs to be able to support increased capacity without compromising capability.

The purpose of scaling is to increase capacity to meet higher demand. Therefore, scaling is primarily a question of logistics. For instance, you need to consider whether you have space and capital to support expanded inventory. You also need to consider whether your supplier(s) have the production capacity to fulfill larger orders.

Phase 3: Shake-Out

After significant growth, the shake-out period sees revenue increasing at a much slower rate. This typically occurs because of market saturation or an influx of new competitors, or possibly a combination of the two.

Even though sales are still increasing during this period, profit actually begins to decrease. This can be attributed to a combination of two factors:

• Revenue growth has slowed.
• Cash flow has either remained the same or increased.

During the shake-out period, sales reach their peak, but they may begin to decline if cash flow doesn’t decrease.

The best way to prevent a sales decline is to minimize expenses. Since revenue growth has slowed, you must compensate by reducing your expenses. This reduction can be achieved by revisiting the business expenses, such as marketing, inventory, and general operating expenses.

Phase 4: Maturity

Like a person nearing retirement, maturity is the stage of business growth where sales and revenue have really slowed down. However, the business is still fairly resilient with consistent revenue. On average, annual revenue growth is about 5% per year . Then at a certain point, profits begin thinning, too.

One of the key challenges that business owners face in the maturity stage is the increased competition. By this point, it’s likely that many competitors with similar businesses have emerged. These new competitors benefitted from being able to reinterpret products in novel ways.

Having reached the maturity stage, the business growth cycle comes to a close. At this time, many business owners begin thinking about the next steps or potentially an exit strategy.

The Final Phase of the Business Life Cycle: Renewal

The business life cycle is a model for the future so you know what’s in store for your business. In turn, you can make decisions now that minimize the likelihood of undesirable outcomes.

The implication of the business life cycle is that just as there’s a beginning for a business, so too, there is an end. As the business winds down, the owner can start to consider a new direction for his or her life — but businesses don’t actually have to end. Or at the very least, the end can be significantly delayed.

Most iterations of the business life cycle have the fifth stage as decline. In other words, they portray the fifth stage as essentially the beginning of the end for businesses. But in reality, you have a choice.

When your business reaches maturity, you’re faced with an important decision: Do you want to exit the market or revitalize your business?

The decline stage closes the life cycle that started with development and launch. Sales and revenue continue to shrink until profits dry up completely. The business owner returns to much the same place as when the journey began, much like a bell curve returning to zero.

How To Delay the Decline

When the decline has already started, it’s harder — albeit not impossible — to stop. Because any strategy for delaying or mitigating decline almost always requires cash flow, meaning there needs to be consistent revenue.

One of the go-to solutions for staving off decline is to allocate a larger budget to marketing. Specifically, a business owner can try some marketing tools that haven’t already been used like social media or affiliate marketing .

Another option would be to find ways to incentivize purchases. For instance, customer loyalty reward programs encourage repeat business. Customers are more likely to make purchases and make more frequent purchases when loyalty programs are offered. These programs also reward customers who have continued to make purchases throughout the life cycle of your store.

How To Begin Renewal

Instead of letting years of hard work go to waste, the fifth stage can alternatively be a period of renewal for a business. In other words, it’s time to make a triumphant return.

In this phase, business owners step back to reassess their businesses. They look for growth opportunities and ways to realize them. The idea is to breathe new life and relevance into the business which often makes the renewal phase a time for creativity, exploration, experimentation, and innovation.

So how do you renew a business? The obvious way would be to tap into emerging markets and product trends. When trending products are actually related to the current industry, this option is particularly appealing. However, you shouldn’t ignore a promising product solely because it’s unrelated to your current industry. In fact, it’s possible that changing directions could make the new iteration of your business even more successful than it was before.

Once a plan for renewal is in place, the business will likely return to the growth stage of the business growth cycle.

What the Business Life Cycle Can Do for You

Now that you’re familiar with the business growth and life cycles, what can you do with them?

Ultimately, the value of the business life cycle is that it lets you plan for what’s to come. When you’re familiar with the business life cycle, you gain insight into the overall trajectory for your business. In turn, you can make smarter decisions that lead to higher revenue , higher profits, and more longevity for your business.

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Business Model Innovation Through the Lens of Time: An Empirical Study of Performance Implications Across Venture Life Cycles

• Original Article
• Open access
• Published: 28 October 2021
• Volume 73 , pages 339–380, ( 2021 )

Cite this article

You have full access to this open access article

• Elena Freisinger 1 ,
• Sven Heidenreich   ORCID: orcid.org/0000-0003-2278-0610 2 ,
• Christian Landau 3 &
• Patrick Spieth 4  

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Current literature suggests that the innovation of a business model is among the most important success factors for organizations and has a positive influence on their performance. What is not yet clear, however, is how this relationship unfolds during an organization’s life cycle. We posit that business model innovation strongly contributes to firm performance in earlier phases, but ultimately gets less important. We therefore collected data on 250 organizations in Germany and used structural equation modeling for analytical purposes. We make the following two main contributions to the literature: (1) We confirm recent findings about the positive impact of business model innovation on performance; (2) we provide first empirical evidence for the important role of life cycle stages as moderator with regard to this relationship. With respect to the latter, our findings show that business model innovation is an important pathway of organizations, especially in their early years of existence, yet somewhat diminishing over time. In conclusion, this study opens new research avenues by extending and incorporating explanations for the life cycle theory and business model innovation.

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1 Introduction

Novel business models appear to play an important role in disrupting entire industry dynamics and changing “the way people live, work, consume, and interact with each other” (Demil et al. 2015 , p. 2). Uber, for example, a new venture founded in 2009, bypassed the traditional licensing system of taxi companies by offering a location-based app that allows individuals to hire a private on-demand driver (de Jong and van Dijk 2015 ). Similarly, bitcoin-based business models successfully disrupted the way traditional banking institutes made business for decades (de Jong and van Dijk 2015 ). Anecdotal evidence shows that profitable business models do not necessarily entail a better or more innovative product, but change the game of the industry (Afuah 2014 ). Hence, it is not surprising that design of successful novel business models have turned into a key strategic priority for managers in multiple industries (Chesbrough 2007 ; Johnson et al. 2008 ; Massa et al. 2017 ). Managers of incumbent firms and entrepreneurs are increasingly using the business model concept in order to understand and to rethink novel ways on how to achieve their company’s goals (Laudien and Daxböck 2017 ; Massa et al. 2017 ). Yet, not only in practice but also in academia, business models are a largely discussed topic spanning almost all disciplines of economics, e.g., technology and innovation management (e.g. Tripsas and Gavetti 2000 ; Tucci and Massa 2013 ), strategy (e.g. Casadesus-Masanell and Zhu 2013 ; Suh et al. 2020; Teece 2010 ), and sustainability (e.g. França et al. 2016 ; Klein et al. 2021; Snihur 2016 ). Ever since the concept has firstly been brought to academia, business model innovation (BMI) is considered as a source of competitive advantage (Casadesus-Masanell and Zhu 2013 ; Demil and Lecocq 2010 ; Teece 2010 ) that ultimately leads to financial performance (Foss and Saebi 2017 ). This prominent link is somewhat the crux, but also the cornerstone of business model research.

Up until 2021, research on BMI is still very much on the rise fueled through recent empirical studies showing that BMIs are a source of competitiveness and competitive advantage (Clauss et al. 2019 a; Teece 2010 ; Wirtz et al. 2010 ), with “the potential to improve enterprise performance” (Lambert and Davidson 2013 , p. 676) or even change the market equilibrium (Trabucchi et al. 2019 ). As a result, in the last twenty years, a growing body of literature is showing a strong interest in BMI denoted as a “new subject of innovation, which complements the traditional subjects of process, product, and organizational innovation” (Zott et al. 2011 , p. 1032). However, besides many others, especially the effect-side of BMI has been paid considerable attention to, but a systematic understanding on how BMI contributes to firm success is still lacking (Foss and Saebi 2017 ). So far, only a handful studies were able to describe this widely-stated association but mainly in a correlational way and without considering the dimension of time (Foss and Saebi 2017 , 2018 ). Yet, almost twenty years after the advent of business model research, it is still not clear, whether BMI is beneficial to the firm at all (Foss and Saebi 2017 , 2018 ). What we know so far is largely based upon empirical studies that investigate how different business model designs contribute to performance effects (e.g., Wei et al. 2014 ; Zott and Amit 2007 , 2008 ). Current studies have shown that environmental factors, e.g., environmental dynamism (Pati et al. 2018 ), environmental turbulence (Schrauder et al. 2018 ), and environmental resource munificence (Zott and Amit 2007 ) influence the relationship. Yet, besides a handful studies, effect-side BMI research has failed to examine contextual factors, such as firm age, firm size, firm characteristics as well as a firm’s focal value proposition. First empirical studies acknowledge that performance implications differ across firms in their early or late life cycle stages in case of a more efficiency-centered business model design (Brettel et al. 2012 ), a paucity of studies, however, remains investigating the impact of the innovativeness of the business model on performance implications for new ventures and more established firms. In a similar vein, research has so far lacked to account for different firm-types, i.e., product- or service-oriented firms, and how their engagement in BMI and the resulting performance implications varies for new and more mature ventures.

In order to improve our understanding, this paper explores the prominent relationship between BMI and firm performance by (1) providing a systematic literature review of empirical studies investigating this relationship, (2) presenting further empirical evidence on the beneficial character of BMI, (3) examining the moderating influence of early and late life cycle stages, and (4) comparing the findings for product- and service-oriented BMIs. We therefore collected data on 250 new and more mature ventures in Germany and used structural equation modeling for analytical purposes. We make the following two main contributions to the literature: (1) we add further evidence to the body of knowledge of effect-side research of BMI, and (2) we bring new contingency factors into the discussion. The paper first gives a systematic literature review, followed by hypotheses derivation. The next section emphasizes the study’s research design and methodology, afterwards we present our results. The last section draws these findings together, discusses its implications for theory, as well as for practice, and concludes with limitations and avenues for further research.

2 Systematic Literature Review

2.1 systematic literature review of the effect-side of bmi research.

In order to grasp the amount of current knowledge on the relationship between BMI and firm performance, we conducted a systematic literature review using the procedure suggested by Denyer and Tranfield ( 2009 ). By executing a systematic search in three scientific databases, namely in EBSCO Business Source Complete, Elsevier-Science Direct, and Scopus, we not only focused on the search term “business model innovation”, but also included the expression(s) “business model design”, “business model development”, “business model renewal” or “business model change” which are used interchangeably for the same phenomenon (Foss and Saebi 2017 ). The search terms had to be included either in the title, the abstract, or in the keywords of peer-reviewed articles between 2000 and December 2020 and by that we identified 1676 articles after removing duplicates. In a next step, we applied an objective criterion (Denyer and Tranfield 2009 ) to assess the relevance of each study. More specifically, we excluded articles which were not ranked A+, A, or B in the VHB-JOURQUAL Footnote 1 ranking to ensure quality as well as theory-focused work. However, we included all articles from the Journal of Business Models, a journal devoted to establishing the discipline of business models as a separately recognized core discipline to get a thorough picture of the literature. This resulted in a total of 397 articles. Furthermore, we reviewed and coded the remaining articles using the MAXQDA software and eliminated publications without a primary focus on BMI; 260 articles were eventually deemed as a fit for our research purpose. We again reviewed and assigned these articles into the categories of antecedents, process, construct, and effects. We found a large volume of published studies describing the role of organizational and individual antecedents ( n  = 85), research investigating the act of designing and implementing BMIs ( n  = 75), and investigations into the construct itself ( n  = 75). However, only a small proportion of studies has devoted its attention to the effect-side of BMI ( n  = 40), yet with a certain increase in recent years (for an overview see Table  1 ).

What we know about BMI performance relationship is largely based upon four types of empirical studies that investigate how BMI impacts performance. The first type encompasses the activity system view (Zott and Amit 2010 ) and investigates how different design themes (Zott and Amit 2007 ) impact performance variables such as firm performance (Brettel et al. 2012 ; Wei et al. 2017 ), technological innovation performance (Hu 2014 ), start-up’s growth performance (Balboni et al. 2019 ), or small and medium-sized enterprise (SME) performance (Pati et al. 2018 ). Another stream of effect-side research, the element-based view (Clauss et al. 2019 b) connects the innovativeness of the business model with different outcomes, such as strategic flexibility (Spieth and Schneider 2016 ), internal corporate venturing performance (Futterer et al. 2018 ), and again firm performance (Clauss et al. 2019 a). A third type of studies examines the effects of different aspects that come along with BMI, such as different types of revenue models (Konya-Baumbach et al. 2019 ), product- and service-orientation (Visnjic et al. 2016 ), or technology and consumer orientation in BMIs (Guo et al. 2020 ), as well as business model adoption (Karimi and Walter 2016 ) and business model imitation behavior (Frankenberger and Stam 2020 ). While these study entail an inside-firm perspective, the fourth type and more recent research shift to a customer-oriented view and examine the effects of BMI on customer satisfaction (Clauss et al. 2019 b), adoption intention (Futterer et al. 2020 ), and brand loyalty (Spieth et al. 2019 ).

With respect to potential benefits, these studies point to the fact that BMI is a powerful predictor for firm performance (Cucculelli and Bettinelli 2015 ; Karimi and Walter 2016 ; Visnjic et al. 2016 ). However, many questions remain in this young field of study. First, while the majority of the studies connects different business model designs with firm performance, more research is needed examining the impact of the innovativeness of business models within the element-based view. There are relatively few current studies that indeed present first evidence for the beneficial character but replicating these studies in different contexts might shed new light on the most prominent statement in the BMI literature. Second, while few studies have integrated contingency and moderating variables in their research, there are many factors that may influence the strength of that effect. Current studies have shown that environmental factors, e.g., environmental dynamism (Pati et al. 2018 ), environmental turbulence (Schrauder et al. 2018 ), and environmental resource munificence (Zott and Amit 2007 ), influence the relationship. Yet, besides a handful studies, effect-side BMI research has failed to examine contextual factors, such as firm age, firm size, firm characteristics as well as a firm focal value proposition. Yet, in combination with an element-based approach, the exploration of contextual factors holds the potential to deepen our understanding of the BMI performance relationship. Previous studies have indicated that BMI performance relationship is especially contingent on the factor time (Balboni et al. 2019 ; Foss and Saebi 2017 ; Pati et al. 2018 ), but a clear understanding of the impact on the effect strength is still missing. In the following, we will first discuss the core assumptions of BMI research and subsequently develop an understanding on how different life cycle stages affect this relationship and discuss how this relationship might further vary for product- and service-oriented BMIs.

2.2 Business Model and Business Model Innovation

For a long time, business models have mainly been used as a template or narrative device to understand and communicate a firm’s current activities by managers (Massa et al. 2017 ). In 2003, Mitchell and Coles moved the idea of managers having the ability to purposefully change a business model into the spotlight (Foss and Saebi 2017 ). By adding the additional dimension of innovation (Foss and Saebi 2017 ), business models have eventually become a potential unit of innovation that “complements the traditional subjects of process, product, and organizational innovation” (Zott et al. 2011 , p. 1032). A business model is a formal conceptual representation of a company (Massa et al. 2017 ) and thereby reflects the “design or architecture of the value creation, delivery, and capture mechanisms” of a firm (Teece 2010 , p. 172). In terms of conceptualization, two dominant views have emerged (Clauss et al. 2019 b): the activity system perspective (Casadesus-Masanell and Ricart 2010 ; Zott and Amit 2010 ) views business models as holistic systemic structures that encompass all activities of a company as well as how and when these activities are carried out (Zott and Amit 2010 ); the element-based perspective approaches the business model construct as a modular set of elements consisting of three (Bocken et al. 2013 ; Clauss 2017 ; Spieth and Schneider 2016 ) or of four elements (Baden-Fuller and Haefliger 2013 ; Futterer et al. 2018 ; Johnson et al. 2008 ; Osterwalder et al. 2010 ). This understanding is rooted in the dynamic perspective on business models (e.g., Casadesus-Masanell and Ricart 2010 ; Demil and Lecocq 2010 ; Martins et al. 2015 ), which refers to dynamic interactions among various business model elements (Casadesus-Masanell and Ricart 2010 ; Demil and Lecocq 2010 ). In the following, we will draw on latter one as the element-based view is generally considered as the cornerstone for BMI research (Clauss 2017 ; Futterer et al. 2018 ; Spieth and Schneider 2016 ). According to the element-based view, business models consists of four interrelated elements, namely (1) value offering, (2) internal value creation, (3) external value creation, and (4) financial architecture (Futterer et al. 2018 ) that capture a firm’s foundational processes (Foss and Saebi 2017 , 2018 ; Saebi et al. 2017 ). The first element, which reflects the value offering of a company, comprises the products and services offered to the target market (Demil and Lecocq 2010 ; Yunus et al. 2010 ), the internal value creation element integrates the methods, processes, structures, and competencies within the company’s value chain (Demil and Lecocq 2010 ; Dubosson-Torbay et al. 2002 ; Osterwalder et al. 2005 ), the third element—the external value creation—describes the relationships with external partners, stakeholders, and distribution channels (Kindström 2010 ; Yunus et al. 2010 ) and the financial architecture element constitutes the company’s revenue mechanisms and cost structure (Chesbrough 2007 ; Osterwalder et al. 2005 ; Yunus et al. 2010 ).

