DEG R E E P RO JE C T

Maximizing value capture from AI digital

solutions
A case study of a startup in the wind energy industry

Anton Hurmavaara
Petter Axelsson

Industrial and Management Engineering, master's level

2023

Luleå University of Technology

Department of Social Sciences, Technology and Arts
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ABSTRACT
Purpose
The purpose of this study is to extend current literature on the concept of value capture for AI
start-ups, focusing on the challenges they face and how to maximize value capture. By
investigating relational and economical value capture dimensions, this study aims to identify
opportunities for start-ups to extract value from their AI digital solutions. The study further aims
to contribute valuable insights to the literature, by building on the link between digital revenue
models and value capture.

Method
To fulfill the stated purpose, this study has adopted a qualitative, abductive single case study
approach with a focus on an AI start-up in the wind energy industry. The analysis was based on
20 semi-structured interviews which were conducted with different companies active in the
wind energy industry. All data was analyzed through a 5-step thematic analysis process.

Findings
Two main challenges a start-up may face were identified which were “Difficulties getting access
to partnering companies” and “Difficulties selling as a start-up”. Additionally, it was found that
relational value capture can be maximized using pilot studies, which is possible by building trust
and close relationships. Regarding economical value capture, this study showcases the
importance of adapting the choice of revenue model to the customer where the perceived risk
of the investment, in the customers’ point of view, plays a big role.

Theoretical contributions
Previous literature has mainly established a connection between the concept of value capture
and revenue models. However, this study further bridges the two, and more in depth displays
how revenue models could affect the captured value regarding AI start-ups. Additionally, this
study further elaborates on the literature regarding relational value capture, showcasing how it
can differ for a start-up and the challenges that arise when AI is involved.

Practical contributions
This study contributes with concrete examples of what challenges a start-up needs to consider
when trying to capture value from their product. Additionally, the study contributes with a
practical understanding on how a start-up can maximize value capture, by showcasing important
factors to consider, both when it comes to relational and economical value capturing. Moreover,
a decision tree has been formed, which can support AI start-ups when choosing a suitable
revenue model.

Limitations and future research

Firstly, the study's findings may not be applicable to other industries, highlighting the need for
multi-industry case studies for generalization and cross-industry comparisons. Secondly, more
in-depth research is needed to explore the specific steps and strategies for building relationships,
especially in the context of start-ups. Thirdly, this study primarily focuses on the revenue model
aspect of value capture, overlooking the concept of value proposition which limits the depth of
the findings and contributions and would be of interest to further investigate.

Keywords
Value capture; Relational value capture; Economical value capture; Digital business models;
Digital revenue models; AI start-ups; AI
ACKNOWLEDGEMENTS
We, the authors of this thesis, would like to express our gratitude to all those who have
contributed to making this work possible. First, we would like to thank Johan Casselgren and
Kent Mrozek for providing us with access to your case that enabled us to conduct this master
thesis. Secondly, we would like to thank our supervisor Patricia Garcia for all feedback,
engagement, and patience. Your guidance has been crucial for this work to turn out as it has,
and your directness and clarity has been highly appreciated.

We would also like to thank the members from our opposition group for your time, providing
us with continuous feedback and highlighting points of improvement to make this work even
better. Also, a great thanks to all the interviewees for your participation, providing us with
valuable insights from your industry and businesses.

