Navigating grand challenges: How environmental dynamism shapes robust action and business model innovation

Abstract

This paper develops a theoretical framework that links environmental dynamism, robust action, and business model innovation (BMI) in response to grand challenges. It argues that as environments shift from relative stability to rapid change and disruption, incumbent firms are likely to deepen their engagement in robust action—through participatory architecture, multivocal inscription, and distributed experimentation. These strategies, in turn, lead firms toward BMIs of increasing scope and degree of novelty—from evolutionary (modular, new-to-firm) to adaptive (architectural, new-to-firm) and focused (modular, new-to-industry) BMIs. However, regardless of the level of environmental dynamism, incumbent firms remain generally reluctant to pursue complex BMIs—those both architectural and new-to-industry—due to the heightened challenges of managing inter-organizational partnerships, aligning divergent stakeholder interests, and reconciling external demands with entrenched internal routines. In today's volatile and fast-evolving environment, business leaders are under increasing pressure to adopt more substantive approaches to addressing grand challenges. Robust action strategies, which emphasize collaboration, openness to diverse perspectives, and experimentation, offer a potentially effective means for promoting large-scale transformations needed to address grand challenges. This study suggests that depending on environmental turbulence, companies may pursue robust action in distinct ways. This, in turn, requires changes of varying scope and novelty in their business models, from incremental adjustments to a radical redesign of their core business model elements. However, companies often resist complex business model changes due to organizational inertia, the need to coordinate complex partner networks, and conflicting stakeholder interests.