BMI itself is a transformation process that purposely alters the key elements of a business model (Bucherer et al. 2012 ; Clauss et al. 2019 a; Tucci and Massa 2013 ) and nontrivial changes to these key elements of a firm’s business model eventually result in a BMI (Foss and Saebi 2017 ). Firms can either innovate single elements or introduce a whole new business model (Foss and Saebi, 2017 ). While changing “of at least one core element is the necessary condition for BMI to be given, the sufficient condition is represented by a subsequent change of the BM’s underlying logic” (Futterer et al. 2018 , p. 2). Since even the change of one core element induces (minor) changes in other elements as well (Demil and Lecocq 2010 ; Johnson et al. 2008 ), innovating only one element often requires reconfigurations of the business logic and thus may constitute BMI (Foss and Saebi 2017 ). In case of established firms, BMI is deemed either the change of an established business model (Amit and Zott 2012 ; Zott and Amit 2013 ) or the creation of a new innovative business model that is added to their portfolio (Snihur and Tarzijan 2018 ). For new ventures, BMI is typically the creation of a new innovative business model (Foss and Saebi 2018 , 2017 ). Eventually, the reference point for the innovation is either its newness to the firm or its newness to the industry (Foss and Saebi 2017 ).

3 Conceptual Development

3.1 business model innovation and firm performance.

Innovation means “doing something new”, e.g., developing new products, new processes, new markets (Schumpeter 1934 ), and now new business models (Taran et al. 2015 ). In new product contexts, innovation is considered as the extent a new product differs from already existing ones (e.g., Cillo et al. 2010 ; Cooper and Kleinschmidt 1987 ; Danneels and Kleinschmidtb 2001 ), meaning innovativeness is the difference between old and new (Garcia and Calantone 2002 ). More precisely, innovativeness covers the amount of newness relative to a certain base, such as the world, the industry, the firm, or the perception of the customer (Calantone et al. 2006 ; Garcia and Calantone 2002 ). In case of business models, innovativeness captures the relative amount of newness to the focal firm (e.g., Osterwalder et al. 2005 ; Spieth and Schneider 2016 ) or to the industry (Amit and Zott 2012 ; Snihur and Tarzijan 2018 ) depending on the perspective. Hence, following the interpretation that business models are attributes of real firms, being innovative in doing business means executing value-adding activities such as value creation and/or value capture (Massa et al. 2017 ) in the core elements of a business model, namely value offering, internal value creation, external value creation, and financial architecture.

According to Lepak et al. “value creation depends on the relative amount of value that is subjectively realized by a target user (or buyer) who is the focus of value creation—whether individual, organization, or society—and that this subjective value realization must at least translate into the user’s willingness to exchange a monetary amount for the value received” (Lepak et al. 2007 , p. 182). The value creation is typically described in the most integral part of a business model in the value offering element that comprises the products and services offered to the target market (Futterer et al. 2018 ). Such changes optimize the resources and competencies employed more toward customers’ preferences and are more tailored toward customers’ needs, enhancing customer satisfaction (Futterer et al. 2020 ). By innovating the value creation in a way that it delivers greater value to the target market a company is able to outperform its competitors (Normann and Ramirez 1994 , 1993 ; Porter 1985 ). Furthermore, business models also describe the value capture domain: “value may be captured by the use of resources with attributes that make them difficult to imitate, through the source’s own use of creative destruction before competitors can use the innovation, and through methods of resource management” (Lepak et al. 2007 , p. 189). Value creation in business models is reflected in the internal value chain, relationships with external partners, and the financial architecture of a company; i.e., all activities necessary to monetize the value created (Massa et al. 2017 ). Hence, being more innovative in the respective business models elements, leads to cost reduction, process optimization, accessing new markets, and eventually to financial performance improvements (Foss and Saebi 2017 ). This indicates a positive link between business model innovativeness and financial performance improvements.

Therefore, we assume the following—

BMI has a positive effect on firm performance.

3.2 Business Model Innovation and Life Cycle Stages

While prior research often emphasizes BMI as the holy grail for achieving firm performance, more recent research indicates that innovated business models are not always necessarily better than existing business models, such that positive performance implications often strongly depend on contingency factors (Casadesus-Masanell and Ricart 2010 ; Futterer et al. 2020 ; Kranich and Wald 2018 ). Understanding the contingency mechanisms that unfold BMI into positive firm performance implications is of utmost importance for many firms. Yet, effect-side BMI research neglected to thoroughly discuss contingency factors of this valuable relationship. So far, recent research acknowledges that the performance implications of firms might differ across early and late life cycle stages depending on the business model design, i.e., either novelty- or efficiency-based, they have chosen (Brettel et al. 2012 ). Yet a more in-depth understanding is still missing. Both, young ventures and more established firms possess a unique bundle of resources and capabilities depending on their individual life stage that provide benefits and weaknesses (Carr et al. 2010 ). These benefits and weaknesses have an influence on the ventures capability to create and capture value from its BMI (Pati et al. 2018 ). Organizations grow in a predictable pattern (Hanks et al. 1993 ) and move through different life cycle stages (e.g., Gaibraith 1982 ; Kazanjian 1988 ; Laudien and Daxböck 2017 ; Quinn and Cameron 1983 ; Smith et al. 1985 ). Every venture’s life begins with a startup or birth stage, moves through certain growth stages, and ends with a form of maturity or with the decline of an organization (Hanks et al. 1993 ). Due to conceptual vagueness and a lack of distinctness concerning the individual stages (Hanks et al. 1993 ), scholars typically differentiate the early and late life cycle stages of ventures (e.g., Brettel et al. 2012 ; Dodge et al. 1994 ; Engelen et al. 2010 ).

More established firms have typically gained some form of stability and execute a viable and working business model. These firms typically capture more value from their experiences, well-functioning processes, established routines and long-term partnerships (Kotha et al. 2011 ). In case of more established SMEs—or firms in their later life cycle stages—BMI means either the change of an existing business model (Amit and Zott 2012 ; Zott and Amit 2013 ) or the creation of a new innovative business model that is added to its portfolio (Snihur and Tarzijan 2018 ). This may happen due to several reasons, e.g., new entrants in the market (Dewald and Bowen 2010 ), disrupting power of new technologies (Sabatier et al. 2012 ) or a general emphasis on innovation in a company (Sorescu et al. 2011 ). Firms in their later life cycle stages have already gained a good sense of their environment, such as their market, customers, and partners (Zahra and George 2002 ). However, changing an existing business model, like Xerox did when switching from selling copiers to leasing them (Chesbrough and Rosenbloom 2002 ), comes also with idiosyncratic challenges for the innovating firm, such as path dependencies, organizational inertia, new management processes, and types of organizational learning (Tucci and Massa 2013 ). The performance effects realized through a BMI might get mitigated by the transition process the company undergoes.

In contrast, new ventures, or firms in their early life cycles stages, are typically created to pursue unexploited opportunities (Dahlqvist and Wiklund 2012 ), are characterized by smaller firm size, lower age, a more uncertain environment and a different structure (Brettel et al. 2012 ), and have to take on a long journey before overcoming their liability of newness (Stinchcombe 1965 ). In new ventures, business models are an important device to narrow down the initial entrepreneurial idea into a describable opportunity (George and Bock 2011 ). In case of new ventures, BMI means the deployment of an innovative business model right from their inception (Foss and Saebi 2017 ). The reference point for innovation in this case is the industry. Uber, for example, outperformed established taxi companies, that offered the traditional licensing system, by providing a location-based app and a taxi service via private drivers (de Jong and van Dijk 2015 ). By being more innovative with their business models than their competitors, they are doing better in creating and capturing value, which ultimately leads to greater firm performance. We argue that this effect is stronger for young ventures in their early life stages for several reasons. First, new ventures tend to have a stronger business sense with less complex decision-making mechanisms, less inefficiencies in their processes, and less rigid structures (Thornhill and Amit 2003 ). Furthermore, younger ventures deploy an atmosphere of creativity and have clearer information channels (Zaheer and Bell 2005 ). New ventures have not yet built formalized processes and standardized work procedures (Engelen et al. 2010 ), since they have to constantly adapt to new and unknown situations (Roure and Keeley 1990 ). These characteristics of ventures in their early years of existence suggest that they are in a more favorable position to benefit from innovation-related opportunities (Rosenbusch et al. 2011 ), BMI being one of them. While many new business models fail, before a new one becomes viable, these new ventures with their innovative business models are sources of abnormal returns (Tucci and Massa 2013 ).

Hence, we conclude that early stage firms might create and capture greater value from BMI and transform it into performance.

In early stages, BMI has stronger effects on firm performance than in later stages.

3.3 Business Model Innovation and Product- and Service-oriented Firm Types

Previous studies have already identified that BMI has a different impact on performance implications, depending on whether BMIs are product- or service-oriented (e.g., Visnjic et al. 2016 ; Visnjic Kastalli et al. 2013 ). However, previous studies have not yet determined how these effects unfold in early and late stages of a venture’s life.

Service-oriented firms are characterized by intangible products and focus on a more people-oriented business (Masurel and Van Montfort 2006 ). In their early life cycle stages their diversification of object types, clients, and activities is typically rather small (Masurel and Van Montfort 2006 ) and it is crucially important to implement and market their innovative business model. In the later stages, service-oriented firms have typically gained broader diversification, more stable relationships with their customers, and deal with a larger variety of markets, clients, as well as sectors (Masurel and Van Montfort 2006 ). Hence, BMI becomes less important for service-oriented firms, due to other value drivers with greater impact in later stages. In contrast to service-oriented firms, ventures with a greater focus on more tangible assets engage more in product innovation, which is considered as one of the main drivers of value creation (Visnjic et al. 2016 ). However, sole product innovation is deemed less profitable than product innovation embedded in the appropriate business model (Chesbrough and Rosenbloom 2002 ; Teece 2010 ). Product-oriented firms in their early stages normally focus on prototyping, thereby enhancing the design of products and establishing a first production process (Gaibraith 1982 ). However, the main introduction of the product into a market happens at a later stage of the life cycle where the venture is more mature and established (Lumpkin and Dess 1995 ).

The relationship between BMI and firm performance in early and late life cycle stages differs for product- and service-oriented firm types, namely

In case of product-oriented ventures, the performance effect of BMI is significantly higher in later than in earlier stages

In case of service-oriented ventures, the performance effect of BMI is significantly higher in earlier than in the later stages

The proposed research model is depicted in Fig.  1 .

Research Model

4 Data and Analysis

4.1 data and sample.

In order to answer our research question, we collected data from ventures in German-speaking countries via a cross-sectional research design. With this research design we respond to a former call of Foss and Saebi ( 2017 ) who have suggested “to collect cross-sectional data on business model changes and regress those data against business or corporate performance” (p. 212). Cross-sectional designs have been proven to be a valid approach when investigating the link between BMI and venture performance (e.g., Futterer et al. 2020 ). Yet, cross-sectional designs always have some limitations with regard to establishing causality. In order to alleviate confounding effects surrounding causality that may arise due to a delay of BMI effects on performance outcomes, we assessed the independent variable of BMI at the time of business formation, and the respective dependent variable “firm performance” at the time of the survey. Our sample needs to consist of the key decision makers within their respective ventures, which are considered to be the top management team or the founder(s) of the venture. This is necessary since the key decision makers are those who shape a firm’s strategic orientation (Talke et al. 2011 ) and, hence, the business model. We, therefore, invited entrepreneurs from the most prominent entrepreneurship directories in Germany (e.g., Bundesverband Deutsche Startups, Gründerszene.de, deutsche-startups.de), Switzerland, Austria, and Lichtenstein (Angellist) to participate in our study in 2017. We collected data via a self-administered survey in the months from April to June, including the first approach and one reminder email. We sent an Email to 3884 individual entrepreneurs containing the link to our online-survey or, when no direct contact information was available, to the venture’s e‑mail address and included the information that had to be forwarded to the key decision maker. We advised the respondents to think about their focal venture when answering the question—bearing in mind that entrepreneurs might have more than one venture. Thereby, 268 questionnaires were returned to us. In sum, eighteen returned questionnaires had significant missing values and straight-liners that we deleted, thereby resulting in 250 respondents and an overall response rate of 6.9%. On average, the 250 ventures were founded in 2014 (3 years old) and conducted mostly business in the IT or service industry, which we assessed by the NACE ( N omenclature statistique des a ctivités économiques dans la C ommunauté e uropéenne) scale. NACE is a four-digit classification of economic activities in the European Community and the participants were asked to self-categorize their venture. Since the service industry has proven to be an adequate research context for studies in the BMI context (Laudien and Pesch 2019 ), we also consider our sample as appropriate for our investigation. 61.60% of all ventures had less than 5 employees, 19.60% had 6–10 employees, 9.60% had 11–15 employees and 9.20% had more than 16 employees. The average founder in our study is thirty-four years old, male (84%), obtained a university degree, has about 5 years of start-up experience, funded about 2.40 prior start-ups of which 0.55 failed. Concerns about survival bias are mitigated by the fact that every company can be listed in the public entrepreneurship database. Consequently, immature and young companies are also included. Table  2 presents descriptive statistics and zero-order correlations among all variables used in the analyses.

4.2 Variables and Method

We drew on established measures (see the Appendix for the main constructs and items) and applied seven-point Likert-type scales except where otherwise stated. We also pre-tested the questionnaire with a group of twelve experts, namely PhD researchers working in the economics department at university, thereby ensuring face validity and clarity (Churchill 1979 ).

Business model innovation Business Model Innovation

is operationalized as a molar third-order hierarchical construct adapted from Futterer et al. ( 2018 ) with four formative second-order elements (Chin 2010 ): (1) value offering, (2) internal value creation, (3) external value creation, and (4) financial architecture, enclosing thirty-two items that Futterer et al. ( 2018 ) derived from established scales. The first element, value offering architecture, builds on the following scales: the novelty-centered business model design by Zott and Amit ( 2007 , 2008 ), product superiority to the customer by Lee and Colarelli O’Connor ( 2003 ), and market newness by Dahlqvist and Wiklund ( 2012 ). The items for the second element, internal value creation architecture, are adapted from Gatignon et al. ( 2002 ), whereas the third item, external value creation architecture, was operationalized with items adapted by the market newness scales of Lee and Colarelli O’Connor ( 2003 ), as well as supplier involvement of Chen and Paulraj ( 2004 ). Finally, the fourth element, financial architecture, mainly builds on items adapted by Spieth and Schneider ( 2016 ), and supplemented by items from Chesbrough ( 2007 ), Dubosson-Torbay et al. ( 2002 ), as well as Yunus et al. ( 2010 ). We asked the founders to think about the moment of the foundation of the company and indicate how innovative their business model was. All items were measured according to a seven-point Likert scale anchored by “strongly disagree” and “strongly agree.”

Firm Performance

In general, new ventures do not need to publicize their financial data in financial reports (Wang et al. 2017 ) and surveying the key informants of the new ventures is a common approach (Anderson and Eshima 2013 ; Kraus et al. 2012 ). In accordance with this, we assessed firm performance via the respondents’ subjective assessments; they were taken from a synthesis used by Vorhies and Morgan ( 2005 ) and comprise previous measures regarding their customer satisfaction (Fornell et al. 1996 ), profitability (Morgan et al. 2002 ), and market effectiveness (Vorhies and Morgan 2003 ) and are commonly used in effect-side research of BMI (e.g., Balboni et al. 2019 ; Nunes and Do Val Pereira 2020 ). In studies that are based on the key-informant approach due to the absence of mandatory financial reports this scale entails all components a key informant, such as the founder of the venture, is able to assess. All scales were designed as seven-point scales and we estimated overall firm performance as a reflective second-order construct, comprising the three first-order latent performance factors, thereby building a type I hierarchical component model (Hair et al. 2018 ).