Thank you,

Luleå, June 2023

Anton Hurmavaara Petter Axelsson

TABLE OF CONTENTS
1 INTRODUCTION ................................................................................................ 1

2 THEORETICAL BACKGROUND .......................................................................... 4

2.1 THE BUSINESS MODEL CONCEPT AND VALUE CAPTURE .............................................................4
2.1.1 The three sub-concepts of the business model concept .........................................................4
2.1.2 Interdependencies between the sub-concepts of the business model .....................................5
2.1.3 A deeper look into the value capture concept........................................................................6
2.2 DIGITAL SOLUTION BUSINESS MODELS ........................................................................................7
2.2.1 Software as a Service (SaaS) ....................................................................................................7
2.2.2 Result-oriented Product Service System ................................................................................8
2.2.3 AI Digital solution business models ........................................................................................8
2.3 DIGITAL SOLUTION REVENUE MODELS ........................................................................................9
2.3.1 Revenue models in digital businesses .....................................................................................9
2.3.2 Licensing model ................................................................................................................... 10
2.3.3 Rental model ........................................................................................................................ 10
2.3.4 Pay-per-use model ............................................................................................................... 11

3 METHOD .......................................................................................................... 13
3.1 RESEARCH APPROACH ............................................................................................................... 13
3.2 RESEARCH PROCESS ................................................................................................................... 14
3.3 THE CASE STUDY ......................................................................................................................... 15
3.3.1 The case company ................................................................................................................ 15
3.3.2 The case industry .................................................................................................................. 16
3.3.3 The choice of a single in-depth case study ........................................................................... 16
3.4 DATA COLLECTION ..................................................................................................................... 16
3.4.1 Wave 1: Secondary data collection ....................................................................................... 16
3.4.2 Wave 2: Primary data collection .......................................................................................... 17
3.5 DATA ANALYSIS ........................................................................................................................... 19
3.5.1 Secondary data analysis ......................................................................................................... 19
3.5.2 Primary data analysis ............................................................................................................. 20
3.5.3 Step 1: Familiarizing with the data ....................................................................................... 20
3.5.4 Step 2: Generating initial codes ............................................................................................ 21
3.5.4 Step 3: Searching for themes ................................................................................................ 21
3.5.5 Step 4: Reviewing themes .................................................................................................... 22
3.5.6 Step 5: Defining and naming themes ................................................................................... 22
3.6 QUALITY IMPROVEMENT MEASURES ......................................................................................... 24

4 FINDINGS ......................................................................................................... 26
 4.1 RESEARCH QUESTION 1: CHALLENGES TO CAPTURE VALUE ................................................... 26
4.1.1 Difficulties getting access to partnering companies............................................................... 26
4.1.2 Difficulties selling as a start-up.............................................................................................. 28
4.2 RESEARCH QUESTION 2: CAPTURING RELATIONAL VALUE ..................................................... 29
4.2.1 Collaborations through well-developed relationships .......................................................... 30
4.2.2 Using pilot studies to build and develop relationships .......................................................... 31
4.3 RESEARCH QUESTION 2: CAPTURING ECONOMICAL VALUE ................................................... 32
4.3.1 Choosing revenue model based on customer's perceived risk of investment ....................... 32
4.3.2 Packaging the offering based on the customer’s needs ......................................................... 34

5 CONCLUSIONS.................................................................................................. 35
5.1 THEORETICAL CONTRIBUTIONS ............................................................................................... 35
5.2 PRACTICAL CONTRIBUTIONS .................................................................................................... 37
5.3 LIMITATIONS AND FURTHER RESEARCH .................................................................................. 38

REFERENCES ........................................................................................................ 40

APPENDIX .............................................................................................................. I
APPENDIX I ...........................................................................................................................................I
APPENDIX II ...................................................................................................................................... III
APPENDIX III ..................................................................................................................................... IV
APPENDIX IIII ..................................................................................................................................... V
1 INTRODUCTION
The tech industry has been identified as one of the major industry trends, shaping society and
the world of business (Li, 2020; Parviainen et al., 2017) where an increasingly recognized part
of the industry is sustainable power technologies (Gielen et al., 2019). Sustainable energy plays
a central role in the success of Agenda 2030 and the Sustainable Development Goals adopted by
the United Nations General Assembly in 2015 (UNDP, n.d). There is currently a large growth
within the tech industry related to renewable energy, where the share of renewable energy
produced in the power sector is estimated to increase from 25% in 2015 to 85% in 2050 (Gielen
et al., 2019). Wind energy, the fastest growing among all renewable power technologies,
witnessed an unprecedented surge in 2021, soaring a 17% increase and recording the highest
growth rate among all renewable power technologies in 2021 (IEA, 2022).

