Business model redesign through effectual action in times of crisis

Abstract

This paper explores why and how some small firms rapidly redesign their business models, while others wait for environmental turbulence to subside. Using multiple case studies, we analyzed changes made to 28 business models by 26 Australian firms, two months after the first COVID lockdown. We discover effectual action patterns utilized as firms redesigned their business models. Three key findings shed light on how effectuation drive entrepreneurial action, first we uncover how framing and entrepreneurial reframing plays a critical role in the contingency effectuation principle. Second our findings show that resources at hand is a necessary, but not sufficient condition for business model redesign. Third partnering, experimentation and affordable loss in combination is most strongly related to small firm business model innovation. Our proposed effectual action framework contributes to the effectuation literature, addressing calls to examine the underlying mechanisms and dynamics that explain effectual action and business model redesign.