Organizational Life Cycle Stage

The moderating variable in our research model, organizational life cycle stage, was operationalized by using the scale of Brettel et al. ( 2012 ) who adapted a five-stage classification scheme from Lumpkin and Dess ( 1995 ). In accordance with this, we followed the approach of Brettel et al. ( 2012 ) and provided an explanatory sentence for each stage. The five stages included (1) startup/conception and development, (2) commercialization/market entry, (3) growth, (4) consolidation, and (5) maturity/diversification. Similar to Brettel et al. ( 2012 ), as well as Engelen et al. ( 2010 ), we built two groups, namely early and later stages. The first one included the stages (1) startup/conception and development, as well as (2) commercialization/market entry. The latter one incorporated the last three stages (3) growth, (4) consolidation, and (5) maturity/diversification. Table  3 gives an overview of the stage classifications.

Control Variables

The relationship between BMI and performance depends on several variables for which we included control variables: age, sex, and education of the key respondents as well as firm size measured according to the number of employees. Although all the firms included in our study were relatively young ventures, the firm size might still influence the relationship between BMI and firm performance.

Common Method Bias

In order to control for common method bias, procedural and statistical remedies were combined (Podsakoff et al. 2012 ). We applied proximal and psychological separation between our independent and dependent variable to reduce the respondents’ ability to use a similar response pattern (Podsakoff et al. 2003 ). Statistical remedies included Harman’s single factor test (Podsakoff et al. 2003 ), the Lindell-Whitney marker variable test (Lindell and Whitney 2001 ), and Kock’s collinearity test (Kock 2015 ). All the independent and dependent variables were included in an exploratory factor analysis, resulting in a total variance of 35.55%, that is below the common threshold of 50% (Podsakoff et al. 2003 ). Next, we applied the Lindell-Whitney marker variable test by integrating the measurement inventory of team trust (Bansal et al. 2004 ) in the model as a theoretically unrelated latent variable (Lindell and Whitney 2001 ). The highest path coefficient turned out to be 0.15, which is below the common threshold of 0.30. In addition, we applied a full collinearity test and found that all the variance inflation factors (VIFs) of the latent constructs in our model were not higher than 3.30 (Kock 2015 ). This indicates that common method variance should not be a concern in our model.

Statistical Procedures

We used structural equation modeling (SEM) to test our research model as this statistical technique allows assessing complex models with different relationships simultaneously (Reinartz et al. 2009 ). More specifically, we applied partial least squares (PLS) SEM that combines indicators to build composite variables (Lohmöller 1989 ), which are designed to be the proxies for the constructs under investigation (Rigdon 2016 ). We have chosen PLS-SEM over covariance-based techniques for several reasons. First, since our study focuses on prediction rather than exploration, indeterminacy is less suitable in a covariance-based approach and more suitable in a PLS approach (e.g. Dijkstra 2014 ). Second and most important, contrary to CB-SEM approaches, PLS-SEM is capable of modeling type IV higher-order constructs (Chin 2010 ), which are present in our research model. PLS-SEM has recently been applied to entrepreneurship studies (e.g. Radosevic and Yoruk 2013 ), in BMI research (Futterer et al. 2018 ), innovation research (Heidenreich et al. 2016 ), and to other management topics (for an overview, see Hair et al. 2011 ). For statistical analyses, SmartPLS 3 (Ringle et al. 2015 ) was used to estimate the inner and outer model parameters by applying a path weighting scheme (Chin 1998 ). We also employed non-parametric bootstrapping (Chin 1998 ; Tenenhaus et al. 2005 ) with 5000 replications and mean replacement as missing value-algorithm, as well as individual-level change pre-processing, to obtain the standard errors of the estimates.

The higher-order latent variable BMI was set up by using the hierarchical component model approach (Lohmöller 1989 ; Tenenhaus et al. 2005 ). In order to handle the measurement issues of higher-order models in PLS-SEM, researchers can apply the repeated indicators approach, the two-stage approach, or the hybrid approach (Becker et al. 2012 ). In a simulation study, Becker et al. ( 2012 ) found that the repeated indicators approach provides better results when it comes to parameter estimates and lower-order construct scores than the other two techniques. Only in certain cases, the approach is particularly problematic: For example, when assessing reflective-formative and formative-formative hierarchical component models (HCM) or when the higher-order construct (HOC) has one or more antecedent latent variables (Becker et al. 2012 ). Similar to our research model, the reflective-formative-formative BMI construct is exogenous and the dependent variable—firm performance—is a reflective-reflective HCM; we draw in both cases on the repeated indicators approach. It assigns all indicators of the lower-order constructs to the measurement model of the HOC (Lohmöller 1989 ; Wold 1982 ) and can also be applied to third-order HCM (e.g., Wetzels et al. 2009 ). Nevertheless, additional technical considerations need to be considered. First, the indicators at the lower level should not vary strongly when it comes to their number (Becker et al. 2012 ); second, the measurement models of the HOCs needs to be evaluated in terms of the relationship with their lower-order components (LOC); third, this necessitates additional attention to the collinearity, significance, and relevance of the relationships between the HOCs and LOCs (Hair et al. 2018 ). We now proceed to evaluate the structural and the measurement models.

5.1 Evaluation of the Measurement Model

In a first step, we evaluated the hierarchical measurement models of the constructs under investigation, thereby following the criteria and procedure pointed out by Hair et al. ( 2017 ). The eight first-order constructs of the molar higher-order construct BMI, as well as the three first-order constructs of the dependent variable firm performance, all have a reflective nature, which means that internal consistency reliability, convergent validity, and discriminant validity need to be evaluated (Hair et al. 2017 ). In terms of internal consistency and reliability, composite reliability values all exceed the threshold of 0.70 (Henseler et al. 2009 ) and the same applies for the Cronbach’s alpha values, which are all above 0.70. When it comes to convergent validity, all the indicator loadings of the reflective constructs are well above the threshold value of 0.70 and further analysis shows that the indicator loadings squared are above 0.50 (Hair et al. 2017 ). The average variance extracted values are all above the required minimum level of 0.50 (Fornell and Larcker 1981 ). In terms of discriminant validity, the values of the heterotrait-monotrait ratio of correlations (HTMT)—with the highest one turning out to be 0.862—are also below the threshold of 0.9 (Gold et al. 2001 ; Teo et al. 2008 ). As stated above, in terms of HOCs, the measurement models are evaluated according to their relationship with its lower-order components, thereby accounting for the same evaluation criteria and thresholds. Consequently, the HOC firm performance, which is likewise a reflective construct, was assessed and the above stated measurement criteria were all met. However, in reflective-reflective or formative-reflective HCMs conceptual and empirical redundancies are expected and, hence, discriminant validity between HOCs and LOCs is of no relevance (Hair et al. 2018 ). In a next step, the measurement criteria of the second-level constructs—that is, the four business model elements, as well as the first-level construct BMI itself, which are all operationalized as formative constructs—are assessed in terms of their relationships with their corresponding LOCs. Consequently, the measurements models are evaluated with regards to potential collinearity issues, as well as the significance and relevance of formative indicators (Chin 2010 ). In terms of collinearity, the VIFs were assessed (Cassel et al. 1999 ; Diamantopoulos and Winklhofer 2001 ) and found to be uniformly below the threshold value of 5 (Hair et al. 2013 ). We, therefore, conclude that collinearity is not an issue in this model. Next we analyzed the outer weights for their significance and relevance by applying a complete bootstrapping procedure using 5000 bootstraps (Hair et al. 2017 ). In terms of significance levels, we found that all the formative constructs’ relationships with their LOCs are significant at a 1% level. All criteria in terms of formative measurement models are therefore met. Appendices 1–4 and Fig.  2 give an overview of the measurement models and their indicators. Considering the results of all the reflective and formative constructs, we found that they exhibit satisfactory levels of quality. Therefore, we could proceed with the evaluation of the structural model.

Results of PLS-SEM

5.2 Evaluation of the Structural Model

The main research goal of this study was to empirically examine the relationship between BMI and firm performance. We, therefore, collected primary data and used SmartPLS 3 (Ringle et al. 2015 ) to test the hypotheses by examining the path coefficients and significances of the structural model. Fig.  2 illustrates the results of the structural model. Again, we followed the procedure outlined by Hair et al. ( 2017 ). With respect to the inner model, no VIF value exceeded the threshold of 5—in fact, the highest value turned out to be 2.441, thereby indicating that multicollinearity should not be a concern. The R‑squared value in the structural model for the relationship between BMI and firm performance turned out to be 0.247 with an effect size f 2 of 0.159. The blindfolding procedure resulted in Q‑squared values above 0 for all endogenous constructs, thereby indicating predictive relevance. BMI has a positive effect on firm performance ( β  = 0.336, p  < 0.001), thereby confirming Hypothesis 1. Furthermore, the life cycle stage of a firm negatively moderates the positive relationship of BMI with firm performance ( β  = −0.154, p  < 0.01), thereby supporting Hypothesis 2. We also studied the moderating relationship by using a separate interaction analysis. Thereby, we used latent variable scores and standardized the predictors prior to the analysis to account for multicollinearity (Aiken and West 1991 ). Table  4 and Fig.  3 show the results of the analysis. The two-way interaction of BMI and life cycle stage is significant and negative ( β  = −0.483, p  = 0.019).

Illustration of the Moderating Effect of Life Cycle Stages

In a next step, we tested for differences between product- and service-oriented BMIs and we again conducted two separate interaction analyses, one for product-oriented and another for service-oriented firms. The interaction analysis shows that product- and service-oriented ventures exhibit different performance implications across life cycle stages. However, as Table  5 and Fig.  4 indicate, the difference between early and late stages is not statistically significant in product-oriented ventures ( β  = −0.435, n. s.) and therefore, Hypotheses 3a is not supported. On the contrary, in the case of service-oriented ventures, the performance effect of BMI is significantly higher in the earlier than in the later stages ( β  = −0.529, p  = 0.025), thereby providing support for Hypotheses 3b.

Illustration of Moderating Effects of Life Cycle Stages in Different Firm Types. a  Product-oriented firms. b  Service-oriented firms

5.3 Additional Analysis

In addition to our research framework, we have calculated an additional analysis as we wanted to determine the relative importance of each element of BMI in early and late life cycle stages. It has been noted that the often stated, yet vaguely described relationship between BMI and performance relationship is difficult to study, due to its complexity (Foss and Saebi 2017 ). This complexity stems from the “multiple complex links” (p. 212) between the business model elements and the performance implications that are not only intertwined, but also unfold differently over time. In addition, previous studies have also identified that elements of BMI have a different impact on performance (Schneider et al. 2013 ). In order to determine the innovation contribution of each business model element in each life cycle stage, we conducted four separate interaction analyses. Table  6 and Fig.  5 show the empirical results and graphic illustration of how each BMI element takes effect on performance in different life cycle stages.

Illustration of Moderating Effects of Life Cycle Stages in Elements. a  Value Offering Innovation. b  Internal Value Creation Innovation. c  External Value Creation Innovation. d  Financial Architecture Innovation

6 Discussion

6.1 theoretical implications.

Academic research has, thus far, claimed that BMI is a strong driver of firm performance (Foss and Saebi 2017 ). However, an important, but largely overlooked research issue is if and to which extent BMI differs in firm performance across different life cycle stages, namely the early and late stages of a venture’s life. Hence, this study strives to add to BMI and life cycle theory by making the following contributions: (1) Our research confirms recent findings on the positive impact of BMI on firm performance, (2) it provides first empirical evidence about the moderating role of life cycle stages on the relationship between positive BMI and performance, and (3) it investigates for the first time how this relationship differs for product- and service-oriented firms.

First, this study found evidence for the hypothesized positive relationship between BMI and firm performance. This finding is in line with previous research in the academic realm (Brettel et al. 2012 ; Cucculelli and Bettinelli 2015 ; Futterer et al. 2018 ; Kim and Min 2015 ; Zott and Amit 2007 ). We contribute to current literature by confirming that more innovation in business models will, indeed, result in higher performance (Foss and Saebi 2017 ).

Second, the life cycle stage’s moderation of a venture brings an important factor into the discussion about the performance advantages of BMI. We thereby extend and challenge extant literature on the outcomes of BMI (Cucculelli and Bettinelli 2015 ; Zott and Amit 2007 ) by providing—for the first time, to the best of our knowledge—empirical evidence for the impact of BMI on firm performance in early and late life cycle stages. More specifically, the more innovative a business model becomes, the higher are the performance implications for ventures in their earlier stages. In accordance with these results, previous studies have demonstrated that BMI leads to firm performance in the earlier stages of entrepreneurial firms (Brettel et al. 2012 ; Cucculelli and Bettinelli 2015 ; Zott and Amit 2007 ). Perhaps the most striking finding is that in the cases of more established ventures; an increase in BMI does not automatically lead to higher rates of performance. This result has not yet been previously described and extends current research on the outcomes of BMI that assumes a positive relationship (Foss and Saebi 2017 ). Although anecdotal evidence shows that established companies like Xerox, Gilette, or Apple successfully innovated their business model and were rewarded with higher performance rates than before. Our findings suggests that the performance implications are not tied to the innovativeness of the business model. An explanation for this phenomenon might be that BMI in firms in their later life cycle phases is a positive trigger in the beginning, but that the value creation and capture mechanisms do stem from their existing assets rather from the innovativeness of the BMI itself. In contrast to more established firms, newly founded ventures often operate in niche markets, serve other customers than incumbents, employ novel resources, and are in a situation where they can play actively with their new business models (Tucci and Massa 2013 ). Further, firms in their early stages are highly centralized in their founder (Chandler and Hanks 1994 ), who is able to monitor and steer the BMI process. A comparison of these results with those of other studies confirms that companies with a high level of control have a higher innovation-input-output ratio (e.g., Duran et al. 2016 ). In similar vein, compared to their later stages, new ventures are less formalized and departmentalized in their earlier stages (Hanks et al. 1993 ) and are, therefore, much more flexible (Jaworski and Kohli 1993 ). After surviving the liability of newness, the business model of firms in their early stages is the central asset for creating and capturing value, and ultimately to generate performance implications. By providing empirical evidence, we extend the life cycle theory with the phenomenon of BMI and conclude that relying only on the innovativeness of the implemented business model in the later stage of a venture’s life, will not enhance organizational performance.

Third, our results deliver first empirical evidence on how the interaction effect of life cycle stages differs in the case of product- and service-oriented firms. We found contradictory results. In the case of service-oriented ventures, a more innovative business model especially pays off in early stages, but performance declines during the later stages like we expected. However, in the case of product-oriented ventures, our results show that BMI is important in both stages with no statistical difference between early and late stages. A possible explanation might be that in the event of market acceptance, a venture’s main goal is to establish itself in the market (Abernathy and Utterback 1982 ; Moore and Tushman 1982 ) and in later stages, ventures aim to maintain their market position by developing a second generation of their product (Kazanjian 1988 ; Moore and Tushman 1982 ). In both cases, an innovative business model designed around their focal products might help leverage their customer adoption. Besides being the first study to investigate how the relationship between BMI and firm performance differs for product- and service-oriented firms, we also extend existing knowledge with regards to the life cycle theory.

Fourth, when it comes to the individual contribution of business model elements in each life cycle, our findings of the additional analysis are mostly in line with the main analysis. More specifically, the innovation of all business model elements pays off more in a venture’s early life than in its later stages; this means that ventures in their early stages need to have greater pressure for BMI, ultimately leading to firm performance. However, in the event of value offering, as well as internal and external value creation, the innovation of the elements in later stages leads to smaller performance implications. A possible explanation might be that firms in their later stages have already gained market acceptance of their offering (Kazanjian 1988 ; Moore and Tushman 1982 ), they have gained a status of formalization with efficient and implemented processes (Churchill and Lewis 1983 ; Gaibraith 1982 ), and they have established stable relationships with their partners and customers (Masurel and Van Montfort 2006 ). After gaining stability and reducing uncertainty for the first time, a change in these offerings, processes, and relationships might lead to confusion and inefficiencies, and ultimately to decreased performance. However, an innovation of the financial architecture element contributes to venture performance in both stages. This is in accordance with current research. In the BMI domain, prior research has shown that efficiency-centered business models, that is, business models designed to reduce transaction costs, enhance firm performance (Zott and Amit 2007 , 2008 ), especially in later stages of organizational life (Brettel et al. 2012 ). By first investigating how business model elements impact on firm performance in different life cycle stages, we extend existing knowledge by adding a more fine-grained analysis, which has only been marginally investigated thus far (Schneider and Spieth 2014 ). Thereby, we laid the groundwork for disentangling the business model construct into its sub-elements with a certain emphasis on the different life cycle stages of ventures.

