Value Creation Through Novel Resource Con Figurations in A Digitally Enabled World

Strategic Entrepreneurship Journal
Strat. Entrepreneurship J., 11: 228–242 (2017)

Published online 14 August 2017 in Wiley Online Library (wileyonlinelibrary.com). DOI: 10.1002/sej.1256
Value Creation through Novel Resource

Configurations in a Digitally Enabled World
Raphael Amit1 and Xu Han2*
1
Management Department, The Wharton School, University of
Pennsylvania, Philadelphia, Pennsylvania
2
Management Department, School of Business, The College of
New Jersey, Ewing, New Jersey
Research summary: We propose a conceptual framework for examining the value-

creation potential embedded into novel, digitally powered resource configurations. We
suggest that business digitization calls for firms to adopt a system-based, value-crea-
tion-centric perspective for designing and organizing their resource configurations.
Our conceptualization of a firm’s resource configuration decisions centers on organiz-
ing access to resources controlled by value cocreators. We discuss resource configura-
tion prototypes, value-creation sources, and the underlying resource configuration
processes enabled by digitization. Our study contributes to the literature on strategic
entrepreneurship by incorporating the ramifications of digitization into the theory on
firms’ resource configuration and its underlying processes to enable strategic
entrepreneurship.
Managerial summary: Digitization has profoundly reshaped the way business oppor-
tunities are discovered and exploited. In this article, we suggest that digitization
expands the scope of resources firm could utilize while requiring firms to take a holistic
approach in considering the resources and addressing the needs of all customers and
partners (e.g., resource providers). We highlight the importance of such a holistic
approach to enhancing the value creation potential in the digital age for entrepreneurs
and managers. In addition, we propose novel ways to connect resources with needs of
customers and partners (e.g., enabling transactions and providing bridges) as well as
the actionable microprocesses that undergird and enable these novel connections in a
digitally enabled world. Copyright © 2017 Strategic Management Society.
The resource configuration of a firm depicts the ways novel configurations of resources and, thereby,
in which it orchestrates and connects the resources it enhance their value (Hitt, Ireland, Sirmon, & Trahms,
utilizes (Sirmon, Hitt, & Ireland, 2007; Sirmon, Hitt, 2011). The substantial advances in computing and
Ireland, & Gilbert, 2011). The rapidly increasing communication technologies have expanded firms’
trend of digitizing companies has reshaped the ways reach to resources and enhanced the effectiveness at
in which firms do business (Weill & Woerner, 2013) which resources are exchanged, combined, and inte-
and is fostering strategic entrepreneurship by grated. These developments have laid the founda-
enabling entrepreneurs and managers alike to create tions for the rise of the “born-on-the-cloud”
innovators (e.g., Uber, Airbnb) and the sharing econ-
Keywords: value creation; resource configuration; digitization; omy. Also, the power of individual customers has
strategic entrepreneurship; organizational design been elevated as a result of the proliferation of prod-
*Correspondence to: Xu Han, Management, School of Business
Building, Room 114, The College of New Jersey, 2000
uct and service information from digitally enabled
Pennington Rd, Ewing Township, NJ 08628. E-mail: hanx@ platforms (e.g., Groupon) and social interaction
tcnj.edu (e.g., Facebook, Twitter), which allow exhaustive
Copyright © 2017 Strategic Management Society

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Novel Resource Configurations in a Digitally Enabled World 229
comparisons of products/services and collective bar- its strategy, business model, and organization
gaining by customers. Moreover, the potential of (Sirmon et al., 2007; Zott & Amit, 2007).
individual customers as contributors of value- In this article, we attempt to address these gaps by
creating resources (e.g., data) has been unlocked by asking how firms create value through resource con-
digitally enabled devices (e.g., mobile phones, wear- figurations in a digitally enabled world. Building on
ables, and Internet of Things) and technologies recent developments in the received research on
resource orchestration (Sirmon et al., 2011) and the
(e.g., big data analytics, image recognition, machine
system-based approach on firms’ value creation
learning, and artificial intelligence). These develop- (Adner & Kapoor, 2016; Lusch, Sagarin, & Tang,
ments have enhanced the scope and type of resources 2016; Zott & Amit, 2015; Zott, Amit, & Massa,
that the firm can access and utilize which, in turn, 2011), we propose a new conceptualization of a
can lead to conceiving of and designing novel firm’s resource configuration decisions and the
resource configurations (Afuah & Tucci, 2000; resulting value creation in a digitally enabled world.
Amit & Zott, 2001). We suggest that the digitization of businesses calls
The profound ramifications of digitization have for firms to conceive of and design their resource
yet to be incorporated in conceptualizing how firms configurations based on a system view and value-cre-
conceive of, design, and organize their resource ation-centric perspective. In particular, this perspec-
configurations. In particular, the extant literatures tive views every potential value-creating participant
mostly conceptualize the resource configuration as both a potential locus of value creation as well as
decisions of firms based on the implicit premise of a resource provider. It would help firms reimagine
the distinct roles of the focal firm, its partners as the locus of their value creation and the boundary of
resource providers, and its customers as the locus value-creating resources they could utilize which, in
of value creation (Priem, Butler, & Li, 2013). The turn, would enable the design of innovative resource
role of customers as potential resource providers configurations. Hence, it calls for the examination
(Shah & Tripsas, 2007) and the role of a focal into novel and innovative resource configuration pro-
firm’s partners as potential loci of value creation totypes as well as the associated resource configura-
(Afuah, 2000; Chatain, 2011) have received only tion processes that have been largely enabled or
sparse attention. Indeed, researchers have suggested empowered by digitization.
