Managing Business Model Exploration in Incumbent Firms: A Case Study of Innovation Labs in European Banks

Digital transformation provides opportunities for business model innovation (BMI). Yet, incumbents may face organizational barriers when exploring radically new business models. The management of these barriers therefore becomes of strategic importance to incumbent BMI. In order to identify key barriers and their management, we investigate challenges encountered by innovation labs in the retail banking industry. Based on the case of four major European banks, we find that innovation labs are constrained not only by existing resources and capabilities, but also by the need to satisfy both top management and managers in the core business units. They seek to do this by using integration mechanisms and by balancing incremental and radical innovation. With this study, we expand our understanding of barriers to radical BMI for incumbents, which has general implications for how managers can develop innovation processes to help their organization to engage effectively in BMI.