Paths of Business Model Evolution
Findings from Business Model Patents
Woori Han, Bomi Song and Yongtae Park
Department of Industrial Engineering, Seoul National University, Seoul, Korea
Keywords: Business Model Evolution, Business Model (BM) Patent, Technology based Business Model.
Abstract: All firms have business models (BMs) and they continuously modify their BMs to adjust to dynamic
environment. The objective of this paper is to find paths of technology based BM evolution by investigating
BM patents which are representative data source of technical BMs. The paper begins by reviewing the BM
and BM patents, and provides a description and justification of the proposed evolutionary paths of BM
major (origination, transplant, mutation) and minor (variation, alternation, addition or subtraction)
evolutionary stream. The paper concludes by highlighting the key findings and drawing limitation and
further research.
As the competitive landscape and conditions change
over time, companies may face the immediate need
to change and adopt their business models in order
to remain competitive (Schweizer, 2005). According
to advances in technology and changes in business
environment, business model (BM) have been
modifying and improving constantly over time.
Firms need to revise their BMs over time to keep up
with changing technology, market and regulatory
conditions. It is indispensable to maintain
profitability of the firms. And technology guides the
most strongly dynamics of a business model in early
development phase of a new business. For a
successful BM, firms should take technological
characteristics and potentials as inputs, and convert
them through customers and markets into economic
value (Chesbrough and Rosenbloom, 2002).
In spite of the importance of BM innovation and
evolution as a critical element for continuous
growth, activities to improve existing business, to
explore trends depend solely on the intuition of
analysts or the discussion of experts. In this aspect,
this research identifies paths of technology based
BM evolution by analyzing BM patents.
The BM patent typically covers combination of
software and business methodology line innovative
online shopping (Dorney, 2001). With the rapid
progress of information technology since the mid
1990s, the current spotlight is on patents for internet-
based inventions, and the number of BM patents is
exploding. BM patents have high value as a
qualitative database, containing detailed BMs both
in manufacturing and the service field.
In light of this, we will propose evolutionary
paths of BM by investigating BM patent information.
To achieve the research purpose, the scope of this
research is as follows: In section 2, definitions and
characteristics of BM and BM patents are briefly
described; and proposed evolutionary paths of
tehcnology based BM are shown in section 3. A
suggested approach can be used as a guideline in
exploring continuous growth and evolution of BM
and developing BM strategies.
2.1 Dynamic Perspective of BM
As technology developed, the needs of new business
opportunity and new way of business operation
management were raised. In this context, there has
been an increasing interest in delineating the concept
and providing further understanding of the BM. The
BM is the method of doing business by which a
company can sustain itself -- that is, generate
revenue. It spells-out how a company makes money
by specifying where it is positioned in the value
chain (Rappa, 2000). And the components of the
BM are defined differently by various authors as
Han W., Song B. and Park Y..
Paths of Business Model Evolution - Findings from Business Model Patents.
DOI: 10.5220/0004065401970200
In Proceedings of the International Conference on Data Communication Networking, e-Business and Optical Communication Systems (ICE-B-2012),
pages 197-200
ISBN: 978-989-8565-23-5
2012 SCITEPRESS (Science and Technology Publications, Lda.)
presented in Table 1.
Table 1: Definition of BM component.
Product/service/information flow architecture
Business actors and roles
Actor benefits
Revenue sources
Marketing strategy
Afuah &
Customer value Price
Revenue sources Scope
Connected activities Capabilities
Implementation Sustainability
Business events, input, and output
Production system Logistic system
Business management/ control system
Information system Partners
Within today’s business environment, the BM
should also be enjoying dynamicity in order to cope
successfully with the continuous changes.
Characterizing the BM as dynamic (MacInnes,
2005) is essential mainly because many industries
nowadays. Unlike the traditional world of business
which is characterized by stability and low levels of
competition, the world of digital business is complex,
dynamic and has high levels of uncertainty and
competition. Hence, in the more complex and
sometimes unique digital business, the BM needs to
be explicit and more flexible (Al-Debei and Avison,
2010). In line with this thinking, the function of a
BM is an interface or an intermediate theoretical
layer between the business strategy and the business
Organizations and firms need to design and
adopt suitable BMs in order to survive and succeed
in a world of increasing environmental complexity.