a shift from a product-based logic to a service- There are several contributions we attempt in the
based logic of value creation as a result of digitally paper: First, we incorporate the far-reaching ramifica-
enabled information access and networking oppor- tions of digitization as well as recent theoretical
tunities, and they have emphasized further the developments in organizational design literature into
growing importance of customers as “value cocrea- the theory on firms’ resource configurations by pro-
tors” for firms (Prahalad & Ramaswamy, 2004; posing a new conceptualization that centers on the
Vargo & Lusch, 2004). Moreover, recent develop- digital age. Second, we complement the existing
ments in the strategy and organizational design lit- firm-based and value-capture-centric perspective on
eratures have increasingly recognized the digitally firms’ resource configurations with a system-based
enabled/enhanced interdependence among firms in and value-creation-centric perspective. Third, we
value creation and innovation, suggesting a system- illustrate distinct ways to create value with digitally
based approach toward firms and their value crea- enabled prototypes of resource configuration. In par-
tion (Iansiti & Levien, 2004; Zott & Amit, 2010). ticular, we draw on the received resource orchestra-
In particular, such a system-based approach has tion framework and develop a number of digitally
explicitly considered the value creation for firms enabled resource configuration processes to extend
that are either transaction partners in a focal firm’s the existing framework to the digital age. Finally, we
business model (Amit & Zott, 2001, 2015) or parts suggest that value creation enabled by digitally pow-
of the “ecosystem” that enable the focal firms’ ered resource configuration is centered on organizing
value creation (Adner, 2006; Adner & Kapoor, access to resources that are owned by a range of
2010). However, these insights have yet to be value cocreators. Organizing resources is an element
incorporated into a conceptualization of the value- of modern organizational design and a manifestation
creation potential that is embedded into the of strategic entrepreneurship (Hitt, Ireland, Camp, &
resource configuration of a firm, which undergirds Sexton, 2001; Hitt et al., 2011).
Copyright © 2017 Strategic Management Society Strat. Entrepreneurship J., 11: 228–242 (2017)
DOI: 10.1002/sej.1256
230 R. Amit and X. Han
The article proceeds as follows: We first review environment. Indeed, strategy scholars have noted
literatures on resource configuration and recent the importance of first considering a focal firm’s total
developments in the literature on organizational value creation for all of its value-creation partners
design (e.g., business model design) to highlight (e.g., customers, suppliers) in conceiving a focal
the importance of advancing theories on resource firm’s strategies (Brandenburger & Stuart, 1996;
configuration in a digitally enabled world. We then Makadok, 2003).
propose a new conceptualization of a firm’s Priem et al. (2013) suggest that the new world of
resource configuration decisions and illustrate it the “consumer internet” calls for a more balanced
with some resource configuration prototypes. We view on value creation and value capture of firms.
proceed to discuss the impact of digitally enabled Indeed, the elevated customer power in the digital
resource configuration on value creation. We con- age results in an increasing amount of scholarly
clude with a discussion of the implication of our attention shifting to the value-creation potential of
conceptualization and directions for future studies. firms as well as the heterogeneity of demands
(rather than resources) as sources of firms’ value
creation (Adner & Kapoor, 2010; Priem, 2007; Ye,
Resource Configuration and Value Priem, & Alshwer, 2012). Moreover, the digitiza-
Creation tion of businesses has substantially reduced infor-
mation asymmetry and frictions in markets and
In the recent decades, we have witnessed a shift of enhanced the transparency among partners; these
scholarly interest from examining the characteris- things have greatly increased the efficiency and
tics of a firm’s resources as the source of its com- effectiveness at which resources are exchanged,
petitive advantage (Amit & Schoemaker, 1993; combined, and integrated (Barua, Konana, Whin-
Barney, 1991; Peteraf, 1993) to understanding the ston, & Yin, 2004). Hence, it encourages firms to
managerial actions through which firms could con- pay more attention to cocreating value with their
figure and manage their resources to gain competi- partners. Importantly, digitization has expanded the
tive advantage (Gruber, Heinemann, Brettel, & scope of resources that are accessible to firms and,
Hungeling, 2010; Sirmon et al., 2007). Indeed, therefore, allows them to conceive of and design
how well a firm could access and orchestrate novel configuration of resources which, in turn,
resources is viewed as core to a firm’s dynamic enables value creation with a broader range of part-
capabilities (Helfat & Peteraf, 2003; Helfat et al., ners, including their customers (Amit & Zott, 2012;
2007). To create an integrated framework, Sirmon Prahalad & Ramaswamy, 2004).
et al. (2011) synthesize resource management Recent developments in the strategy and organi-
(e.g., structuring, bundling, and leveraging) with zational design literatures have begun to highlight
asset orchestration (e.g., search, selection, configu- the ramifications of digitization in the design of a
ration, deployment) to develop a framework of business model that centers on value creation
resource orchestration, which has provided theoreti- (Amit & Zott, 2001, 2015; Zott et al., 2011).
