Title: Supporting business model decisions: a scenario-based simulation approach

Authors: Karl Täuscher; Melvis Chafac

Addresses: Fraunhofer Center for International Management and Knowledge Economy, Neumarkt 9-19, 04109 Leipzig, Germany; Haas School of Business, UC Berkeley, 2220 Piedmont Ave, Berkeley, CA 94720, USA ' Sociotechnical Systems Research Center, Massachusetts Institute of Technology (MIT), 77 Massachusetts Avenue, Building E38-600, Cambridge, MA 02139-4307, USA

Abstract: A key challenge for entrepreneurs is to find a robust and scalable business model. In complex environments, business model decisions often build on highly uncertain assumptions. The uncertainty increases when the entrepreneurial venture is confronted with unexpected changes in the environment. This paper proposes an approach to support entrepreneurs in understanding the future implications of their business model decisions. The approach combines system dynamics simulation modelling with formal scenario building. The paper presents a novel conceptual approach to modelling business models. It develops a business model simulation for a multi-sided platform such as the online marketplace eBay. The paper builds future scenarios to conduct simulation experiments that incorporate the uncertainty of developments external to the firm. Based on historic data of eBay, it demonstrates how the scenario-based simulation approach allows comparing the implications of different revenue model options on eBay's performance. Finally, the research discusses the general applicability of the scenario-based simulation approach as a tool for entrepreneurial decision making.

Keywords: entrepreneurship; online marketplace; multi-sided platforms; business models; network effects; simulation; modelling; system dynamics; eBay; internet startups; scenario building; high-growth firms; firm growth; decision support systems; DSS; uncertainty; revenue options; entrepreneurial decision making.

DOI: 10.1504/IJMABS.2016.078107

International Journal of Markets and Business Systems, 2016 Vol.2 No.1, pp.45 - 67

Received: 03 Oct 2015
Accepted: 03 Jan 2016
Published online: 02 Aug 2016 *

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