6.2 Managerial Implications

These findings may help managers and entrepreneurs to understand how to leverage a new business model to success. In line with earlier studies (Cucculelli and Bettinelli 2015 ; Zott and Amit 2007 ), research has found that BMI is an important predictor of performance implications in organizations. Our findings show that a more innovative business model makes a stronger contribution toward organizational performance than a less innovative one. A key policy priority for managers should, therefore, be to design and implement an innovative business model. Second, our results show that especially in the early stages of an organization’s life cycle, an innovative business model entails a unique selling point and is a key asset in a successful growth process. The more a venture grows, the less important an innovative business model becomes as other factors gain in importance. Within this context, this study shows that the individual life cycle stage of an organization has an important impact on the performance outcomes of BMI and should, therefore, be carefully assessed. Third, our results point out that managers of organizations have to take their firm type—either a product-oriented or a service-oriented venture—into account. According to our findings, especially in the earlier stages, a service-oriented venture has, to a certain extent, emphasize the design and development of a rather innovative business model. In later stages, however, a very innovative business model might lead to decreased performance. In case of product-oriented ventures, an innovative business model is highly important in both stages. In sum: We advise managers and entrepreneurs to not only carefully assess the innovativeness of their ventures’ business models, as well as its elements, by, for example, using the measurement inventory of Futterer et al. ( 2018 ), but to also assess, respectively, each life cycle stage the venture is currently passing through by using the framework of Kazanjian ( 1988 ). Furthermore, the venture’s main offering, which is either a service or a product, must be taken into account for the best possible organizational performance outcome.

7 Limitations and Avenues for Future Research

The findings derived from this study make several contributions to the current literature. However, as with any study, this one also has its limitations. First, we conducted a cross-sectional investigation of the relationship between BMI and performance in the new ventures domain to empirically examine the positive implications. Although using cross-sectional data is a common approach in BMI research (Futterer et al. 2018 ), such approach might suffer from several limitations. The most important one for our investigation might be tied to a potential delay of performance effects of BMI. While we did account for potential confounding effects due to such delay within our measurements, future research might replicate our findings employing a longitudinal sample to completely rule out any confounding effect in this regard by establishing true causality. Second, both the independent and dependent variable were assessed by the same instrument, i.e., survey, and respondent. To minimize potential problems due to common method bias, we applied procedural and statistical measures to rule out common method variance as effectively as possible. However, again replicating our findings by a longitudinal study with secondary data might provide additional support for our results. Furthermore, in terms of the moderating role of a firm’s life cycle stage, a longitudinal design might provide additional insights and a more fine-grained analysis of the complex mechanisms of BMI and the growth process of a firm. Third, in similar vein, we split our dataset into two stages of a venture’s life, namely early and late stages. Although it has provided initial insights into the moderating role of lifecycle stages on firm performance during BMI, it also comes with a lack of information. We therefore encourage scholars to examine the growth process of a new venture in each stage to link their individual growth pattern with the relationship between BMI and performance. A more fine-grained analysis might shed more light on the prominent relationship and produces viable insights in the underlying mechanism on how performance effects unfold over time. Forth, our study was not able to account for the amount of structural change brought about by the innovation of a business model in an established company. Although we split our dataset into early and late stages, the latter stage does not resemble established companies, since our dataset entails only young and older new ventures, but not established companies. When it comes to directions for future research, further studies might explore the relationship investigated in established companies with a special emphasis on the stages of maturity, diversification, and decline. This might result in worthwhile contributions to research on the life cycle theory and BMI. Fifth, an arguable weakness of this study is the founders’ self-evaluation of performance as a dependent variable, which makes these findings less generalizable. Although new ventures do not need to publicize their financial data (Wang et al. 2017 ) and surveying the key informants of the new ventures is a common approach (Anderson and Eshima 2013 ; Kraus et al. 2012 ), future research might work with secondary data, such as the amount of investments a venture receives during its growth process as an indicator for third-party’s trust in its potential to validate and strengthen our findings.

The VHB-JOURQUAL Rating is a journal ranking of the German scientific community. The scientific quality of a journal is defined as the extent to which the journal in question advances business administration as a scientific discipline. The categories A and B in this ranking do largely correspond with the categories 4 and 3 in the ABS journal ranking.

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Freisinger, E., Heidenreich, S., Landau, C. et al. Business Model Innovation Through the Lens of Time: An Empirical Study of Performance Implications Across Venture Life Cycles. Schmalenbach J Bus Res 73 , 339–380 (2021). https://doi.org/10.1007/s41471-021-00116-6

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Business Cycle: What It Is, How to Measure It, the 4 Phases

What Is a Business Cycle?

Business cycles are a type of fluctuation found in the aggregate economic activity of a nation—a cycle that consists of expansions occurring at about the same time in many economic activities, followed by similarly general contractions. This sequence of changes is recurrent but not periodic.

The business cycle is also called the economic cycle .

Key Takeaways

• Business cycles are composed of concerted cyclical upswings and downswings in the broad measures of economic activity—output, employment, income, and sales.
• The alternating phases of the business cycle are expansions and contractions.
• Contractions often lead to recessions, but the entire phase isn't always a recession.
• Recessions often start at the peak of the business cycle—when an expansion ends—and end at the trough of the business cycle, when the next expansion begins.
• The severity of a recession is measured by the three Ds: depth, diffusion, and duration.

Madelyn Goodnight / Investopedia

Understanding the Business Cycle

In essence, business cycles are marked by the alternation of the phases of expansion and contraction in aggregate economic activity and the co-movement among economic variables in each phase of the cycle. Aggregate economic activity is represented by not only real (i.e., inflation-adjusted) GDP—a measure of aggregate output—but also the aggregate measures of industrial production, employment, income, and sales, which are the key coincident economic indicators used for the official determination of U.S. business cycle peak and trough dates.

Popular misconceptions are that the contractionary phase is a recession and that two consecutive quarters of decline in real GDP (an informal rule of thumb) means a recession. It's important to note that recessions occur during contractions but are not always the entire contractionary phase. Also, consecutive declines in real GDP are one of the indicators used by the NBER, but it is not the definition the organization uses to determine recessionary periods.

On the flip side, a business cycle recovery begins when that recessionary vicious cycle reverses and becomes a virtuous cycle, with rising output triggering job gains, rising incomes, and increasing sales that feedback into a further rise in output . The recovery can persist and result in a sustained economic expansion only if it becomes self-feeding, which is ensured by this domino effect driving the diffusion of the revival across the economy.

Of course, the stock market is not the economy. Therefore, the business cycle should not be confused with market cycles , which are measured using broad stock price indices.

Measuring and Dating Business Cycles

The severity of a recession is measured by the three D's: depth, diffusion, and duration. A recession's depth is determined by the magnitude of the peak-to-trough decline in the broad measures of output, employment, income, and sales. Its diffusion is measured by the extent of its spread across economic activities, industries, and geographical regions. Its duration is determined by the time interval between the peak and the trough.

An expansion begins at the trough (or bottom) of a business cycle and continues until the next peak, while a recession starts at that peak and continues until the following trough.

The National Bureau of Economic Research (NBER) determines the business cycle chronology—the start and end dates of recessions and expansions for the United States. Accordingly, its Business Cycle Dating Committee considers a recession to be "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales."

The Dating Committee typically determines recession start and end dates long after the fact. For instance, after the end of the 2007–09 recession, it "waited to make its decision until revisions in the National Income and Product Accounts [were] released on July 30 and Aug. 27, 2010," and announced the June 2009 recession end date on Sept. 20, 2010.

The average length of recessions in the U.S. since World War II has been around 11 months. The Great Recession was the longest one during this period, reaching 18 months.

U.S. expansions have typically lasted longer than U.S. contractions. From 1854–1899, they were almost equal in length, with contractions lasting about 25 months and expansions lasting about 29 months, on average. The average contraction duration then fell to 18 months in the 1900–1945 period and 11 months in the post-World War II period. Meanwhile, the average duration of expansions increased progressively, from 29 months in 1854–1899 to 30 months in 1900–1945, 43 months in 1945–1982, and 70 months in 1982–2009.

Stock Prices and the Business Cycle

The biggest stock price downturns tend to occur—but not always—around business cycle downturns (e.g., contractions and recessions). For example, the Dow Jones Industrial Average and the S&P 500 took steep dives during the Great Recession. The Dow fell 51.1%, and the S&P 500 fell 56.8% between Oct. 9, 2007 to March 9, 2009.

There are many reasons for this, but primarily, it is because businesses assume defensive measures and investor confidence falls during contractionary periods. Many events occur before those in an economy are aware they are in a contraction, but the stock market trails what is going on in the economy.

So, if there is speculation or rumors about a recession, mass layoffs, rising unemployment, decreasing output, or other indications, businesses and investors begin to fear a recession and act accordingly. Businesses assume defensive tactics, reducing their workforces and budgeting for an environment of falling revenues.

Investors flee to investments "known" to preserve capital, demand for expansionary investments falls, and stock prices drop.

It's important to remember that while stock prices tend to fall during economic contractions, the phase does not cause stock prices to fall—fear of a recession causes them to fall.

What Are the Stages of the Business Cycle?

In general, the business cycle consists of four distinct phases: expansion, peak, contraction, and trough.

How Long Does the Business Cycle Last?

According to U.S. government research, the business cycle in America takes, on average, around 6.33 years.

What Was the Longest Economic Expansion?

The 2009-2020 expansion was the longest on record at 128 months.

The Bottom Line

The business cycle is the time is takes the economy to go through all four phases of the cycle: expansion, peak, contraction, and trough. Expansions are times of increasing profits for businesses, rising economic output, and are the phase the U.S. economy spends the most time in. Contractions are times of decreasing profits and lower output, and is the phase the least amount of time is spent in.

St. Louis Federal Reserve. " All About the Business Cycle: Where Do Recessions Come From? "

The National Bureau of Economic Research. " Business Cycle Dating ."

National Bureau of Economic Research. “ Business Cycle Dating Procedure: Frequently Asked Questions. What is a Recession? What is an Expansion? ”

National Bureau of Economic Research. " The NBER's Recession Dating Procedure ."

National Bureau of Economic Research. " Business Cycle Dating Committee, National Bureau of Economic Research ."

National Bureau of Economic Research. " US Business Cycle Expansions and Contractions ."

Federal Reserve Bank of Atlanta. " Stock Prices in the Financial Crisis ."

Congressional Research Service. " Introduction to U.S. Economy: The Business Cycle and Growth ," Page 2.

• Depression in the Economy: Definition and Example 1 of 14
• What Is Economic Collapse? Definition and How It Can Occur 2 of 14
• Business Cycle: What It Is, How to Measure It, the 4 Phases 3 of 14
• Boom And Bust Cycle: Definition, How It Works, and History 4 of 14
• Negative Growth: Definition and Economic Impact 5 of 14
• The Great Depression: Overview, Causes, and Effects 6 of 14
• Were There Any Periods of Major Deflation in U.S. History? 7 of 14
• The Greatest Generation: Definition and Characteristics 8 of 14
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The Business Process Management Life Cycle (+ Examples)

The business world is fiercely competitive, so if you want to stay afloat, it’s crucial to manage processes efficiently and effectively. This is where business process management life cycle ( BPM ) comes in. 

If your goal is to optimize processes and boost performance, a BPM may be the right tool for you.

But what is BPM ?

In this blog post, I’ll explore the concept of BPM, its importance, and the key steps involved in the BPM life cycle. 

By the end, you will have a better understanding of BPM and how to use it to improve the efficiency, quality, and customer satisfaction of your business.

So let’s begin!

What is the business process management life cycle?

Business process management is a popular approach many business owners take to manage their processes. 

It involves identifying, designing, executing, monitoring, and continuously improving processes to achieve goals. 

With the help of a BPM , you’ll be able to: 

• streamline operations
• reduce costs
• improve quality
• enhance customer satisfaction

There are four stages of business process management that we will explore shortly. But if you are keen to learn more about this topic, check out our Complete Guide to Process Management. 

Why is business process management important?

BPM is important for several reasons.

So let’s talk about the benefits of business process management .

It enhances process efficiency and effectiveness

When you streamline processes, you’ll start cutting costs, notice fewer errors, and improve the quality of your processes. 

In turn, leading to increased customer satisfaction, loyalty, and in an increase in revenue. 

Allows you to adapt to changing market conditions and customer needs 

The BPM process enables you to respond quickly to shifts in the business environment. 

The newly acquired agility will give you a competitive advantage in your industry and new clientele interested in your product.

Helps to comply with regulatory requirements and industry standards 

Business process management ensures standardized processes.

With a BPM , you’ll reduce the risk of non-compliance and mitigate potential legal and financial risks.

A BPM life cycle is a framework that outlines the stages involved in managing a process from start to finish. 

The BPM life cycle consists of stages that, if executed well, will take your business to the next level.

Here’s what you’ll want to do:

• Identify the process and define its goals and objectives
• Design the process flow, inputs, and outputs
• Specify the activities and tasks required to carry out the process
• Assign tasks to the appropriate stakeholders and provide them with resources 
• Execute the process
• Monitor the process to identify any issues or areas for improvement
• Analyze the process performance using KPIs
• Optimize the process by identifying areas for improvement 
• Monitor the process again to ensure that the changes have been effective

BPM life cycle steps

We now know the main stages of the BPM life cycle. Now let’s take a closer look at the steps you’ll want to take in more detail.

Stage 1: Design

This first stage lays the foundation for the rest of the BPM life cycle by setting the scope and boundaries of the process.

This stage involves:

• Identifying the process needed to be optimized
• Defining goals and requirements
• Determining the stakeholders that will be working on the process
• Defining the roles and responsibilities of each one

Stage 2: Modeling

The second stage takes care of creating a visual representation of the process. 

This representation serves as a blueprint for the process and provides a common understanding of how the process works.

Some steps you may be taking here are:

• Defining the process flow
• Identifying the inputs and outputs
• Specifying the activities and tasks 

Stage 3: Execution

This stage involves carrying out the process according to the model you pre-determined in stage 2. 

For example:

• assigning tasks to the appropriate stakeholders
• providing them with the necessary resources
• monitoring their progress

In simple terms, the execution stage ensures that the process is carried out efficiently and effectively. It also assumes that everyone working on it is on the same page and knows how to handle the workload.

Stage 4: Monitoring

Monitoring is all about identifying any issues or areas that may need improvement. 

You can monitor performance by measuring key performance indicators (KPIs) such as cycle time, throughput, and error rate. 

This provides valuable feedback that you’ll later utilize to optimize the process and improve its performance.

Business process management life cycle examples

You may now be wondering how all this applies to your specific situation. 

To help you find out, I’ve devised a list of some examples of business process management life cycle use cases:

Sales Process Management

Sales are complex and involve multiple stakeholders and activities. 

The BPM life cycle can be used to manage the sales process from lead generation to order fulfillment. 

By optimizing the sales process using BPM, you’ll not only improve efficiency but also increase customer satisfaction.

Customer Service Process Management

The customer service process is another important process that can benefit from BPM. 

Why? Because it requires managing an array of things at the same time. Customer services often have to deal with customer requests, complaints, and inquiries simultaneously. So you want to ensure that these issues are resolved in a timely and efficient manner. 

Using BPM to manage the customer service process, you’ll enhance responsiveness and reduce customer wait times.

Procurement Process Management

The procurement process concerns purchasing goods and services from suppliers. 

You can use a BMP life cycle to manage the procurement process, from identifying the need for goods or services to paying suppliers. 

This will result in stronger supplier relationships and increased procurement efficiency.

Hiring Process Management

The hiring process is one of many critical processes that can benefit from BPM. 

From job posting to onboarding, BPM will make it easy to manage the hiring process, streamline the recruitment process, reduce recruitment costs, and improve the quality of new hires.

BPM life cycle will benefit you in many ways

If you follow the steps I outlined, a business process management life cycle will make your life much, much easier.

With it, you can design, model, execute, and monitor processes to ensure they meet your business goals. 

Continuous improvement is key to the success of BPM, so embrace this approach, and you’ll be more likely to flourish. Remember! Equipped with the right tools , you can unlock the full potential of your processes and achieve lasting success.

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Life cycle-driven business models to increase sustainable impact

27 June, 2014

Eric Mieras

Many companies have embarked on the road to sustainability and are looking to adopt sustainable business models. That’s great news. However, there's a big risk in following the latest trends without making sure that that’s the right choice for your business.

There are a lot of interesting-sounding trends in sustainable business models: sharing economy, eco-design, circular economy and many others, all with their good points and their fifteen minutes of fame. Even if companies have good products and a thorough understanding of their customers’ needs, using the wrong business model means not all of them succeed in achieving their sustainable business goals.