cal anchors for subsequent empirical studies that Increasingly, scholars emphasize the importance of
examine how resources could be managed better adopting a system-based view and focusing more
internally to enhance firm performance (Chadwick, on the value creation enabled by the focal firm
Super, & Kwon, 2015; Chirico, Sirmon, Sciascia, & (Adner & Kapoor, 2010; Zott & Amit, 2010; Zott
Mazzola, 2011; Ndofor, Sirmon, & He, 2015). et al., 2011). Distinct from a firm-based perspec-
Deeply rooted in received literatures on the tive, the system-based view is characterized by
resource-based view (RBV) and dynamic capability considering explicitly the value propositions for all
(Barney, 1991; Teece, Pisano, & Shuen, 1997), the value-creation participants, rather than only those
resource orchestration framework provides guidance for the customers when designing a system
on how the focal firm could gain a competitive (Amit & Zott, 2015). Thus, it acknowledges the
advantage and capture value through its resource potential multiple loci of value creation enabled by
configuration (Hitt et al., 2011; Sirmon & Hitt, a focal firm in a system in which the focal firm is
2009). We build on this conceptualization to address embedded. Such a system-based view draws on the
the ways in which value is created for a focal firm’s ecosystem perspective by recognizing the important
partners and customers in a digitally enhanced role of complementary resource providers in a focal
DOI: 10.1002/sej.1256
firm’s ecosystem in determining its value creation (e.g., the network effect) in driving customer acqui-
or innovation outcome (Adner & Kapoor, 2010). sition and business model design strategies (Amit &
We note, however, that the system-based view cen- Zott, 2012). As evidenced by the proliferation
ters on resources in the focal firm’s ecosystem that of “freemium” models, firms have increasingly
are directly embedded into the focal firm’s resource prioritized their value-creation strategies for custo-
configuration, while the ecosystem perspective mers and partners over their value-capture strategies
encompasses a much broader set of resources, in order to gain first mover advantage, which is dif-
some of which may be indirectly related to the ficult to dislodge in the digital age. Thus, it calls for
focal firm or not currently related at all. The more attention to the aspects of a resource configu-
system-based view also highlights the value drivers ration that could accommodate and unleash the
that enable value creation (e.g., novelty, comple- value-creation strategies.
mentarity) and also value capture (e.g., lock-in)
(Amit & Zott, 2001). Such a balanced view is in
line with the strategic entrepreneurship perspective, Conceptual Framework
which advocates a firm’s simultaneous pursuit of
opportunity seeking (value creation) and advantage Drawing on the system-based and value-creation-
seeking (value capture) (Hitt et al., 2001, 2011). centric approach, we first conceptualize the setting
Built on design thinking (Beckman & Barry, in which a focal firm’s resource configuration deci-
2007; Boland & Collopy, 2004; Brown, 2008, sions are made. A novel strategy boundary model is
2009), Zott and Amit (2015) propose a process proposed by Priem et al. (2013), in which they inte-
model that centers on how a business model could grate the RBV and the demand-side view and con-
be designed to create value. Specifically, the proc- ceptualize the playing field for managers’ strategic
ess model consists of five stages in which value decisions as a system consisting of “heterogeneous
could be created by observing, synthesizing, gener- raw materials” and “households” heterogeneous
ating, refining, and implementing a system of inter- assortments.”
dependent activities with other value-creation Building on Priem et al. (2013), we propose a new
participants. While scholars have suggested the conceptualization of a firm’s resource configuration
importance of resources in enabling and undergird- decision in a digitally enabled world. In particular, we
ing business models in value creation (Johnson, suggest that in a digital age, every value-creation par-
Christensen, & Kagermann, 2008; Zott & Amit, ticipant who is involved in the value-creation process,
2007), these insights about the process of designing which we term a “value cocreator” (Vargo & Lusch,
a value-creating business model have not yet been 2004), has dual identities: the resource provider and
incorporated in examining value creation through the value beneficiary. For instance, while individual
resource configuration. customers are viewed mostly as only the beneficiaries
We suggest that these theoretical developments of the value created by firms, they have also long
in the strategy and organizational design literatures been recognized as the providers of resources, such as
represent a system-based, value-creation-centric money (e.g., customers’ actual contribution to firms’
approach, which complements the firm-based and revenue or their potential purchasing power)
value-capture-centric approach in the extant litera- (Christensen & Bower, 1995), insights about product
ture on resource configuration (Sirmon et al., 2011; innovation (von Hippel, 1976), and customer data
Zott et al., 2011). Hence, drawing on these new (Lengnick-Hall, 1996). The value-creation process is
insights is conducive in advancing our understand- thus the process by which valuable resources of any
ing about how resources could be configured to cre- and all value cocreators are deployed and utilized to
ate value in a digital age. In particular, the digital address one or more needs of any and all value
age enables firms to create and manage more com- cocreators.
plicated systems of activities as well as the Figure 1 illustrates our conceptualization of the
resources that undergird the activities (Weill & setting in which firms make resource configuration
Woerner, 2013). Thus, it is imperative to take a decisions to create value. The left circle of Figure 1
system-based view to understand how the systems depicts heterogeneous resources of potential value
of resources are formed and managed. Also, the dig- cocreators and the diameter of the left circle depicts
ital age has significantly empowered Metcalfe’s law that boundary of resources that the focal firm could
DOI: 10.1002/sej.1256
Figure 1. The conceptualization of the setting for a firm’s resource configuration decisions.
