System dynamic and simulation of business model innovation in digital companies: An open innovation approach

Abstract

Digital companies must improve their business models evolutionarily and innovatively. Therefore, IT investment, especially for revitalizing digital capabilities for operational changes, is im-portant. Most companies are looking to source innovation from outside organizations. Partnership assessment is a crucial problem since it is not easy to integrate internal and external capabilities. The study aims to define business model innovation based on system dynamics with partnership scenarios. Open innovation is needed to evolve to meet market expansion. Partnership and IP strategies are discussed. System Dynamics modeling is utilized to map a system structure to capture its behavior and the relationships between elements, creating a simulation over time. The study develops a BMI to show how OI variables significantly contribute to the engine of growth for digital companies. The simulation reveals that OI has a significant effect on the company’s performance, indicated by significantly growing revenue after two years. At the early stage, patenting IP is not practical since the companies involved are unclear about the detailed IP. The IP success or the partner failure rate does not affect revenue significantly. After two years, companies sharing IP find the best way to benefit from it and lead to sustainable growth.