Know what your hotspots are

Why do they fail? The reason is simple. Companies often don’t determine objectively where their hotspots for improvement are – that’s where their impact is largest – even though that determines which business model works best for them. For example, if your impact is biggest at the end of life of your product, a circular business model will work for you. If your hotspot in the use phase, however, it won’t make a big sustainability difference to embrace a circular business model. Companies like Unilever and Interface realized how important is to be aware of their company hotspots throughout a product’s life cycle, and have successfully implemented sustainable business models.

Sound approach needed to gather insight

Gaining valuable insights is only possible with a methodologically sound approach. Materiality assessments carry the risk that you’ll be influenced by what others find important instead of looking objectively at where your biggest impact is. One of the most accepted and proven methodologies is life cycle analysis (LCA), successfully used in sustainability for the last 20 years.  In recent years, however, it hasn’t been used as the standard approach as much. Sustainability professionals may have felt that it focused too much on scientific progress and methodology and not enough on benefits for businesses.

However, as Unilever and Interface show, LCA is still a powerful tool. Life cycle thinking helps you find out what your hotspots are, as it shows how much each phase – from the extraction of raw materials right up to the end of life – contributes to your total impact. Those metrics and insights can also help you pinpoint who in your business ecosystem you can collaborate with to become more efficient and co-create new, sustainable products or services.

Tackle the trade-off

Before choosing your sustainable business model, you need to understand multiple environmental impacts . Focusing on one aspect only might– unintentionally – create undesirable results. For instance, reducing  CO2 emissions might lead to an increase in particulate matter, as is the case with some new car engines. This trade-off can make the overall impact on the environment worse, even though the car meets carbon reduction targets.

You can only make deliberate choices if you have a complete overview of your product’s impact on multiple indicators in your system. These systemic insights can be generated with an LCA based on public data from databases like ecoinvent or company-specific data collected throughout the supply chain.

Relevant business models per stage

The question is how this proven methodology can be linked to the latest developments in sustainability. Inspired by the general principles of LCA and a study of Chun and Lee at Ajou University in Korea, we connected the dots between life cycle stages and some of the most popular sustainable business models to show how they can contribute to improving your impact.

Understanding your total impact in each of these life cycle stages helps you select what kind of sustainable business model would best help your company achieve your sustainability goals.

If you have a car lease company, it doesn’t make sense to look into a circular economy. When you’re a producer of electronics or plastics, it does make sense to have a waste strategy and close the loop. For a services firm, the situation may be completely different, leading you to focus on a collaborative business model to crowdsource your services.

A rich source for business model innovation

Of course, this list is not exhaustive. It doesn’t cover the social aspects of sustainability, for instance. But it is a good place to start, and might even spur additional ideas about sustainable business models. That shows exactly how powerful life cycle thinking is when applied in a pragmatic way that takes your business perspective into account: it gives you new insights and ideas about how you can innovate your business model and become a more sustainable company.

This interview was originally published on Thursday, June 26th, by Sustainable Brands

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Sustainability is all about impact. Positive impact makes you meaningful. But first you have to know where you are making an impact and where you can create shared value. That’s where PRé comes in. Pinpointing your impact is an essential starting point for taking joint action with people and organisations in your ecosystem. The combination of sustainability and social business can make a real change in the way we do business.

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3 Benefits of Transitioning to a Platform Business Model

• 16 May 2024

In a world dominated by digital innovation, platform business models aren’t just reshaping industries but redefining the market. From startups disrupting traditional markets to established companies pivoting to platform strategies, innovation is critical to staying relevant.

“Platform companies have become increasingly important to the global economy and are some of the largest and most valued companies today,” says Harvard Business School Professor Feng Zhu, who teaches the online course Winning with Digital Platforms .

If you're considering a platform business model for your company, here's what transitioning to one involves and its strategic advantages.

Access your free e-book today.

What Is a Platform Business Model?

A platform business model capitalizes on digital infrastructure to facilitate interactions between user groups. Organizations that use such models generate value and revenue through transaction fees, advertising, and data monetization.

Platform business models fall into two categories:

• Open: Platforms designed to be accessible and flexible with no single gatekeeper controlling access to or regulating them
• Closed: Platforms owned and heavily controlled by one company to protect its interests at all costs

When it comes to your business, you don’t need to choose one or the other.

For example, Adobe transitioned from licensed software to a digital platform, Creative Cloud, by combining a subscription-based model for its core software with an open platform community, Behance. This enabled Adobe to control who accesses its tools and services while allowing users to engage and share resources and creations with each other.

Related: Digital Platforms: What They Are & How They Create Value

“Companies transition to a platform model for many reasons,” Zhu says in Winning with Digital Platforms . “For one thing, the fact that more and more companies are becoming platforms means that you could lose ground to competitors who have capitalized on the benefits of platform transformation if you fail to make the jump.”

If you’re interested in bringing your business into the digital age, here’s how transitioning to a platform business model can benefit you.

1. Expanded Market Reach

One advantage of transitioning to a platform business model is that you can expand your market reach exponentially. By leveraging your existing user base, you can harness network effects —which occur when your service’s value increases as more users join—and help your business grow.

Network effects include:

• Direct/same-side network effects: A situation in which the value the user receives changes with the number of all users in the same group or side
• Indirect/cross-side network effects: Increased users in one group or side (e.g., sellers) enhance value for those in the other (e.g., buyers) by boosting variety or service quality
• Data network effects: Data generated from user activities improves your platform's services, attracting more users and creating a reinforcing cycle that enhances your offerings

As HBS Associate Professor Chiara Farronato notes in Winning with Digital Platforms , network effects have contributed to the success of social media companies like TikTok and Facebook.

“The more users are actually using TikTok or Facebook and creating content—distributing content on those platforms—the more valuable that platform is for every other user who's considering joining it,” Farronato says. “This is a form of direct, or same-side, network effects. The fact that there are many other users like me participating in a platform makes me more willing to participate in that platform.”

Utilizing network effects can rapidly increase user engagement and participation—in turn, broadening your platform business's impact and reach.

2. Better Scalability

Transitioning to a platform business model also offers scalability opportunities. By taking a digital-first approach, you can connect supply and demand without extensive physical infrastructure—reducing barriers to expansion and adapting quickly to market shifts.

In Winning with Digital Platforms , CEO of Zé Delivery Rodolfo Chung shares how the platform improved scalability with the support of its parent company, AB InBev, during the COVID-19 pandemic. Using partner networks and existing corporate structures, the beverage delivery service pivoted and expanded its operations, achieving growth that would’ve taken months without AB InBev’s resources.

“With tapping through the InBev ecosystem, we did it in a matter of weeks,” Chung says in the course. “In less than a month, we were able to have the sales team explaining, expanding the ecosystem, gathering new partners in over 300 cities throughout Brazil because you already had people in all those locations.”

The synergistic relationship and accelerated scaling not only served as a strategic advantage but provided a buffer against market volatility.

3. Cost Efficiency

Beyond improving scalability, transitioning to a platform business model can lower operational costs.

Unlike companies with traditional models, platform businesses act as intermediaries that facilitate transactions and interactions, meaning they don’t need to invest heavily in production, inventory, and resources.

For example, e-commerce platform eBay doesn’t hold inventory, instead providing a marketplace where sellers can list items that buyers can purchase. Its model eliminates the risks and costs associated with inventory management, such as storage, obsolescence, and supply-chain logistics.

This can be advantageous when transitioning to a platform model. Since starting a business from scratch often demands substantial upfront investment, it helps if you already have existing digital infrastructure—which generally requires less capital.

Shifting from a capital-intensive to an asset-light approach for your platform can allow you to better deploy funds and invest more in technology and customer acquisition.

Transitioning to a Platform Business Model

Transitioning to a platform business model calls for reassessing your product and service offerings, redefining your customer acquisition strategies, and embracing technological upgrades.

One of the best ways to prepare for the process is by enrolling in an online course, such as Winning with Digital Platforms . The course can not only enrich your understanding of platform business models through real-world examples but connect you with fellow learners from diverse professional backgrounds .

Do you want to learn more about the digital platform landscape and launching and scaling a platform business? Explore our online course, Winning with Digital Platforms , and download our free entrepreneurship e-book to discover how you can take your career to the next level.

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Reviewing your business model time for change – adjusting your business model.

A company’s ability to change determines its long-term success. But when is the right time for a company to realign its business model? And what are the biggest challenges that SMEs face in doing so? We explain.

Key points in brief:

• There are many reasons for a new business model: market changes, new technologies, changed customer needs or internal structural reasons, to name just a few.
• It makes sense to seek expert advice when making such fundamental adjustments.
• Resilient companies are less impacted by external events.

Successful companies never stand still. They are always endeavoring to meet current market requirements, customer needs and economic conditions. This sometimes necessitates an adjustment to their business model.

Changes to business models are often only made in the event of negative financial developments. However, falling revenues are frequently a symptom of problems that have existed for some time. Ideally, the need to adapt a business model will be recognized at an early stage.

For entrepreneurs, the question arises as to when exactly they have to adapt or further develop their business model .

1. Reasons for realigning your business model

1.1. market changes.

The market is subject to fundamental change. Such change can mean that a company’s business model may have to be revised. Triggers can include the following:

• New market dynamics: depending on the sector in question, every market passes through cycles of growth, maturity and sometimes even contraction. Understanding these cycles helps companies to revise their strategies accordingly and enjoy success in the long term.
• New competitors: the emergence of new competition can threaten the market share of established companies. After all, these newcomers often come with innovations, services or business models that challenge the status quo. It is key for existing companies to observe these new market players and, if necessary, adjust their own offerings or strategies.
• Changed needs: customers needs change. What is relevant today can already find itself outdated tomorrow. Companies have to maintain constant dialog with their customers and, where appropriate, conduct market analyses to enable them to adjust their offering in a targeted fashion.

1.2. Technological developments

New technologies and innovations can turn the business world upside down. They open up new opportunities for products and services, simplify processes and change customer relationships. Disruptive technologies can quickly change or replace established technologies and processes.

1.3. Regulatory changes

New laws, regulations and political decisions can have a major impact on markets. Stringent environmental regulations, for example, can put smaller companies at a disadvantage, as they do not have the necessary financial resources at their disposal to meet these requirements. Data protection rules, in turn, have a direct impact on how companies handle data.

1.4. Global trends and macroeconomic factors

Global events such as recessions and pandemics can also impact local markets. Observing these trends in a forward-looking manner can help to minimize risks.

1.5. Internal structural reasons

A further reason why continuous corporate development is necessary are changes in internal structures or dynamics.

• Changes within the workforce: the world of work is changing. Trends such as working from home and new working methods mean that companies are having to change their business model.
• Change in management: new managers bring fresh ideas and objectives to the table that can lead to new approaches being adopted.
• Partnerships or acquisitions: while new cooperations can boost efficiency, they often also require a change to existing business processes.

1.6. Management errors

It is neither easy to always make the right decisions for your company, nor is it simple to recognize all important market changes at an early stage and respond to them correctly. Nevertheless, if the management of an SME does make the wrong decisions, these have to be corrected afterwards. This sometimes goes hand in hand with a realignment of the business model.

Wrong decisions at a management level may include, for example, over-the-top growth targets that were formulated without taking account of real market conditions, the company’s own capacities or its resources. Failing to recognize market dynamics, competitive situations or technological trends are also errors that can have long-term consequences.

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2. Risks of failing to recognize the need for action

Companies that fail to adjust their business model in good time run the risk of not being viable in the long run. The following direct consequences may arise:

• Decline in turnover A lack of adaptability can lead to a decline in turnover, as the company may find that it is no longer in a position to meet the needs and requirements of its customers (complaints, customer churn, etc.).
• Loss of competitiveness If a company is unable to keep pace with the changing needs of customers or ignores new technologies, it risks being overtaken by more competitive companies.
• Cost increases A company that fails to adapt may persist with less efficient processes or outdated technologies, leading to higher operating costs and weighing on its profitability.
• Loss of innovation Companies that fail to innovate or adapt may miss out on the chance to tap into new markets or develop new products and services that could drive their growth.

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3. How to review your current business model

• Conduct an analysis A thorough internal and, if necessary, external analysis or your company's strengths, weaknesses, opportunities and threats (SWOT analysis*) can help in ascertaining which resources and skills are available for adapting your business model.
• Set clear goals It is important to define clear goals and milestones for the adjustment of your business model, for example with respect to your company’s structure, culture and employees. These goals should be specific, measurable, achievable, relevant and time-bound in order to provide a basis for successful change.
• Implementation and continuous review The process of adapting your business model should not be viewed as a one-off undertaking. Companies should continuously review how well the new business model is working and make any necessary adjustments to ensure that it meets changing market conditions.
• Draw on expert advice The benefits of external support in the area of change management are obvious: change experts contribute specialist knowledge and experience, understand the complexity of change and the interactions it involves, ask the right questions and are familiar with proven methods for making the transition as smooth as possible. In performing their work, they can also provide an objective and unbiased opinion and help in developing clear and convincing messages – without the risk of being professionally blinkered.

* A SWOT analysis examines a company’s strengths, weakness, opportunities and threats and thus provides a strategic planning tool.

4. The recipe for long-term success: make your company more resilient

The ability of companies to deal with challenges, change and crises and to recovery from them falls under the term “resilience”. Resilient organizations are less at risk of being overrun by change and are less overwhelmed by a sense of urgency when it comes to change processes. There are number of factors that can boost a company’s resilience:

• Building up reserves: ensuring sufficient liquid funds and building up reserves can ensure a company’s financial stability during uncertain times.
• Continuous monitoring and adjustment: regularly reviewing and adapting business strategies, plans and processes can help a company to respond quickly to unforeseen events.
• A well-functioning finance area: a carefully planned budget, solid financial planning and meaningful controlling (including costs controls and post calculation) are good tools for recognizing developments in good time.
• Risk analysis and management: a risk management plan assesses internal and external risks and defines risk minimization measures. This means that a company is better positioned to deal with unforeseen events.
• Diversification: by diversifying its business, for example by tapping into new markets, products or services, a company can protect itself against possible risks.
• Flexibility and agility: companies that are both flexible and agile are better able to adjust to changing circumstances and successfully implement change processes. Promoting a corporate culture that welcomes change and is able to responds quickly to new challenges is valuable.

And a final note : as important as it is to be proactive in bringing about change, it is also important not to jump the gun or make constant changes to your business mode l without having clear indicators or reasons for doing so. Excessive or ill-considered change can lead to confusion and have a detrimental effect on the company’s core business. Every change should therefore for be carefully considered and strategically planned.

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Jürgen Mayer

Ubs credit solutions.

Jürgen Mayer works in the credit risk area at UBS. He provides corporate clients with advice on complex financial and sophisticated succession solutions.

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Innovative Ecosystem Model of Vaccine Lifecycle Management

Associated data.

Data available in a publicly accessible repository.

The COVID-19 pandemic has severely tested humanity, revealing the need to develop and improve the medical, economic, managerial, and IT components of vaccine management systems. The vaccine lifecycle includes vaccine research and development, production, distribution, and vaccination of the population. To manage this cycle effectively the proper organizational and IT support model of the interaction of vaccine lifecycle management stakeholders is needed—which are an innovation ecosystem and an appropriate virtual platform. A literature review has revealed the lack of methodological basis for the vaccine innovation ecosystem and virtual platform. This article is devoted to the development of a complex approach for the development of an innovation ecosystem based on vaccine lifecycle management and a virtual platform which provides the data exchange environment and IT support for the ecosystem stakeholders. The methodological foundation of the solution, developed in the article, is an enterprise architecture approach, CALS technologies, supply chain management and an open innovation philosophy. The results, presented in the article, are supposed to be a reference set of models for the creation of a vaccine innovation ecosystem, both during pandemics and periods of stable viral load.

1. Introduction

The COVID-19 pandemic has made the world’s population aware of the importance of integrated multidisciplinary approaches to solving global problems, in particular in the field of healthcare. Thus, the pandemic has highlighted the problem of the impossibility of responding effectively to the global epidemic challenge by individual (even influential, global) private companies, putting on the agenda the relevance of combining the efforts of all stakeholders in the fight against the spread of the virus. Such discussions, in particular, refer to vaccine lifecycle management approaches. The current pandemic has highlighted the need to develop comprehensive solutions (organizational and IT) to unify the stakeholders of the entire vaccine lifecycle together in order to perform collaboration processes that are smoother and to provide faster and more effective responses to virus challenges.

Launching a new vaccine is not an easy task, since it involves not only research and development of the substance, but also production, distribution, feedback and performance analysis. Thus, a certain organizational solution, which will unite all the vaccine lifecycle stakeholders into a single system is needed. In the meantime, such a knowledge- and innovation-intensive area as vaccine development requires a free circulation of knowledge and an environment that promotes innovation, technology sharing, and know-how. In order to provide the excellence-oriented governance of such a complicated system, which should be capable of responding to growing challenges over time, it is essential to develop a strong innovation ecosystem [ 1 ]. With the active development of digital technologies and platform solutions, it seems to be possible to provide the appropriate IT support to such an innovation ecosystem.

