Business model innovation in South African startups

Abstract

The rise of successful technology startups has seen an increasing interest in their ability to innovate conventional business models to create unique value that is disrupting highly competitive industries. This study investigates business model innovation within startups and its potential to provide new firms with a unique opportunity to develop a competitive advantage and differentiate themselves from competitors. The value-capturing potential of business model innovation has amassed increasing interest in academic literature, but its application in an entrepreneurial context requires further exploration. Within the South African context, entrepreneurship is a macroeconomic imperative in to order address growth and unemployment challenges. However, most startups fail. This study sought to understand the challenges encountered by startups in relation to business model innovation. This qualitative study, by way of semi-structured interviews, gained access to two South African incubators - a total of 14 startups were interviewed. The results of this study indicated that entrepreneurs were not yet poised to take advantage of business model innovation and remained reactive to its value-creating power in favour of conventional focus areas. An uncertain entrepreneurial environment combined with a lack of business experience emerged as significant challenges. A new model to address these shortcomings was then developed.