access either physically or virtually. The potential metropolitan cities. However, the resource configura-
value cocreators’ needs are shown in the right cir- tion of Zipcar involves obtaining cars from car leas-
cle. Every resource and need is associated with a ing companies and renting cars to individuals on an
potential value cocreator (e.g., N1 and R1 are asso- hourly or daily basis, while the resource configuration
ciated with V-C1).1 For instance, assuming that of Uber involves connecting passengers with individ-
V-C1 is a customer of Google, N1 could be the cus- ual drivers who provide a taxi-like transportation
tomer’s need for online search services and R1 service. In particular, the resource inputs Zipcar uti-
could be the customer’s data or advertisement eye- lizes to create value for its users include cars from car
balls. The resource configuration decision of a focal leasing companies, parking lots, and insurance plans,
firm is, thus, to create a structure that connects and while the resource inputs Uber utilizes include (but
orchestrates a selected group of value cocreators are not limited to) cars, time, and individuals’ driving
(including the focal firm, customers, and others). skills. Moreover, while both resource configurations
The conceptualization represents a simple yet address similar customer needs, different value
inclusive way to conceive of a firm’s resource config- cocreators (e.g., resource controllers) are engaged in
uration decision in the digital age, as digitization enabling the resource configurations. Building on the
enables firms to expand both the scope of resources received literature (Sirmon et al., 2011) and our con-
they could access and utilize, as well as the needs ceptualization as illustrated by the preceding example,
they could address (e.g., the diameter of circles on we suggest that a resource configuration of a focal
both sides of Figure 1 are expanded). We suggest that firm reflects its decisions on what resources to utilize;
value can also be created with digitally enabled, novel what needs are addressed with the resources; and
resource configurations, which imply heterogeneous how resources are accessed, connected, and coordi-
resource inputs being accessed and utilized in novel nated to address the perceived needs.
ways and being transformed into distinct product/ As noted, the implications of digitization can be
service outputs even though they address similar depicted as the expansion of the diameter of both
needs. Taking the car rental company Zipcar and the circles in Figure 1. On the resource side, digitization
ride hailing company Uber as examples, both compa- enables the effective commercialization of underuti-
nies address the transportation needs of individuals in lized resources controlled by individuals and firms
alike (e.g., time, vehicles, space, and inventory) and
1
Ri and Ni may each denote a vector of a set of resources allows the generation of new resources (e.g., data).
and the associated needs. On the need side, customers have been cultivated to
DOI: 10.1002/sej.1256
Figure 2. Resource configuration prototypes.
be “digital natives” and increasingly expect digitally configurations as well as the distinct roles of the focal
enabled product features (e.g., internet, social) and firm. Prototype A illustrates the simplest resource
service experience (e.g., real-time delivery). configuration, in which the focal firm transforms the
Accordingly, firms have increasingly valued online resources (RF) to address the demand (N1) and, as an
channels as means to market their products/services exchange, the customers contribute to the revenue of
and engage with their customers and partners. The the focal firm (NF) with their resources (e.g., money)
Internet of Things is commonly interpreted to imply (R1). Prototype B illustrates a resource configuration
giving a digital makeover—such as computerizing in which the focal firm collaborates with a partner
and connecting to the internet—to all sorts of physi- (V-C2) to address the demand (N1). In particular, the
cal things, including appliances, clothing, watches, resources that are utilized to address the demand
cars, jet engines, factory equipment, and more.2 (e.g., RF and R2) are not integrated inside the focal
Emerging technologies such as artificial intelligence firm but are contributed separately by the focal firm
(e.g., IBM’s Watson) will enable reimagining of and its partner(s). In this case, the partner is a “com-
physical systems functionalities in health care, plementor” in the ecosystem of the focal firm
transportation, energy, and other sectors in ways (Adner & Kapoor, 2010) rather than its direct
that were not feasible before and, thereby, create resource provider. The role of the focal firm is not an
new needs for stakeholders. In other words, the integrator (or a transformer) as in Prototype A, but a
expansion of both accessible resources and address- collaborator who discovers and engages other firms
able needs has increased significantly the variety of (e.g., V-C2) to create value together for customers
possible resource configurations a firm could design (e.g., V-C1). Also, the customers contribute to the
and enable in a digital age. revenue of both the focal firm and its partner (NF and
Figure 2 shows some distinct prototypes of N2) with their resources (e.g., money) (R1).
resource configurations based on our conceptualiza- Prototype C illustrates the resource configuration
tion in order to illustrate the differences in resource in a firm-enabled two-sided market, which has been
increasingly adopted by firms in the digital age
(Eisenmann, Parker, & Van Alstyne, 2006; Rysman,
2
According to the market research firm Gartner, there were 2009). Simply put, a firm contributes resources (Rf)
6.4 billion Internet of Things devices in the world in 2016.