The World Health Organization (WHO) has repeatedly stated that a new, more severe pandemic awaits humanity in the short term. At the same time, “usual” epidemics also continue to have a serious impact on the social and economic life of the population. A high-tech response, including appropriate business models and information support models, is a panacea in the fight against epidemiological threats. Approaches to the development of an integrated management model for vaccine development, production and delivery, based on the vaccine lifecycle model are the focus of the research presented in this article. Such ka management solution, supported by an appropriate digital platform, is supposed to create a prerequisite for establishing a solid foundation for the national vaccine lifecycle management system, uniting all participants of this cycle into a single ecosystem.

Analysis of the current state showed that the research and practice-oriented community lacks comprehensive approaches to vaccine lifecycle management, which would offer a state-wide organizational form of interaction between the participants of this cycle and an IT solution model to support such interaction. In the meantime, it is evident that such an approach will be in demand both during a pandemic and during periods of a stable seasonal viral load [ 2 ]. The relevance of such a study is determined by the following factors, revealed during the research:

• 1. The COVID-19 pandemic. The new coronavirus infection has caused significant damage to public health, living standards, and economies across the world. In addition, it indicated the importance of systemic regulation of vaccine handling at all stages of their lifecycle—from the emergence of a new pathogen to vaccination of the population and monitoring the effectiveness of this vaccination [ 3 , 4 ].
• 2. The trend toward value-based medicine. In recent decades, the so-called value-based medicine—the ideology of monitoring and evaluation of the effect of treatment (vaccination) after the provision of medical services in order to identify the true value of the treatment provided—has become one of the factors in the development of health care [ 5 , 6 ]. From a vaccine point of view, a value-based approach in healthcare encourages the involvement of after-vaccination stages into the vaccine life-cycle as an essential part of the whole process, which creates an input for a new vaccine cycle.
• 3. Patient-centered approach to vaccination. The peculiarities of this approach to vaccination are that on the basis of client-orientation it is necessary to create an innovative approach to planning, conducting, evaluating and monitoring the vaccination process, which is based on partnership and mutually beneficial principles of cooperation between the patient and his immediate environment (family) with a medical organization represented by administrative, medical, nursing and support personnel. It is represented as a three-tier structure of patient-oriented healthcare. At the micro level, the key is the model of the relationship “doctor–patient”, at the middle level “medical organization–patient”, and at the macro level “national health care system–patient”.
• 4. Platform economy. A shared economy means active roles of industrial ecosystems and IT platforms as a service-oriented environment of ecosystem participants’ communication. It enhances innovation and technology diffusion, involves all the participants in the value creation process, lowers transaction costs, reduce time for new services to enter the market due to the high level of competition, enables rapid development of infrastructures [ 7 , 8 ] This way of industrial cooperation completely meets the requirements of a vaccine lifecycle support system.
• 5. Open innovation (including open source IT solutions). According to [ 9 , 10 , 11 ], the obvious advantages of open innovations are lower costs, greater security, greater speed of diffusion, free knowledge circulation, continuous improvement, and customer orientation. The aforementioned advantages are essential components of the vaccine lifecycle management as it is a very innovation-intensive area which has to react fast to the population demand for certain virus protection.

The factors mentioned above determine the need to develop an integrated approach to working with vaccines. This approach should take into account the technological and business processes (supply chain) of development, production and delivery of vaccines; propose a model for IT support of processes at all stages; provide opportunities for the collaboration of participants, including in terms of the use of data; and offer an open solution that involves new entrants in order to stimulate innovation in the sector.

This article is devoted to the description of the methodological basis for the vaccine innovation ecosystem development based on the vaccine lifecycle. The purpose of the study is to develop the architecture model (a set of models) of the development, production, distribution of vaccines and vaccination of the population, supported at every stage by a virtual platform, which would provide the systematic management of the vaccine lifecycle at the state level. The article consistently solves the following tasks:

• • analysis of the state of the art in the vaccine lifecycle management approaches and IT solutions applied to support this cycle;
• • creating the supply-chain-based innovative ecosystem model of the vaccine lifecycle management;
• • development of the virtual IT platform model for innovative ecosystem model of the vaccine lifecycle management.

The article presents the results of the original study, based on both research literature analysis and existing practices of ecosystems’ organization and their IT support, which is still really scarce. The key results of the study are represented as a set of models representing the supply chain-based vaccine lifecycle, the vaccine ecosystem stakeholders view model, the vaccine ecosystem service model, and the IT platform model supporting the vaccine ecosystem.

The following sections of the article address consistently: the theoretical basis and methodology of research, analysis of research literature, the authors’ vision of vaccine lifecycle management in terms of models of the business and IT components of the innovation ecosystem, the topics of future research areas.

2. Materials and Methods

For development the target vaccine lifecycle innovative ecosystem model (described in the Section 4 ) the following approaches were chosen as a methodological foundation:

• 1. An enterprise architecture approach to the development and analysis of models of interaction of heterogeneous elements (business and IT logic) of socio-economic systems;
• 2. Process approach to the analysis of socio-economic systems;
• 3. CALS-technologies as models supporting the lifecycle of products;
• 4. Supply chain management principles.

Enterprise Architecture. Deservedly accepted by the international scientific and professional community the concept of architecture of the enterprise proclaims consideration of any business system as a set of the interconnected and interdependent diverse elements. Business management as a system includes such elements as goalsetting, strategy, motivation, functional structure, business-processes system, organizational structure, architecture of information systems, applications and data, information exchange models, IT-infrastructure. [ 12 , 13 ] Presentation of the above elements in a single complex allows you to understand and analyze the essence of the system and the nature of the interaction of its elements. This creates the prerequisites for the effective development of business systems, because it provides traceability of any changes in the entire system when changing any of its elements.

Enterprise architecture emerged during the period of rapid development of IT for business as a response to the challenge: how to effectively align business and IT elements within a single set of business management. Therefore, special attention is paid to the relationship between business requirements and information system services and applications in enterprise architecture. The functional structure of information systems must take into account the functional structure of the business, while ensuring integration between these functions to support end-to-end enterprise processes. The function-oriented approach to the design of information systems is to ensure effective information exchange within each function at all levels of the IT architecture hierarchy. Architectural approach is applicable to the analysis of both individual enterprises and their complexes, industries, economic systems at the state level.

This article aims to develop an integrated solution for the management of vaccine development, production and delivery processes, and proposes to consider the interaction of such elements as stakeholders, business processes, IT support and data. This is possible in the framework of architectural modeling. [ 14 ] As a result of the study we will offer models of different architectural perspectives of vaccine ecosystem, reflecting the features of interaction of stakeholders, data exchange, IT-support, service architecture of the virtual digital platform.

Business Process Management. The process approach has long been widely used in business management, as well as in the implementation of IT solutions. If the functional structure of enterprise activity defines “What to do?”, the system of process models answers the question “How is the enterprise activity realized to achieve the required result?”. Ref. [ 15 , 16 ] The process approach allows you to describe the sequence of actions to achieve the result, decomposing it into individual steps to the required level of detail. Thanks to the structure of the process approach it became a basis for enterprise activity automation. The process approach enhances smoother and faster innovation implementation as it tracks the whole stages of any prescribed cycle properly.

CALS technology. Ref. [ 17 , 18 ] CALS (continuous acquisition and lifecycle support) is a concept that unites the principles and technologies of information support of the product lifecycle at all its stages, based on the use of an integrated information environment (single information space), providing uniform methods of process management and interaction of all participants in this cycle—customers (including government agencies), suppliers and manufacturers, operating and management personnel—in accordance with the requirements of the appropriate standards mainly by means of electronic data exchange.

Key advantages of CALS-technologies are:

• • Shorter time to market;
• • Reduction of the lifecycle cost;
• • Improving the quality of the product.

The main problems hindering effective management of vaccine information are the enormous amount of information (“information chaos”) and communication barriers between all the participants of the lifecycle. The ways to solve them are laid down in the CALS strategy. CALS strategy is to create a single information space for everyone involved in the vaccine lifecycle, including the consumer. The single information space is based on the use of open architectures, international standards, joint data storage and proven software and hardware tools.

Supply chain management principles. Supply chain management principles were declared in 1997 in [ 19 ]. The principles are still actual over decades. They are intended to provide adopted, service-oriented, smooth path of goods and services through all the participants of the supply chain.

The authors formulated the following methodological and functional requirements for the architectural solution being developed for vaccine lifecycle management. The system of models of the architectural solution should take into account:

• 1. the Deming continuous improvement cycle;
• 2. ecosystem approach, describing character of interaction of all stakeholders of lifecycle, acting within a single value chain;
• 3. requirements of innovations openness, making possible to connect new participants to the cycle (both from organizational and IT points of view), capable;
• 4. service-oriented architecture principles for development the IT-support model of the vaccine life-cycle.

3. Literature Review

In order to synthesize existing works on a research topic in a fair manner and identify the gap, in Section 3 a systematic literature review was conducted. The Kitchenham’s [ 20 ] guideline for systematic literature review was used as a reference. According to the proposed literature review algorithm the following steps were implemented ( Figure 1 ):

Literature review methodology model.

In our study, the following research questions were defined:

• What is the vaccine lifecycle?
• Who are the actors responsible for implementing the different stages of the vaccine lifecycle and what are their relationships?
• What IT and digital solutions exist to support the vaccine lifecycle?
• What services are required to support the vaccine lifecycle and ensure effective collaboration between the actors responsible for the different stages of the vaccine lifecycle?
• Specification of inclusion and exclusion criteria.
• 2. Specification of inclusion and exclusion criteria.

The main focus of this research was on the vaccine lifecycle and its information support. The review was made for the period of the last 3 years (2019–2021). In the search it was discovered that quite a number of articles during the mentioned period consider the problem of vaccination through the prism of coronavirus, emphasizing the peculiarities of this virus. The study aims to develop a universal solution for vaccine lifecycle management, so articles examining the specifics of coronavirus vaccine development were excluded from consideration.

It was decided to exclude those studies that could not be accessed without additional investments.

• 3. Definition of the search strategy and data sources.

In this study, we used an electronic search procedure to identify the set of articles about innovation hubs and a manual search to pick the studies that help to answer the research questions. The electronic search procedure was chosen as it ensures accuracy and completeness of the evidence. The electronic search was applied on the Scopus search engine, because almost 80% of Scopus records include abstract, which makes analysis easier, and a high quality of search outcomes.

In total, 110 open-access articles in English on the target research area were identified.

• 4. Manual check of the results.

The analysis of articles abstracts resulted in selection of the most relevant ones. The number of analyzed articles decreased to 24. These articles have been categorized into large categories showing the industry of the research ( Table 1 ).

MatriX of articles collected initially with SCOPUS.

Moreover, it can be noted that of all the articles that reached the final review, 15 were case studies and referred to a specific region or some kind of industrial example, and nine displayed concepts. Thus, the analyzed articles reflect both the practical and historical states of the art.

• 5. Analysis of the selected articles.

Stern P.L. reviews the main elements that provide for the development of safe and effective vaccines. The three vaccine development phases (preclinical, clinical, and post-licensure) integrate the requirements to ensure safety, immunogenicity, and efficacy in the final licensed product [ 24 ].

Article [ 25 ] describes the traditional approach to vaccine R&D and possible improvements, particularly towards being better prepared for emerging viral diseases.

Verbeke R. et al. highlight the challenges in vaccine design, testing and administration, key considerations in the design of mRNA-based vaccines and new opportunities that arise when packaging mRNA in nanoparticulate vaccines [ 26 ].

Hartmann K. et al. in their article say that it is vital that the safety of all vaccines is monitored throughout their lifecycle [ 27 ].

Zawawi A. et al. in research on a vaccine for parasitic helminths say that multiple lifecycle stages exist, each presenting stage-specific antigens [ 28 ].

In [ 29 ] the stages of human papillomavirus (HPV) vaccine development are discussed. Pan-gender vaccination and current clinical trials are also discussed.

This review focuses on the development of CHIKV vaccines that have reached the stage of clinical trials since the late 1960s up until 2018. Also, various stages of vaccine development are considered [ 30 ].

This review outlines the main technological advancements as well as major issues to tackle in the development of vaccines. Possible applications for unmet clinical needs are described [ 21 ].

The research of Zhou, X. et al. summarizes vaccine development paradigms and major types of vaccines [ 31 ].

To better understand the role of innovation in breakthrough drug and vaccine development, the article analyzed recent results for assets developed using different types of innovation [ 22 ].

This report summarizes the major issues and priority areas of research, the roadmap not only encourages research aimed at new solutions, but also provides guidance on the use of innovative tools to drive breakthroughs in the influenza vaccine R&D [ 32 ].

Giersing B. et al. describe the challenges encountered in developing vaccines and a vaccine-product innovation ‘theory of change’, which highlights actions that should be undertaken in parallel to product development to incentivize sustainable investment and prepare the pathway for uptake and impact [ 33 ].

The research was conducted based on a partnership framework which analyzed multiple factors-partnership prerequisites, partnership model, partnership process, and partnership performance, thereby providing a comprehensive insight into the successful utilization of partnership networks for vaccine introduction [ 37 ].

Golan M. et al. analyze current trends in implementing and modeling resilience and recommendations for bridging the gap in the lack of quantitative models, consistent definitions, and trade-off analyses for vaccine supply chains [ 35 ].

Kitney R. I. et al. talk about distributed manufacturing model. The advent of synthetic biology promises much in terms of vaccine design [ 34 ].

The research of Rappuoli R. et al. states that conquering diseases requires considerable investment and a new sustainable model of vaccine development involving close collaborations between public and private sectors [ 36 ].

This study examines the application of systemic vaccinology at various stages of vaccine development. Systems vaccinology is a tool that provides novel and comprehensive understanding if properly used. Data sets retrieved from systems-based studies endorse rational design and effective development of safe and efficacious vaccines [ 38 ].

Mohanty E. et al. review the present scenario of peptide vaccines which are developed using mathematical and computational statistics methods to prevent the spread of disease caused by RNA viruses. We also focus on the importance and current stage of AI and mathematical evolutionary modeling using machine learning tools in the establishment of these new peptide vaccines for the control of viral disease [ 39 ].

The study states that various measures are being taken in India to develop a collaborative ecosystem for vaccine research. The Government of India, and in particular the Department of Biotechnology, is developing mechanisms to support end-to-end vaccine development and testing by strengthening collaboration between industry, academia and government [ 42 ].

Cornwell E. et al. create a susceptible-exposed-infectious-vaccinated hybrid ordinary differential equation and difference equation model [ 40 ].

In research by Sun X. et al. the simulation-based approach combining both route optimization and dynamic simulation to improve the logistics performance for COVID-19 vaccine distribution was developed [ 41 ].

The authors of [ 43 ] have developed a novel deep learning platform—deep docking (DD)—which provides fast prediction of docking scores of Glide (or any other docking program) and, hence, enables structure-based virtual screening of billions of purchasable molecules in a short time.

The article [ 44 ] demonstrates successful pursuit of a platform development approach to manufacture important vaccines. Platform in this article refers to vaccine platform technologies (not digital platforms) that allows the vaccine development cycle to be shortened by means of using the experience of previously developed vaccines.

Jarrett S. et al. tell that the counterfeiting of vaccines is an increasing problem globally with the safety of persons vaccinated, trust in vaccines generally and the associated reputation of vaccine manufacturers and regulatory agencies at risk. This article highlights the efforts of industry and governments on the value of traceability and introduction to 2D barcodes [ 23 ].

The analysis of research papers showed that the most discussed topic concerns development of innovative ways to produce vaccines. Researchers distinguish three phases of vaccine development-preclinical, clinical, and post-licensing. They are united by the requirements for safety, immunogenicity and efficacy of the final licensed product.

In order to understand vaccine handling activities, the authors analyzed the relevant processes through the prism of the Deming cycle (plan-do-check-act) [ 45 ]. The latter means that any process should be designed in such a way that its implementation is necessarily supported by the possibility of monitoring, feedback gathering and analysis in order to make the necessary adjustments in the next process execution cycle. In this regard, the following top-level Deming cycle model was proposed for vaccination processes: epidemiological situation monitoring–vaccine development–vaccine production–vaccination. It should be noted that the authors have not found any publications that describe the whole proposed cycle or some similar concept. Researchers and specialists often focus on one of the four steps of the proposed cycle without paying attention to the place of the specific step in the overall system and its interfaces with the related processes. At the same time, medical specialists, when describing the processes, often do not pay proper attention to the issues of managing the business process of working with vaccines, in particular to the issues of logistics.