The rapid growth of the tech industry has led to an increasing number of digital solution start-
ups, many of which are based on artificial intelligence (AI) (Weber et al., 2022). The term AI
can be defined as “a system’s ability to interpret external data correctly, to learn from such data,
and to use those learnings to achieve specific goals and tasks through flexible adaptation” (Kaplan
& Haenlein, 2019), where an AI digital solution can be described as a software or system that
incorporates AI techniques to solve a distinct problem. According to Unterkalmsteiner et al.
(2016), these start-ups are extra fascinating as they can create groundbreaking AI-based solutions
despite limited time and resources.

However, selling a newly developed technology to other companies is not easy, and start-ups
often struggle with commercializing their innovations due to their youth, limited size, and lack
of market experience (Anderson et al., 2006). The challenge for these companies is therefore to
turn promising technologies into financial returns for all stakeholders (Gans & Stern, 2003)
where the problem they face is not invention, but rather how to effectively bring their
innovation to market (Chesbrough & Rosenbloom, 2002; Gans & Stern, 2003; Schief &
Buxmann, 2012). Hence, choosing an appropriate business model is key to successfully
commercializing a digital solution (Chesbrough & Rosenbloom, 2002; Schief & Buxmann,
2012; Teece, 2018). For a start-up to be successful, it is therefore a necessity to understand the
business model concept.

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The business model concept has been widely discussed in academic literature and practitioner-
oriented studies in recent years, with considerable focus on innovation and technology
management (Chesbrough & Rosenbloom, 2002; Malmmose et al., 2015). According to Parida
et al. (2019), a business model can be divided into three sub-concepts: value creation, value
capture, and value delivery. Therefore, the term business model can be described as a company’s
strategy on how to create, deliver, and capture value (Osterwalder & Pigneur, 2010; Teece,
2010). All three sub-concepts have previously been researched in the literature where the sub-
concepts of value creation and value capture are the most common (Daeyoup & Jaeyoung,
2015).

Some researchers argue that value capture is seen as one of the more primary sub-concepts of
the business model due the fact that it can be explained as how well a company can retain profits
(Biloshapka & Osiyevskyy, 2018). Additionally, value capture can be seen through several
perspectives, where the most common includes the economical perspective focusing on the
monetary aspects, such as profits. Another perspective is the relational, which focuses on the
value that can be captured through building trust and relationships (Dyer et al., 2018). However,
in the long run, the goal of relational value capture is still to further maximize economical value
capture.

The revenue stream is one of the key elements in the business model concept (Osterwalder,
2004) and plays a vital role when selling a product to another company (Osterwalder & Pigneur,
2010). The concept is highly linked to the term revenue models which is widely used in
businesses and can be described as the strategy for managing a company’s revenue streams (Rajala
et al., 2003). The choice of revenue model affects a company’s ability to capture value,
particularly economical value. Additionally, an AI digital solution can be offered and sold using
different revenue models or a combination of models. The choice of revenue model will have
a direct effect on how the value is delivered (Ferrante, 2006; Rajala et al., 2003; Sainio &
Marjakoski, 2009), which, in turn, will impact the amount of value being captured. Some of
the most common revenue models used by companies selling digital solutions consist of
licensing, rental, and pay-per-use (Ojala, 2015, Rajala et al., 2003; Weber et al., 2022).