Since, enhancing their competitive positions by
improving their ability to respond quickly to rapid
environmental changes with high quality business
decisions can be supported by adopting suitable
BMs for the new world of digital business (Al-Debei
and Avison, 2010).
2.3 BM Patent
A BM patent is defined as a method of
administering, managing, or operating an enterprise
or organization, and is a technique used in
conducting business (Koda, 2000). Most BM patents
are intended to protect the business model within
legal boundaries. They also describe the real world
business and business models of manufacturing and
the service field in electronic environments, and they
are the only sources of information that can explain
the business process or method thoroughly.
BM patents in the United States Patent and
Trademark Office (USPTO) are classified as class
705. This class contains four major and numerous
smaller groupings directed to specific and general
business data processing machines and methods.
These methods still heavily reflect the electrical and
computer engineering that underlie them.
Basically, a BM patent encompasses processes
and methods of general business. Despite the
considerable contribution that BM patents can bring
to business, there has been little research conducted
on them. Furthermore, most of that research has
focused on analyzing the need to apply patents and
conduct patenting activity, rather than the content of
the BM patent itself (Coriat and Orsi, 2002; Connor
and Leak, 2002; Wu, 2005). Therefore, in this
research we deal with the contents of BM patents. In
particular, we focus on technology based BM in an
attempt to identify paths of evolution.
By investigating BM patents we can find that there
are several paths in evolution of technical BMs. The
identified evolutionary paths were divided into two
types depending on the degree of change. Firstly, if
the evolutionary change takes place on the whole
BM, then that kind of evolutionary path assorts in
major stream of evolution (origination, transplant,
mutation). Along with this, if the evolutionary
change occurs in the component level of a BM, then
it belongs to minor stream of evolution (variation,
alternation, addition or subtraction). Figure 1
illustrates the evolutionary paths of technology
based BMs with some symbols respectively.
Figure 1: Evolutionary paths of BMs.
3.1 Major Stream
3.1.1 Origination
Origination of a BM means that a totally new BM,
ICE-B 2012 - International Conference on e-Business
which did not exist at all, is came into the world by
any chance. Most of the BM origination arises from
creative business ideas and technologies materialize
that kind of ideas. One of the most famous cases of
technical BM origination is automatic teller’s
machine (ATM) (No. 4660168: Apparatus for
completing a customer initiated ATM transaction).
An ATM having various peripheral devices such as
a card handler mechanism, a printer mechanism, one
or more cash dispenser mechanisms, and a
depository mechanism, include a dedicated
processor and memory for controlling the operation
of the peripheral device connected thereto. The
ATM also includes a peripheral control unit
connected to the various subsystem controllers and
to an ATM control unit for receiving generated
transaction sequence event messages and in response
thereto concurrently processing the messages to
initiate simultaneous real-time operation of the
various peripheral devices. It made possible to self
service system, that is to say, customers participate
actively in the process of service production not only
just receive the service.
3.1.2 Transplant
The great part of major evolution of technology
based BM can be considered as BM transplant. With
the advance of technology, existing BMs should be
changed on the whole BM due to the transfer of
infrastructure. Owing to the development of
information technology especially, almost
businesses based on off-line market move to on-line
marketplace. Nowadays, mobile marketplace takes
center stage of business and moreover, ubiquitous
technologies lead to a new business world. Among
the huge amount of transplant BM cases which can
be found in BM patent database, healthcare services
are explicable for transplant BMs. Healthcare
services were originally delivered by hospitals or
pharmacies, so a patient should visit the hospitals or
pharmacies. But as technology developed, the
patient does not need to go out. Patent No. 7260586:
Method and system for home medical management
and patent No. 7307543: System and method for
video observation of a patient in a health care
location shows that the patient can receive
healthcare service in his/her home. Patent No.