There are certain paradigms for the development of different types of vaccines. After studying the sources, we have a fairly complete picture of the vaccine development process, which consists of the following steps:

• • Virus analysis;
• • Pharmaceutical development;
• • Pre-clinical laboratory research;
• • Testing on cell cultures (in vitro);
• • Testing on animals (in vivo);
• • Testing on volunteers;
• • Vaccine registration.

The processes of Epidemiological situation monitoring, Vaccine production and vaccination have received incomparably less attention in the research literature.

In addition to the literature review, the authors analyzed the open information of the world famous vaccine developers and manufacturers (the State Research Center “Vector” (Kolsovo, Russia) the National Research Center for Epidemiology and Microbiology named after N.F. Gamalei (Moscow, Russia), Federal Scientific Center for Research and Development of Immunobiological Preparations named after V.I. M.P. Chumakova (Moscow, Russia) in Russia; the Wuhan Institute of Virology at the Chinese Academy of Sciences (Wuhan, China), the Wuhan Institute of Biologicals (part of the Sinopharm Group, Shanghai, China), Sinovac Research and Development Co. (Beijing, China), CanSino Biologics Inc. (Tianjin, China) in China; The National Institute of Allergy and Infectious Diseases (Rockville, MA, USA), Moderna (Cambridge, MA, USA), Inovio (Plymouth Meeting, PA, USA), Arcturus Therapeutics (San Diego, CA, USA), Johnson and Johnson’s (New Brunswick, NJ, USA) in the USA; Duke-NUS Singapore School of Medicine in Singapore; Petrovax Pharm (Moscow, Russia), Pfizer (New York, NY, USA) and IT vendors in search of the integrated vaccine lifecycle support solution—both business and IT [ 46 , 47 , 48 ].

All of the above listed companies focus on the full-cycle research and production (up to the finished dosage form) with subsequent registration and promotion in the pharmaceutical markets of medical products, which are the parts of the vaccine supply chain. The companies do not mention the remaining stages of the supply chain in their activities which would include vaccine delivery to the patients and further steps.

Nor do the IT companies describe complex solutions for tracking all stages of the vaccine lifecycle. There are different IT systems for supporting the different stages of the vaccine lifecycle (vaccine development systems, vaccine testing systems, vaccine inventory monitoring systems of a company level, immunization registries of the state level) used by different stakeholders of the cycle and not integrated with each other.

From the business point of view, the solution SAP Vaccine Collaboration Hub (SAP VCH) should be mentioned as the one, supporting a certain part of a vaccine lifecycle and providing the IT support not for the single companies, but to the vaccine ecosystem [ 49 , 50 ]. Compared with the research publications mentioned above, in which there was a lack of business focus, the SAP solution is vaccine supply chain oriented, but specifically medical steps of the vaccine lifecycle (vaccine development, epidemiological situation monitoring) are missing.

One important issue is an analysis of current trends in implementation and modeling the sustainability of existing vaccine supply chains. New models of distributed production, sustainable vaccine development involve close collaboration between the public and private sectors.

Additionally, a search for existing organizational forms of cooperation within the vaccine lifecycle was conducted. The search string “vaccine + hub or ecosystem” was formed for the Google search engine. Except the information about SAP Vaccine Collaboration Hub, mentioned above, the following vaccine-related ecosystems were identified.

Various ecosystems such as BioNTech are being set up to organize vaccine research, and mechanisms are being developed to support end-to-end vaccine development and testing by strengthening collaboration between industry, academia, and government. Ref. [ 51 ] Biopharmaceutical New Technologies (BioNTech, Mainz, Germany) is a next-generation immunotherapy company that is developing new treatments for cancer, infectious and rare diseases, as well as developing vaccines. BioNTech has created its own ecosystem for vaccine development.

Modeling contributes immensely to the development of the industry. Various modeling approaches improve the logistics performance of vaccine distribution.

To support vaccine production, various platforms such as The cBio Cancer Genomics Portal and The European Thoracic Oncology Platform are being developed and introduced into production. The cBio Cancer Genomics Portal is a resource for multidimensional cancer genomics and vaccine datasets that currently provides access to data from more than 5000 tumor samples from 20 cancer studies. The cBio Cancer Genomics Portal significantly reduces the barriers between complex genomic data and cancer researchers who want access to molecular profiles and clinical characteristics from large-scale cancer genomics projects, and enables researchers to translate these rich data sets into biological insights and clinical applications. [ 52 ] The European Thoracic Oncology Platform is a platform that promotes academic clinical research and the exchange of ideas in thoracic oncology. It contains research projects and clinical vaccine trials with a focus on knowledge development in the field of thoracic malignancies. ETOP includes more than 50 collaborative groups and institutions from across Europe and beyond. [ 53 ] They simplify the vaccine production process as well as increase its efficiency.

The analysis revealed the following:

• • No explicit description of the complete vaccine life-cycle, reflecting the Deming continuous improvement cycle, has been found; different researchers consider separate stages of this cycle but not their interconnection; in practice different stakeholders are responsible for implementing a specific stage of the vaccine cycle, which does not provide the synergy effect of the whole ecosystem;
• • No information has been found on a comprehensive IT solution that supports the entire vaccine cycle.

The current state of the research and the practice in the vaccine lifecycle management make this article relevant.

4. Results and Discussion

4.1. business model of a vaccine ecosystem.

The safe use of vaccines will require proper vaccine management and supply chain management, which will be determined by the characteristics of the finished vaccine product (such as release form, composition, stability, temperature requirements, storage and transport volumes). It is essential to ensure that a national system for tracking and monitoring the use of vaccine products is in place to manage multiple vaccine products, manage the supply of vaccines for subsequent doses of vaccines, participate in the monitoring of vaccine safety, and address potential drug withdrawals, and their series/parties. The following are key points to look out for when managing a vaccine supply chain:

• 1. Establish early contact with potential vaccine suppliers to access data on vaccines and plan the necessary infrastructure and procedures for storing, transporting and administering vaccines;
• • Evaluating peak vaccine storage and transportation options, and developing contingency plans to enhance the current distribution system’s capabilities;
• • Review, update (as needed), and distribute “standard operating procedures” describing all aspects of vaccine and vaccine supply management.
• 3. Planning the management of consumables and auxiliaries used in immunization (syringes, needles, containers for disposal of sharp and stabbing waste, personal protective equipment, thermal containers, cooler bags, cold items, kits for assisting with anaphylactic shock, vaccination card blanks, educational materials).

Based on a review of publications, real companies’ experience and IT solutions for vaccine lifecycle support (see Section 3 ), the following model of lifecycle stages was proposed as the basis for developing a management model for vaccine development, production, and delivery ( Figure 2 ).

Vaccine lifecycle: business viewpoint.

The cycle proposed in Figure 2 implies the sequential implementation of the following steps:

• • Epidemiological situation monitoring;
• • Vaccine development;
• • Vaccine production;
• • Vaccine distribution;
• • Vaccination;
• • Feedback collection.

The vaccine planning and control processes are implemented continuously throughout the cycle.

The model in Figure 1 depicts the business processes of vaccine-related activities, while the specific medical, manufacturing and research processes can be described in the decomposition diagrams of the blocks shown in Figure 2 . For example, the decomposition of the vaccine development process is the model in Figure 3 . This view of the process is common among the vaccine development research community. The authors of this article propose to place these specific processes in the context of the overall value chain, which would ensure proper consistency between the inputs and outputs of the vaccine lifecycle stages and provide the individual participants with a common vision of the whole cycle and their place in it.

Vaccine development process in the context of the vaccine lifecycle.

Vaccine lifecycle management is a multilevel process involving the government, corporate stakeholders (research organizations, manufacturers, distributors, etc.), and the public. The architectural solution for vaccine lifecycle management should provide management of the process at the operational (production), tactical and strategic levels.

Strategic management level. The strategic level is the management at the level of the state, as a key institutional customer, the level of development and implementation of the mission in the field of development, production and delivery of vaccines. Each state has different stages of the vaccine lifecycle under its control. For example, in Uzbekistan there are manufacturers, distributors and vaccinators of almost all global vaccine brands (Sputnik V (with partial production), AstraZeneca, Sinovac, Pfizer, etc.), but no vaccine development here. The situation in Russia is different from that in Uzbekistan: Sputnik V is the main vaccine (developed in the country), but there are others (also domestically developed) that mostly support it.

Most countries are not capable of producing a vaccine on their own. For example, France, having declared its own vaccine ready and of high quality, has not been able to produce it. This leads to the fact that more than 95% of WHO purchasing organizations are focused on importing vaccines. However, looking at the situation in Kazakhstan, we can say that it has export-import capabilities: it produces and partially exports Sputnik V. Belarus has a complete technological cycle of growing vaccine substance for production and sale.

Tactical management level. Tactical level implies management at the level of supply chains—the level of management, compliance with expectations which allows linking the flow of patients allowed for vaccination, vaccines in the appropriate state (temperature storage and transportation, etc.), and specialists providing vaccination services (for vaccination it is necessary to validate the patient, monitor the patient’s condition after vaccination). In addition, this level must take into account the restrictions in force in different countries (e.g., the GMP standard in the EU countries).

Operational management level. The operational level is the level at which the plan from the levels above is executed.

A description of the tasks of the different levels of supply chain management is presented in Table 2 .

Vaccine ecosystem management levels.

Let us describe the process proposed as the basis for a vaccine lifecycle management system, focusing on the role of stakeholders ( Figure 4 ).

Vaccine ecosystem: stakeholders’ view.

In the model of interaction between the stakeholders of the vaccine cycle presented in Figure 3 the following stakeholders are defined:

• 1. Institutional consumer (traditionally state government or health ministry)—shapes the mission and strategy for vaccine development, production and delivery, and creates the state order for vaccines;
• 2. Medical researchers—develop vaccines for emerging viruses or virus strains. Medical ecosystems bring together many different stakeholders, but the core of such systems should be medical and research organizations as the main centers of expertise accumulation and medical innovations production and the drivers of their dissemination;
• 3. Component suppliers—supply vaccine components;
• 4. Manufacturers—produce vaccines;
• 5. Distributors—transport vaccines between manufacturers and distribution centers;
• 6. Distribution points—places where vaccines are stored for further transportation to the next storage sites or places where vaccines are directly administered;
• 7. Vaccination points—medical institutions and other facilities where vaccines are administered to patients and recorded;
• 8. Target population—groups to be vaccinated;
• 9. Monitoring agencies—monitor and analyze the epidemiological situation and the results and consequences of vaccination.

Medical researchers and monitoring agencies in this model are specific entities. They are performing their activities on a permanent manner: development of vaccines and monitoring the epidemiological situation is carried out on the regular basis, not depending on a particular quantitative state order. The trigger of the medical research process is a new virus emergence, and the monitoring of the epidemiological situation is carried out on a regular basis. Whereas the trigger for the entire supply chain shown in Figure 3 is the placed state order for vaccines, and the trigger for individual blocks of this chain is the completion of activities of the previous block.

The following management tasks are addressed in the supply chain shown in Figure 3 :

• 1. Public purchasing (institutional consumer).

The state may not be the purchaser of the vaccine, but it will control it in its territory. It is the source of the strategic goal, forms the mission and quantifies the success of the mission. For example, the Ministry of Health sets the target number of vaccinated people in the country as a whole and separately in the regions. The institutional customer carries out planning based on methodologies developed by hygienic health experts.

After the approval of the procurement plan at the state level, based on the percentage of the population in different types of vaccines, the budget is calculated, which is allocated according to the items: the contract price of vaccine production, payment of medical personnel, logistics of delivery, storage, delivery to the place of vaccination (organized groups, the army, power structures, rotational workers, teachers, etc.). Next, a strategic program is formed, which reflects the necessary number of different types of vaccine in the country in a given time, from which follows the planning of the budget.

• 2. Placement of the requisition with potential suppliers.

The state-approved application is placed with potential suppliers.

• 3. Logistics management.

After confirming the application, logistics (logistics service for delivery of vaccines to vaccination sites through the elements of the logistics chain) is built. At this level the following tasks are solved:

• • If raw materials are purchased abroad, they must be validated to the GMP quality standard;
• • Within the framework of export-import operations, the strategic requirement calculated at the state level is verified against the production and delivery capacities;
• • Determination of technical feasibility of storage and delivery of vaccines to the central storage facility;
• • Once the release and delivery calendar is approved, the question of the technical feasibility of storing vaccines purchased domestically or through import operations and delivering them to a central customer audited storage facility to meet existing state-approved standards is addressed. This step aims to ensure the quality of the vaccine.
• 4. Internal logistics.

Internal logistics is harmonized with the logistics flow to the central storage facility. The delivery is organized from the central storage sites (production warehouse of finished products, etc.) to the vaccination sites. For example, in a geographically distributed country like Russia, the main flow for vaccinations is brought to a regional distribution center, and then distributed to vaccination centers. In some regions, however, the vaccine is delivered directly to vaccination sites due to low population densities. An example of such an experience is the Trans-Baikal Territory of Russia. In such regions, the problems of organized collection of a population and their organized delivery to vaccination sites should be solved, while taking into account the factor of lack of vaccine storage capacity.

• 5. Providing transportation capacities.

Transport capacities ensure the movement of vaccines to vaccination sites. The task is technologically complex because of the transportation requirements.

• 6. Performing vaccinations.

The execution of a vaccination is an internal production process of the vaccination point, from the questionnaire and control examination of the patient, to the administration of the vaccine to the patient.

• 7. Feedback collection.

Collecting feedback involves monitoring post-vaccination phenomena in vaccinated patients (temperature increase, etc.).

Thus, the process management process consists of three levels: strategic, tactical and operational, and it looks like a simple linear process chain.

4.2. IT Support Model of a Vaccine Ecosystem

The spread and development of ecosystem approaches in recent years has been made possible in large part by digital technology. It is they that provide the proper level of information exchange between participants and data processing that is necessary to organize effective interaction and obtain the necessary synergies. The role of IT companies in healthcare ecosystems is really significant: they are responsible for creating platforms, providing appropriate services and developing other IT solutions for doctors and patients on the basis of healthcare ecosystem data [ 17 ].

The process described in Section 4.1 implies efficient data exchange between subjects of a vaccine lifecycle and information processing. In the authors’ opinion, the form of implementation of such IT support is to become an ecosystem platform that integrates the levels of ecosystem interaction necessary for decision-making and for data exchange between the participants.

A virtual platform that allows tracking support for the development and production of vaccines and further vaccination of the population, taking into account all the requirements of a patient-centered and open innovation philosophy, should meet a number of requirements:

• 1. The solution must provide control of the process at the operational (value-chain visibility), strategic (supply chain planning) and tactical (mission control) levels.
• • validate the patient for the vaccine;
• • control of the state after the vaccine has been administered.

Apart from physical and medical requirements, there are a number of legal requirements. For example, it is necessary to follow the GMP (international quality standard for medicinal products) certificate protocol.

• 3. At the operational level, it is necessary to ensure the execution of the plan developed from the tactical level.
• 4. For the vaccine development stage the openness of the solution for new participants and new data is crucially important as this stage is very sensitive for innovations. The ability to access new (including external) data and ideas will allow for faster creation of new vaccines and more effective feedback on existing vaccines.

The top-level services model of such a platform is shown in Figure 5 .

Vaccine ecosystem: service view.

In terms of IT support, the following tasks must be accomplished:

• 1. ERP accounting task—implementation of calculations underlying the strategy.
• 2. ERP as an accounting system connected with external production—in the situation when production is an external entity in relation to the customer, but it is possible to obtain data on the readiness to produce a vaccine (a confirmed application). ERP 4.0 is an entity that connects various unaffiliated players within a single landscape that quickly adapts to the needs of companies that are part of a vertically integrated chain of unaffiliated companies. Today, there are ERP and vendor systems that are linked to the ERP in use through a production bus.
• 3. Coordination of logistics—as a “web”, which connects the players of different types: transport logisticians, warehouse logisticians, production managers, coordinators, calculators, controllers of the budget process, the treasury center. When building logistics there is coordination between the various players, which leads to achieving a common strategic goal through the work of a coherent single mechanism.
• 4. Coordination planning—it connects three logistic flows: patients–doctors–vaccines, taking into account the technological limitations of production, delivery and storage at different stages in case of any contradictions. To smoothly enter the solution of main medical tasks and avoid failures after vaccination, balancing strategic tasks is necessary to eliminate contradictions on finances, terms, target benchmarks on the vaccinated population, preservation of economic efficiency of enterprises, which are involved in the production of medical products, specialization of doctors.