By 2020, Gartner projects there will be 20.8 billion Internet to facilitate or enable transactions between two
of Things devices in use (Lohr, 2016). groups of value cocreators whose needs (e.g., N1 and
DOI: 10.1002/sej.1256
N2) can be addressed by the other group’s resources (e.g., Prototype C) much faster than before. Moreo-
(e.g., R2 and R1). One example is Lending Club, a ver, the increasing variety of digitally associated
debt-based crowdfunding online platform, in which needs and virtual resources (e.g., data), together
individual lenders provide capital to meet the needs with the unprecedented rate of customer acquisition
of individual borrowers while individual borrowers enabled by digital means, significantly enhance the
pay premium interest to address the return on capital potential for firms to bridge a novel set of value
desired by the lenders. The distinct role of the focal cocreators (e.g., Prototype D) that have not been
firm as the enabler in this prototype is determined by connected before. Both of them have increasingly
how its resources are deployed. For instance, in been embraced by companies, especially start-up
the case of Lending Club, its technologies and human companies, in the digital age.
capital are utilized to facilitate transactions
(e.g., through effective matching) between the two
groups of value cocreators rather than directly addres- Resource Configuration as a Source of
sing the needs (e.g., capital need) that resources of Value Creation in a Digitally Enabled
other value cocreators (e.g., capital) address. World
Prototype D illustrates the resource configura-
tion in a firm-bridged two-sided market. Distinct Building on the system-based and value-creation-
from the role of the focal firm as a transaction ena- centric conceptualization, we explore sources of
bler in Prototype C, the focal firm is a bridge pro- value creation that may be supported by novel
vider in Prototype D. As Figure 2d shows, the resource configuration in a digitally enabled world.
focal firm uses its resources (RF) to address the We note that the resource configuration Prototype A
need of one group of value cocreators (N1). The in Figure 2, in which the focal firm transforms
focal firm further enables the utilization of the resources to create value for customers, has been the
resources controlled by that group of value cocrea- predominant type of resource configuration for tradi-
tors (R1) to address needs of another group of tional “brick and mortar” firms (e.g., manufacturers)
value cocreators (N2) and gets revenue (NF) from and, hence, has also been addressed by the received
the latter group of value cocreators (R2). One theories on resource configuration (Sirmon et al.,
example is Google’s ad-sponsored search engine, 2007). Also, the importance of resource configura-
in which consumers enjoy the search engine devel- tion Prototype B, in which firms collaborate with
oped by Google for free. Google (F) in turn enables partners who own complementary resources, as a
advertisers (V-C2) to leverage the search by consu- value-creating resource configuration has been
mers (V-C1) to market their products and services, increasingly recognized by the received literatures on
and advertisers pay Google for the marketing. alliances (Lavie, 2007; Wassmer & Dussauge, 2011)
Whether the advertisements add value to customers and business ecosystems (Adner & Kapoor, 2010;
is arguable and varies with the specific scenarios; Ceccagnoli, Forman, Huang, & DJ, 2012). Since
for example, Google ads might serve the users’ Prototypes C and D have been adopted by more and
needs for information, yet Spotify’s ads during its more firms in the digital age, particularly the “born-
free music service undermine the users’ experience. on-the-cloud” start-up companies (e.g., Uber,
A major distinction of Prototype D versus Proto- Airbnb, Snapchat), and have proven to be successful
type C is that the needs of the focal firm are often in value creation,3 we focus on these two prototypes
satisfied only with the resources from one side of (i.e., C & D) to discuss the sources of value creation
the market (e.g., R1 is not utilized to satisfy Nf in a digitally enabled world.
directly). It is possible that a bridge provider
(Prototype D) might morph into a transaction ena-
Identifying New Needs and Resources
bler (Prototype C) once the focal firm starts to
exploit resources on both sides of the market. The identification of new needs enabled by emer-
Indeed, Prototypes C and D have been largely ging digital technologies can be achieved through a
enabled by the rapid expansion of both circles in combination of several processes that are high-
Figure 1 as a result of digitization. In particular, 3
Among the five highest-valued private companies in United
firms’ broader and easier access to resources in the States, Uber and Airbnb are based mainly on Prototype C,
digital age allows them to build two-sided markets and Snapchat is based mainly on Prototype D.
DOI: 10.1002/sej.1256
lighted in the received literature; these include Proposition 1a: Continuous testing facilitates
observing and synthesizing the needs of customers the focal firm’s identification of new unmet
and partners (Zott & Amit, 2015), identifying the needs of potential value cocreators and
owners of resources, and selecting the resources to enhances the value creation of a focal firm’s
be utilized (Helfat et al., 2007). Value is created resource configuration in a digitally enabled
for all value cocreators when new needs, which world.
have not been addressed before, are added or
underutilized resources are used in a more effective The second process is resource crowdsourcing.
