Constraints for Business Model Innovation: How market stability and transformation is achieved in the Bordeaux wine market?

Abstract

The notion of business model innovation became popular in the last decade, even though recent publications show that its implementation often fails. One reason is that business academics focus on success cases, hence the literature is limited in terms of constraints to business model innovation. In the literature, business model innovation is a strategic decision: a choice. However, we know little about whether the architecture of markets restrict business models. To address this limitation, this paper investigates the constraints embedded in markets for business model innovation. The empirical study is a case study on the Bordeaux wine market. In this market, just a handful of market actors benefit from the most profitable luxury-driven business model. Our findings show that incumbents manufacture exclusivity into the business network to justify luxury. To that purpose, incumbents rely on normalizing practices that determine who can and who can’t participate in La Place de Bordeaux. Normalizing practices are maintained using valuation practices and exchange traditions that are highly ritualized. In addition, we investigate how the wine producers operating at the margins of this market configuration resist market constraints. We find three strategies: play and master the game, subvert and shape the market architecture, and avoid troublesome market practices to reinvent business models.