The model of the platform solving the above tasks is presented in Figure 6 . The described platform is primarily focused on efficient and prompt distribution and implementation of innovations, and therefore should be open to potential access by admitted players. At the same time, it is not a homogeneous, but a heterogeneous solution, i.e., there can be several platforms, but they are integrated through a data bus and become a virtual single platform. For example, in Uzbekistan, the state itself implements the task of controlling the logistics flows, because a ready-made solution was already created. Thus, three platforms were combined into a single platform with access for authorized players. Within a single landscape of similar platform solutions several components from different vendors can co-exist, and the presence of a single virtual platform solves the problem of access to data related to the vaccination process for interested players. Through the bus (portal), it is possible to gain the necessary access and operational or synthetic analytics, which allows the process to be managed.

Vaccine ecosystem: platform application and data architecture view.

The proposed vaccine ecosystem model solution is relevant not only during the current pandemic, but also during periods of stable viral load. There are effective vaccines with short lifecycles that do not allow long storage, and there are those with long lifecycles with expensive storage. These contradictions lead to a decision on the timing of production and delivery, storage, etc. Thus there is a return to the Deming cycle, which is interpreted not only on the operational, but also on the tactical circuit. We can say that the population will experience a standard viral load: corona virus, influenza, acute respiratory viral infections, etc. The viral load is stationary and equal to the constant. The volume of diseased people will have a stable value due to the principles of immunity realization. After the end of one disease, it is necessary to go to the planning stage relying on statistics and expert data. In order to collect statistical data, it is necessary to have a tool for receiving feedback from the population.

The article proposes the reference solutions for the vaccine lifecycle management in a form of the innovative ecosystem and its virtual platform. Implementing the proposed model to the real situation will require tailoring it to the particular conditions. While adopting the solution, it is necessary to consider the following input factors:

• • Cyclical planning requirements;
• • Specificity of the presence of supervisory bodies at different levels;
• • Multi-level;
• • Openness of the architecture;
• • Compliance with the general methodology of the enterprise architecture;
• • Cloud/non-cloud deployment;
• • Methodological and methodological business requirements.

The organizational issues of vaccine ecosystem development are beyond the scope of this article. In other words, the symbiosis of medical institutions with IT and telecom companies into medical ecosystems is a clearly formed trend. The authors have already analyzed the features of innovative ecosystems as a form of cooperation activity within the supply chain [ 54 , 55 ]. The further research in this direction could be a study of the peculiarities of organizing innovative ecosystems in health care and, specifically, in vaccine development, production, and delivery. The growing activity in the sphere of ecosystem cooperation in health care and vaccination can be undoubtedly considered as one of the consequences of the COVID-19 pandemic.

The proposed IT solution models ( Figure 5 and Figure 6 ) are largely based on and develop the SAP VCH solution. The emergence of a SAP VCH solution is the result of an architectural composition of ready-made components for the actual business task, which appeared quite quickly as a huge challenge. In this context, the concept proposed in the article allows us to approach the task of designing, creating, analyzing, and developing a solution in vaccine management in the most holistic and, as a consequence, effective way.

The architecture model of the development, production, distribution of vaccines and vaccination of the population, supported at every stage by a virtual platform, proposed in the article, provides the following benefits:

• 1. Single information space, effective data management at all stages;
• 2. Effective domain knowledge management;
• 3. Effective innovation management and implementation throughout the whole vaccine supply chain;
• 4. Life-cycle management, providing the key benefits of the CALS approach;
• 5. A virtual platform without being tied to a specific IT solution allows new members of the system to be connected;
• 6. The ability to scale the platform for its further use in tracking the stages of drug development.

5. Conclusions

The COVID-19 pandemic was a serious test for humanity, revealing the need to develop and improve the medical, economic, managerial, and IT components of vaccine development, production, and delivery systems. New and re-emerging infections with pandemic potential will undoubtedly arise. The problem is how best to prepare for such an event. One of the key lessons learned from the current pandemic should be to understand how to avoid such global socio-biological disasters.

Developing a reliable and effective vaccine is no easy task, since it is not only important to create the vaccine itself in the laboratory, but also to produce, distribute and administer it to the population. In this regard, it is important to have a systematic view of the lifecycle of vaccine development, production and delivery, including a model of this lifecycle, a model of interaction between the participants in this cycle, as well as a model of its IT support within a single information space. The article describes the set of architecture models for state-level management of the vaccine lifecycle, including the model of the supply chain-based lifecycle model, the model of the vaccine lifecycle ecosystem and its virtual platform model.

The proposed complex architecture solution provides a theoretical foundation for the organization of the vaccine management and control activities at the national or regional levels. It can be considered as the upper-level reference model for creating a real vaccine lifecycle ecosystem. The ecosystem solution proposed in the article, ensuring the lifecycle of vaccines, is relevant not only in periods of global pandemics, but also during stable seasonal viral load. With a hypothetical victory over coronavirus in the near future, we will still face other epidemics (seasonal influenza). The creation of a vaccine ecosystem model on the basis of this complex will provide society with an effective organizational and management mechanism for continuous improvement and development of the vaccine system both during the pandemic and the acceptable epidemiological situation.

The results presented in this article are essentially the fruit of the open innovation philosophy [ 56 , 57 ]. The article was prepared by the staff of Peter the Great Saint Petersburg Polytechnic University, a university that is a member of the SAP University Alliance. SAP brought to market the SAP VCH solution which, despite a certain integrity in the sense of IT support of the set of tasks in the specific area, did not contain a proper scientific justification and did not offer a common framework for the formation of this kind of IT platform. The IT landscape of the solution was in fact heterogeneous in each case. How do we correctly, quickly, cost-effectively, in accordance with future projections, develop such an architecture, taking into account epidemiological, immunological, country, economic, logical, production peculiarities? The trial and error method or long discussions are hardly applicable in this case: people’s lives and well-being are at stake. The scientific approach proposed by the authors of this article is the result of the interaction of organizations external to each other and their knowledge, which they openly share with each other and with professionals in society. The approach, in its most open presentation and interpretation, is the very tool that allows us to find a solution that takes into account the multifaceted specifics of a particular case, the constraints and dynamically changing goals.

The article does not address the issues of evaluating the effectiveness of the proposed ecosystem and platform solutions—this is a topic for a separate study. The authors have a strong track record on approaches to assessing the effectiveness of IT solutions. The study of the effectiveness of ecosystem interactions and platform solutions used in ecosystems includes several significant aspects:

• • Assessing changes in supply chain efficiency through the creation of an innovative industry ecosystem;
• • Assessing the effectiveness of platform solutions that support information exchange in an industry innovation ecosystem;
• • Assessing the value and the feasible cost of participation in the industry innovation ecosystem for its participants.

All the listed issues are supposed to be topics for further research.

Acknowledgments

This paper and the research behind it would not have been possible without the support of Smorodintsev Research Institute of Influenza (Saint Petersburg, Russia) and IT partners of Graduate School of Business Engineering, who provided us with necessary data and gave their precious feedback on our research ideas, but wished to stay in the shade of the authors.

Author Contributions

Conceptualization, I.I.; Investigation, A.L.; Methodology, A.L. and K.F.; Supervision, I.I.; Writing—original draft, A.L.; Writing—review & editing, K.F. All authors have read and agreed to the published version of the manuscript.

The research is partially funded by the Ministry of Science and Higher Education of the Russian Federation as part of World-class Research Center program: Advanced Digital Technologies (contract No. 075-15-2020-934 dated by 17 November 2020).

Institutional Review Board Statement

Not applicable.

Informed Consent Statement

Data availability statement, conflicts of interest.

The authors declare no conflict of interest. The funders had no role in the design of the study; in the collection, analyses, or interpretation of data; in the writing of the manuscript, or in the decision to publish the results.

Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations.

More From Forbes

The lifecycle of a genai application.

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Lavanya Shukla is VP of Growth at Weights & Biases .

Today, I want to explore the lifecycle of a GenAI project. I'll begin by explaining the benefits of building with LLMs (large language models), then walk through the common steps to doing so. This is informed by our own work at Weights & Biases building LLMs as well as what we see our customers doing right this moment.

Reasons To Build With LLMs

LLMs massively expedite the ability for anyone to quickly build useful applications. In traditional machine learning, putting a useful model in production—everything from getting data to training the model to fine-tuning and deploying it—would take months. Meanwhile, with many LLMs, you can write good prompts and iterate to find one that works for you in a matter of minutes. You can frequently start making API calls to the model and make inferences in a couple of hours.

Getting great results from LLMs also doesn’t require knowledge of deep learning models, programming, math or statistics. You can simply use natural language to interact with them. This means anyone can get massive value from them. And while at the beginning of 2024, ChatGPT was much better than other models out there, open-source projects have really caught up, making them ideal for building models that won’t break the bank.

Finally, in addition to being faster and requiring less coding chops, there’s something else about LLMs that’s different from traditional software: In software, the output is the code that produces an application. But with LLMs, the output is all the things you tried along the way—the data, prompts, pipelines, evaluation metrics, etc. You should think of those experiments and lessons as your company’s IP. While this isn’t exactly a reason why people are leveraging LLMs, it is an important thing to keep in mind as you’re building.

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Next, let’s look at the typical steps in one of these projects.

The LLM Lifecycle: From Idea to Production

1. define the scope..

When putting LLMs into production, starting with a narrow scope gives you a quick baseline you can improve on while also validating your data and the general direction of the project.

Defining the scope of your use case also helps you pick what size model best fits your needs. This is where you’ll decide if you want to start with prompt engineering, fine-tuning an off-the-shelf model, or train your own model from scratch. For a simple translation or summarization task, an off-the-shelf model might do the trick. If you want it to respond in a specific tone or answer questions about proprietary data, it might be worth looking into fine-tuning. Being specific about what your model needs to do can save you both time and compute cost.

2. Learn how to better engineer your prompts.

While prompt engineering is a bit of an art, it’s an intuitive one, and often, it alone is enough to get massive gains in performance. I've personally built applications where performance goes from 20% to over 90% with just a few smart, prompt engineering tweaks. Gauge how your model evolves with each prompt change and double down on tactics that are working well for you. Eventually, you can expect your performance to plateau before moving on to more technical improvements, but do realize that prompting alone can make a massive difference in overall performance.

3. Fine-tune your base model.

Some tasks may require fine-tuning your base model upfront. Typically, these might be tasks where an LLM hasn’t seen enough data like yours. That can be something like proprietary, internal sales data or medical data (due to regulatory guardrails). Fine-tuning is simply a way to train a general LLM on novel data to improve performance on your specific problem.

4. Evaluate performance.

Without having a good way to evaluate the model performance, we lose valuable learning and any experiments we do are in vain. We want to evaluate our models both while building our LLM app and when the app is running in production. We might also look into model limitations like the tendency to hallucinate and build in fail-safes to prevent them.

Simply put, evaluating the model performance against custom metrics or benchmarks can help compare the various techniques you experiment with and make sure you’re actually building something that will be useful in production.

5. Iterate.

You almost certainly won’t get acceptable performance the first time through the last three steps. Expect to tweak your prompt, fine-tune and re-evaluate against your original baseline. This is a big part of what I mentioned earlier in this piece: These steps are effectively your company’s IP, and you can use what you learn here to build more complex LLM applications or start on new ones.

Once we have a model with acceptable performance, we can optimize it for deployment to make sure it’s making the best use of compute resources and deploy it into our app.

I hope this post helped you understand what makes LLM applications special and the lifecycle of putting these apps into production. I'm excited to see what you build with LLMs!

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How to Manage Change Through the Software Development Lifecycle

Customers today have a lot of options and ever-changing product needs, and therefore, incorporating a hasty business change would mean chaos.

Still, change is constant in the agile software development industry . New non-functional and functional needs might arise unexpectedly, with existing requirements being impacted. Failure to handle such additional needs effectively might result in business failure.

Therefore, software development teams must cope with a constantly changing business landscape to prevent this predicament and deliver the result. How is this possible? The answer lies in adopting more simplified methods for effective change.

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The Need for Effective Change Management in SDLC

Creating a high-quality product requires a well-defined and fast-moving Software Development Life Cycle (SDLC). And even though change management is not exactly a part of the SDLC, it plays a key role in the software development process.

Businesses need to equip themselves with robust change management tools for many reasons, including quick adoption, greater control, change representation, and change implementation. This involves creating flowcharts and emphasizing the project planning that helps manage business changes.

Now, a series of steps are followed when any software program or product undergoes any modifications in an IT environment:

• Create a change request
• Review and analyze a change request
• Planning the change
• Testing the change
• Crafting a change proposal
• Implementing changes
• Reviewing change performance
• Finalizing the procedure

So, Why Exactly is Change Management Important?

Here are three key reasons why change management is important:

• Operational excellence: Organizations often pivot resources to accomplishing too many things at once rather than concentrating on the required actions. Adopting change helps businesses correct activities in line with their business plan.
• Risk management: Managing change through secured SDLC is all about minimizing risk. Before establishing a new policy or procedure, it is best to consider the business values. You can do away with taking the risk if it does not align with your key business goals in the longer run.
• Overall strategy: The adjustment for the change should remain consistent with the company’s overall strategy. A change manager must know where the company is headed to determine whether a change should be adopted or put on the “skip” list.

If you decide to refine your change management processes, here are some best practices to consider:

Get customer input

Ensure prioritizing key business aspects — customers, product/service quality, vendors, etc. Aim to maintain a balance between risk and pace of change by explaining to key stakeholders that this is a business risk they must embrace and take responsibility for.

Next, decide on software that assigns importance for change to each involved business entity going forward. You may discover that these objectives are different for various services or business divisions, and be prepared to make some changes to your procedures that accommodate them.

Get input from people who request changes

Project teams and business managers are examples of functional groups that could fall into this category. It is better not to assume what motivates them and what you can do to help them unlock success. Work together rather than relying on competing systems to enhance the overall flow.

Sometimes, customers demand a single process owner for the software development lifecycle (SDLC), IT change, and deployment management. Although these processes are different, the tools, activities, and KPIs are integrated and harmonized across the full-service lifecycle .

Get familiar with agile and DevOps

It is good to speak with practitioners who adopt agile and DevOps as a part of SDLC . This way, you can know whether your business should incorporate any of these concepts as a part of your change management process. This does not mean that you abandon everything you’re doing and start over. Still, you should see if you can incorporate portions of some alternative approaches that have proven effective for other IT businesses.

Review the change processes

Check to see if you can streamline your change management process operations. Reduce the number of individuals who need to authorize every change but hold the remaining change auditors responsible for its success. This may sometimes considerably speed up the process of change in an organization.

Review change management metrics

Ensuring striking a great balance between the risk management and speed of change metrics before you start monitoring those as a part of SDLC.

4 Steps to Effective Change Management

Enabling change management through SDLC requires adopting a strategic approach that ensures effective change with the least effect on the current business operations. Here are the four steps to follow when implementing change.

Step 1. Identify the change

Begin with identifying the change and specify the sort of change taking place within your business environment. Considering an SDLC point of view will need you to take the name, type, scope, and budget project that describe your change. Doing so will make it easy for everyone engaged in your project to get hold of this change.

Step 2. Assess the impact

Identify the potential risks and consequences of the modification, its effects on the software development team and the end-users. Beware of any possible adverse effects and how the change will affect your whole system. It is best to consider changes in the project’s budget, timeframe, and the resources, including human and IT, required to implement the change.

Step 3. Prepare to introduce change

You need to decide whether to implement the change straightaway or get permission. This starts with involving the key decision-makers and implementing the change at a functional level.

As soon as possible, address the change process to help frame the right strategy that responds to changes when they take place. It is better to keep everyone on board and updated at every step of the change process that helps push the right decision.

Step 4. Plan the introduction of the change

If required, you can change the initial project plan to include the effect of each proposed change within the scope of your software or any other components. This means preparedness to adjust to the modification in an agile manner.

Include any response to the challenges or backlogs that the whole organization will face when the change is implemented. Consider the additional challenges that the change may entail, such as modifying the nature of the job performed by everyone within the ecosystem.

It is best to identify and realize the changing context before defining your change management methods. Software development also considers keeping track of changes to your documentation and code. This involves implementing changes to your business that will impact many people.

Ask questions about whether your IT infrastructure is ready to adapt to the change. Regardless of the nature of the change, a well-managed transition may frequently be the difference between failure and success.

Ensure that they communicate the change to customers and see change management as a valuable process. SDLC transformation should help them accomplish their business objectives at the business end.

About The Author

Lucy Manole is a creative content writer and strategist at Marketing Digest. She specializes in writing about emerging technologies like big data, AI, machine learning, and much more. When she is not writing or editing, she spends time reading books, cooking and traveling.

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