7260586 relates to a printed record contains
emergency contact information, medical history
information, personal information and medication
information. The report can be used as a life saving
device in an emergency situation to provide
emergency personnel with required information. It
can be also used during doctor visits and hospital
stays to eliminate mistakes and on a daily basis to
manage the individual's taking of medications. And
patent No. 7307543 relates to a system and method
for observing patients in geographically dispersed
health care locations. A patient is assigned to a
health care location comprising a patient visual
monitoring system, a patient audio receiver, and a
patient controller.
3.1.3 Mutation
Mutation of a BM intends to create a new
marketplace by dealing a novel value. Its business
configuration is not much different with its previous
BM, but it brings out a huge difference in the value
of the business. Apples iTune (No. 7797242:
Method and system for network-based purchase and
distribution of media) case can illustrate mutation
BM. In this BM, a potential purchaser can search
and browse through numerous media items on-line
that are available for purchase. The potential
purchaser can thereafter purchase one or more media
items on-line with great ease. Upon purchasing a
media item, the content for the media item can be
downloaded over the network to the purchaser. The
content for the media item is then encrypted for the
purchaser's use and stored on the purchaser's
machine. Thereafter, the purchaser can make use of
the media item (e.g., play the media item). Improved
graphical user interfaces suitable for reviewing,
browsing, previewing and/or purchasing numerous
media items are also disclosed.
3.2 Minor Stream
3.2.1 Alternation
The majority of the evolutionary path of technical
BMs can be considered as alternation BM. It
changes a certain component of BM, although
maintains overall BM. New technology leads to
substitute the existing BM components, and
emergence of a new component drives innovation of
a suitable structure and architecture. In other words,
alteration of the BM components is the main factor
of innovation and evolution of the industry. As a
representative case, for identification of the
customer which is one of the most important BM
component, sensing instruments are changed.
Traditionally a simple card with limited information
was used, but as technology developed, smartcard
(No. 6199762: Methods and apparatus for dynamic
smartcard synchronization and personalization) or
fingerprint (No. 7240207: Fingerprinting media
Paths of Business Model Evolution - Findings from Business Model Patents
entities employing fingerprint algorithms and bit-to-
bit comparisons) replaced its fucntion.
3.2.2 Addition / Subtraction
Firms try to change their BMs by adding new
business function components for diversification or
subtracting exist business function components for
simplification. Impact of that kind of attempt is
generally trivial but it cannot be ignored. With the
primary functions of ATM cash dispensing,
deposit and transfer, there are numerous trials to add
and subtract supplement functions such as
advertisement (No. 5870724: Targeting advertising
in a home retail banking delivery service), currency
dispensing (No. 7584885: Currency dispensing
ATM with RFID card reader), and gift certificate
dispensing (No. 7660767: Application banking
machine gift certificate dispensing system).
3.2.3 Variation
For continuous improvement of the firms, they
provide another version or edition of their exist BM.
In this context, they change their business value
mostly. By way of example, a bank focus its
business value on optimizing accounts (No. 7383223:
Method and apparatus for managing multiple
accounts) then the bank can modify its business
value on enhanced management (No. 7536350:
Systems and methods for providing enhanced
account management services for multiple banks).
It is natural that interests in BM evolution are
growing and that demands for new businesses are on
the rise, due to humanity’s constant need for
newness. And a BM for a digital business should be
reviewed continually to ensure its fit with the
complex, uncertain, and rapidly changing external
environment. Accordingly, in this research we
identified distinct types of evolutionary paths of
technology based BMs and gave several examples to
demonstrate the paths.
Through this research, we can understand the
overall flow of technology based BM’s evolution.
This research is meaningful in its setting up
typology of technology based BM evolution paths.
We found the evolution from BM patent data, so the
evolution is basically derived from technology
development. But there are opportunities for further
research. In view of the technology-intensive
characteristics of BM patent, exploring evolution of
other technology-intensive businesses or knowledge-
intensive business services (KIBS) also can be a
meaningful work.
This work was supported by the National Research
Foundation of Korea(NRF) grant funded by the
Korea government(MEST) (No. 2009-0085757).
This work was supported by the National
Research Foundation of Korea(NRF) grant funded
by the Korea government (MEST) (No.2011-
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