manner in the resource configuration. For instance, Afuah and Tucci (2012) have highlighted the impor-
Zappos, the online shoe store, was started as a tance of crowdsourcing as a problem-solving mech-
result of the founder’s identification of individuals’ anism in certain circumstances (e.g., when the crowd
unmet needs to compare and buy shoes through the is large, with some members of the crowd motivated
internet, as well as the underutilized inventory of and knowledgeable enough to self-select and solve
shoe stores. Instacart, the online grocery shopping problems). Building on their insights, we suggest that
platform, was started as a result of the founders’ crowdsourcing might also be a mechanism through
identification of the unmet need of working urban which a focal firm discovers and accesses underuti-
residents to save time on grocery shopping as well lized resources at a large scale. In particular, resource
as the underutilized time and labor of other urban crowdsourcing is characterized by a focal firm amas-
residents (e.g., those who are unemployed). We sing a small amount of underutilized resources from
observe that the importance of identifying unmet a large group of resource providers and is more
needs and underutilized resources in value creation important when underutilized resources are scattered
is elevated by digitization, as it has created new (or widely distributed) in a large group of value
needs (which were nonexistent) and expanded cocreators. For instance, the premise of the sharing
firms’ reach to underutilized resources (which were economy (e.g., Uber and Airbnb) includes the exist-
inaccessible). ence of sufficient underutilized resources as well as
We further suggest that there are two digitally individuals’ motivation yet incapacity to monetize
empowered value-creation processes that facilitate their underutilized resources (e.g., time or space) on
the identification of new needs and underutilized their own. The process of crowdsourcing could
resources. The first process is continuous testing, quickly amass resources to reach a scale that enables
in which firms calibrate their offerings a two-sided marketplace and allows the resource con-
(e.g., products or services) to the unmet and chan- trollers to benefit from the economies of scale, which
ging needs of their value cocreators is often available only for large firms. As digitization
(e.g., customers or partners) through testing and has significantly broadened a focal firm’s reach to
modifying/pivoting its offerings with their value resources and reduced the transaction cost of acces-
cocreators (Vargo & Lusch, 2004). This process is sing resources, crowdsourcing is increasingly becom-
characterized by the fast feedback loop between a ing an important means to discover and acquire
focal firm and its value cocreators and the contin- underutilized resources. Hence, we propose:
uous enhancements of the focal firm’s offerings
(Ries, 2011). It is particularly important when Proposition 1b: Resource crowdsourcing facili-
firms take a discovery-driven planning approach tates the focal firm’s identification of new under-
to uncover unmet needs (McGrath & MacMillan, utilized resources of potential value cocreators
1995). The digitization has largely enabled this and enhances the value creation of a focal firm’s
process by increasing the number of channels resource configuration in a digitally enabled
(e.g., APPs or websites) to conduct the testing world.
and easing the collection, analysis, and interpreta-
tion of the data (e.g., A/B testing). We suggest
that in a digital age, iterative testing enhances the
efficiency and effectiveness at which new unmet
Matching Needs with Resources
needs are discovered and, hence, enhances the
value-creation potential of resource configurations. One profound change in the digital age is the sig-
Thus, we propose: nificant decrease in transaction costs due to the
DOI: 10.1002/sej.1256
proliferation of information and enhanced transpar- enables syndication between “star” angel investors
ency. As a result, the roles of traditional intermedi- and other investors on the platform to alleviate the
aries (e.g., agents) have been reduced and replaced information asymmetry concerns of other investors
by a new generation of firms that focus on their and, thereby, facilitate the matching of angel inves-
roles as “enablers” of transactions. In particular, tors with start-up companies. This process is char-
instead of leveraging their information advantage acterized by the focal firm developing and refining
to arbitrage between upstream resources owners the categorization of needs based on different value
and downstream customers, the enablers often propositions (e.g., convenience and price) and the
directly connect upstream resources with down- categorization of resources based on their (and their
stream customers (e.g., Prototype C) and leverage owners’) characteristics (e.g., quality and return
their information advantage to facilitate transac- expectation). This process is particularly important
tions. One such strategy is to enable more efficient when the markets for needs and resources are very
and effective matching of transaction parties. “fragmented.” The digitization has largely empow-
One source of value creation that is depicted by ered this process by enabling the collection and
Prototype C is the increased efficiency and effec- synthetization of more data, as well as more refined
tiveness at which needs are matched with and accurate categorizations. Such categorizations
resources. Note that the matching is a two-way could further simplify and accelerate the matching
process. Taking Lending Club (assuming it is F in process and enhance the efficiency and effective-
Prototype C) as an example, the availability of cap- ness at which value is created. Hence, we propose:
ital and interest rate required by the lender (R1)
need to meet the demands of the borrower (N2). Proposition 2a: Sorting increases the efficiency
Also, the credibility of the borrower and the capac- and effectiveness in matching unmet needs with
ity to return the principal and the interest (R2) also underutilized resources of potential value cocrea-
need to meet the risk and return profile of the tors and enhances the value creation of a
lender (N1). The information and algorithm that focal firm’s resource configuration in a digitally
Lending Club contributes (Rf) is to locate bor- enabled world.
rowers and lenders and to enable the match
between them more efficiently and effectively. The The second process that facilitates the matching
matching of new needs and resources requires the of needs with resources is prospecting. It is a proc-
focal firm to “generate” activities to collect infor- ess in which the focal firm predicts the needs for
mation and categorize transaction partners (Zott &
certain resources as well as resource controllers’
Amit, 2015). It might also require the focal firm to
expectations so that it can proactively match them
acquire, accumulate (“structure”), and enrich (“bun-
through selective advertising or making recommen-
dle”) its resources (e.g., acquire and accumulate
dations. Entrepreneurship scholars have noted that
data, develop matching algorithm and strategies)
prospecting activities reflect the proactivity in indi-
(Sirmon et al., 2007). Value is created for all value
cocreators when new transactions are enabled viduals’ entrepreneurial orientations, which could
through matching and/or the efficiency and effec- be a source of value creation (Lumpkin & Dess,
tiveness at which the matching is conducted are 1996). Drawing on their insights, we suggest that
enhanced. such a process could also be a source of value crea-
We suggest that there are two processes that are tion at the organizational level. In particular, the
critical in matching needs with resources in a dig- prospecting process is characterized by a focal firm
ital age. The first is the process of sorting, in which analyzing both the needs and resources of its value
firms develop methods and strategies to categorize cocreators based on historical or current data and
both needs and resources so they can be matched prioritizing the most relevant information when dis-
in a more efficient and effective manner. For seminating them to value cocreators. The relevance
instance, Lending Club develops algorithms to cat- of the information is determined by its likelihood
egorize borrowers based on their profile informa- of leading to a transaction or effective matching.
tion and, thereby, makes it easier for lenders to This process is particularly important when value
select borrowers and price their loans. AngelList, cocreators are overwhelmed by information or have
an equity-based crowdfunding online platform, latent needs to be uncovered. For instance, many
DOI: 10.1002/sej.1256
online shopping marketplaces (e.g., Amazon or D creates value through digitally enabled novel
eBay) make recommendations based on customers’ combination of value cocreators. Prototype D has
purchase history. Online marketplaces for restau- become increasingly prevalent since being pio-
rants or food delivery services (e.g., OpenTable or neered by Google. For instance, Square Inc.
Caviar) promote information about the trending (F) started by providing retail stores (V-C1) with
restaurants or dishes, which influences customers’ free payment processing machines to help them
purchase decisions. The capability of firms to con- with their credit card processing (N1). However,
duct prospecting has been largely elevated by big- the company later brought in finance providers
data analytics and increased computing power (e.g., institutional investors) (V-C2) who would like
made possible by digitization. Such a process not to pay for (R2) the access to information (R1) about
only increases the efficiency at which current needs Square’s retail store clients in order to provide cash
meet resources, but also may unveil needs that are advance services (N2). Another example is Pinter-
latent. Hence, it enhances the effectiveness at est (F), which started as a visual bookmarking tool
which existing resources are utilized and unlocks to address individuals’ (V-C1) needs to save and
their value-creation potential. Therefore, we post pictures online (N1). Yet, the company later
propose: brought in fashion brands (V-C2) that would like to
pay for (R2) the views of users (R1 and Rf), as the
Proposition 2b: Prospecting increases efficiency brands’ marketing could be more effective through
and effectiveness in matching unmet needs with pictures (N2). To bridge two groups of value
underutilized resources of potential value cocrea- cocreators, it undoubtedly requires the insights of
tors and enhances the value creation of a focal the focal firms in discovering the needs and
firm’s resource configuration in a digitally resources of customers (V-C1) in the first place;
enabled world. however, what is equally important is bringing
other value cocreators (e.g., V-C2) into the process
of refining and implementing the initial resource
configuration (Zott & Amit, 2015). Moreover, the
bridging role also requires the focal firms to coordi-
Bridging Needs and Resources
nate the resources and activities of all value cocrea-
As noted, digitization has elevated the role of cus- tors (Helfat et al., 2007). Value is created for all
tomers as both the locus of value creation and as value cocreators when new value cocreators with
resource providers. Increasingly, firms in the digital distinct yet complementary resources and needs are
age prioritize value creation for customers in the added into the configuration and the overall com-
early stage of their development to establish their plementarity of the resource configuration is
first-mover advantage, which is often difficult to enhanced.
dislodge due to network effects and gradually bring We suggest that there are two processes that are
in other value cocreators to balance the value equa- critical in bridging needs and resources in a digital
tion. Prototype D illustrates one scenario of this age. The first is the process of grafting. It is a proc-
customer-centric resource configuration, in which ess in which a focal firm experiments with new
the focal firm uses its resources (Rf) to address combinations of heretofore unconnected (or less
needs of customers (N1) for free. Nevertheless, the connected) resources and needs. For instance,
focal firm brings in another value cocreator (V-C2) Square has been experimenting with connecting its
whose needs could be addressed by customers’ retail store clients with many other value cocreators
resources (R1). The value cocreator (V-C2) pays its that have not had effective connections with retail
resources (R2) to the focal firm for the focal firm’s stores. Such value cocreators include, but are not
complementary resources (Rf) that enable the use limited to, financial service providers (e.g., credit
of customers’ resources (R1). report services), business service providers
In Prototype D, the focal firm provides the (e.g., tax service), and logistics service providers
bridge that “intermediates” two groups of value (e.g., on-demand delivery service). The objective
cocreators; however, unlike traditional intermediar- of the grafting is to identify unique complementar-
ies, who leverage their information advantage ity between resources and needs and enhance the
mostly to capture value, the focal firm in Prototype value creation of the resource configuration.
DOI: 10.1002/sej.1256
Distinct from a typical problem-solving process, realizing the full value-creation potential of the
the grafting process often starts with resources at firm’s resource configuration. The digitization has
hand and searches for needs of new value cocrea- largely enabled the streamlining process by increas-
tors that enable firms to leverage the resources to ing the variety of digitally enabled resources
create more value (Hitt et al., 2011). The process (e.g., data in multiple digital formats), which could
involves a lot of creativity and serendipity, and it is be utilized to complement existing resources and
particularly important when firms have the capabil- address the incompatibility issue. These digitally
ities to access resources at a faster pace and at a enabled resources indeed enable the creation or
larger scale. The digitization empowers firms with enrichment of the unique complementarity between
that capability through allowing firms to reach resource bundles and unmet needs that a firm
resource controllers (e.g., customers) at an unprece- bridges. Hence, we propose:
dented pace and to experiment with new combina-
tions of resources and needs with minimum costs Proposition 3b: Streamlining enables the unique
(Ries, 2011). The unique complementarity a focal and novel complementarity among the value
firm identifies and realizes leads to value creation cocreators that the focal firm bridges and
for all value cocreators. Hence, we propose: enhances the value creation of a focal firm’s
resource configuration in a digitally enabled
Proposition 3a: Grafting enables the creation of world.
the unique complementarity among the value
cocreators that the focal firm bridges and
enhances the value creation of a focal firm’s
resource configuration in a digitally enabled
world. Conclusion
The second process that enables a firm to bridge The digitization of businesses allows entrepreneurs
needs and resources is streamlining. It is the proc- and managers alike to reimagine the boundary of
ess in which the focal firm provides or connects their resource configurations and, thereby, enhance
the value-creation potential of resources. Figure 3
additional resources to enable or enrich the unique
summarizes our framework on resource configura-
and novel complementarity they create through
tion in a digitally enabled world. The framework
bridging needs and resources. For instance, Pinter-
we propose highlights the importance of adopting a
est identifies the unique complementarity between
system-based and value-creation-centric perspective
its fashion-chasing users and the fashion brands,
that considers the needs and resources of all value
who commit substantial resources to attract and
cocreators when conceiving of resource configura-
engage with such prospective customers. While the tion. The resource-configuration prototypes illus-
fashion brands might have the resources trate distinct means of value creation, which are
(e.g., image of their fashion goods) that Pinterest’s enabled by the digitization of businesses. Building
fashion-chasing users need, their current marketing on these prototypes as well as on the received lit-
channels (e.g., exclusive shops) do not allow them eratures on resource orchestration (Sirmon et al.,
to reach these customers effectively. Pinterest 2011) and business-model design (Zott & Amit,
enriches the marketing of fashion brands through 2015), we discuss distinct sources of value creation
collecting trending and customer preference infor- (e.g., discovering new needs and resources, match-
mation, which enables more targeted and effective ing needs with resources, bridging needs and
image-based marketing. Moreover, Pinterest con- resources) in the digital era as well as the processes
nects image data analytics and data solution com- that enable the value creation, which we hope will
panies to facilitate customers’ purchase of fashion inspire new value-creation strategies by both scho-
brands through images. The streamlining process lars and practitioners.
reduces the incompatibilities and uncertainties as a Our framework intends to provide the foundation
result of the unique and novel complementarity the for conceiving of and designing novel ways to link
bridging process creates. The mitigation of the heterogeneous resources with heterogeneous needs in
uncertainties and incompatibility is critical in a digitally enabled world. In line with the business
DOI: 10.1002/sej.1256
Figure 3. Framework of resource configuration in a digitally enabled world.
model innovation literature (Amit & Zott, 2001, anchor our process model on the resource orches-
2012), we suggest that the novelty of a digitally tration framework (Sirmon et al., 2011) and further
powered resource configuration may come from: crystalize the underlying microprocesses that have
(a) the newness of the needs to be met and/or the been significantly empowered by digitization. In
newness of resources to be more effectively utilized, particular, we illustrate how these microprocesses
(b) the innovative ways through which the matching are, on the one hand, rooted in the existing
of resources and needs are enabled and more effi- resource orchestration framework, and, on the other
ciently and effectively managed, and (c) the unique- hand, linked with distinct digitally enabled ways to
ness of the complementarity among all value create value through resource configuration. We
cocreators that the focal firm bridges and involves in thereby enrich the strategic entrepreneurship litera-
the value-creation process. We note that the specific ture by highlighting the processes through which
resource configuration prototypes we use illustrate existing resources could be exploited to explore
sources of value creation. They are templates new opportunities in the digital age. In addition,
(Amit & Zott, 2015) that could be modified, com- our framework also builds linkages among resource
bined, integrated, or even disrupted so that novel configuration prototypes, their sources of value cre-
resource configuration could arise through “the gales ation, and the underlying resource orchestration
of creative destruction” (Schumpeter, 1934). processes in the digital age. By incorporating the
We also intend to advance the strategic entrepre- ramifications of digitization into the existing
neurship literature through introducing digitization resource orchestration framework, we extend the
as an important contextual element for firms when framework to a digitally enabled world.
conceiving of and designing their resource config- Future studies may advance our conceptualiza-
urations. In particular, building on the extant tion in several ways. First, while acknowledging
framework of how strategic entrepreneurship could the fact that the needs and resources in our frame-
be achieved through resource orchestration (Hitt work are representations of a vector of needs and
et al., 2011), we propose specific microresource resources, we have not explicitly addressed the het-
configuration processes, which largely have been erogeneity of resources and needs that are associ-
enabled (e.g., crowdsourcing) or enhanced ated with each value cocreator. In particular, each
(e.g., continuous testing) by digitization. In value cocreator (e.g., a customer) often has multi-
Figure 3, we illustrate how our resource configura- ple needs (e.g., quality, ease of use) and controls
tion processes link to the processes in the resource multiple types of resources (e.g., money, data, and
orchestration framework. As Figure 3 depicts, we knowledge). Factoring such heterogeneity into the
DOI: 10.1002/sej.1256
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Value Creation Through Novel Resource Con Figurations in A Digitally Enabled World

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Value Creation Through Novel Resource Con Figurations in A Digitally Enabled World

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Strategic Entrepreneurship Journal

Strat. Entrepreneurship J., 11: 228–242 (2017)

Value Creation through Novel Resource

Research summary: We propose a conceptual framework for examining the value-

Copyright © 2017 Strategic Management Society

Figure 2. Resource conﬁguration prototypes.

Figure 3. Framework of resource conﬁguration in a digitally enabled world.

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