The development of sustainable energy technologies is crucial to reaching Agenda 2030’s goals.
Additionally, new AI digital solutions are more relevant than ever (Ali et al., 2022) and research
shows that AI could play an important role in assisting in meeting these sustainability goals (Jha

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et al., 2017). Furthermore, selling a newly developed digital solution to a larger company is not
easy, especially for start-ups, where their limited size, resources and market experience plays a
key role. When a start-up sells their newly developed solution, the sub-concept of value capture
plays a key role in their success (Chesbrough & Rosenbloom, 2002; Schief & Buxmann, 2012),
where the consequences of value capture failure could be the complete downfall of the start-up.
However, the concept of value capture regarding digital solutions is lacking (Parida et al., 2019),
and is even more deficient regarding AI digital solutions, mainly due to the infancy of the theory.
Even though new technologies such as AI digital solutions are an emerging topic, today's theory
within the concept of value capture is still adapted to traditional product sales. How an
innovative AI start-up could capture value from AI digital solutions is therefore lacking in
literature. The deficient research on the concept of value capture within AI digital solutions
opens up a gap in the literature, which from a theoretical point of view is interesting to
investigate.

Furthermore, start-ups that have developed a digital solution struggle to a higher degree in
establishing a strategy to capture value, mainly because the value created from software is not
always self-evident (Teece & Linden, 2017). Due to the critical role that value capture plays in
the success of a start-up, further research on the value capture concept for AI start-ups is clearly
needed. Additionally, large corporations within industries such as the renewable energy industry,
often lack the agility and expertise to develop innovative digital solutions themselves. Therefore,
there is not only a practical need for knowledge and understanding of value capture for AI start-
ups, but this research could also support the broader goal of enabling the implementation of
innovative digital solutions in the renewable energy sector.
In order to accelerate the transition towards a more sustainable future, this study aims to develop
a further understanding of how an AI start-up in the wind energy industry can maximize value
capture as well as identify the potential challenges it may face when doing so. Specifically, the
study addresses the following research questions:

RQ 1: What are the challenges for an AI start-up to capture value in the wind energy industry?

RQ 2: How can an AI start-up in the wind energy industry maximize value capture?

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2 THEORETICAL BACKGROUND
The following chapter will consist of previous research within similar areas to this study. This
includes theories regarding business models, the sub-concept of value capture and how it
differentiates when the product is based on AI. Lastly, commonly used revenue models for digital
solutions will be discussed.

2.1 The business model concept and value capture

2.1.1 The three sub-concepts of the business model concept

Over the last three decades, thousands of articles have been featured in peer-reviewed journals
regarding business models (Zott et al., 2011). Despite the large number of published articles,
there is still no universally agreed upon definition of a business model (Foss & Saebi, 2018; Massa
et al., 2017; Teece, 2010; Zott et al., 2011). However, a commonly used definition is a
company’s strategy on how to create, deliver, and capture value (Osterwalder & Pigneur, 2010;
Teece, 2010). Therefore, the business model outlines how the company will provide value to
customers, persuade customers to pay for that value, and convert those payments into profit
(Teece, 2010). Based on the definition, it is common for the business model to be divided into
the three sub-concepts: value creation, value delivery and value capture (Daeyoup & Jaeyoung,
2015) where the concepts of value creation and capture are usually seen as the primary functions
in the business model (Biloshapka & Osiyevskyy, 2018).

In the literature, several definitions can be found regarding these sub-concepts where a common
definition of value creation is the processes aimed at increasing the generated value (Chesbrough
et al., 2018; Sjödin et al., 2020). In other words, value creation could be described as a resource
deployment process where the perceived benefits outweigh the perceived costs. Furthermore,
the sub-concept of value capture can be defined as the process of securing profits from value
creation and distributing them among relevant actors, such as providers, customers, and partners
(Chesbrough et al., 2018; Dyer et al., 2018; Sjödin et al., 2020). The sub-concept of value
delivery, however, is not as common in the literature but has still been highlighted as having an
important role in the business model (Osterwalder & Pigneur, 2010; Teece, 2010). Value
delivery can be defined as how a company’s offerings can be delivered on the promises in a cost-
effective way (Biloshapka, 2018; Parida et al., 2019) which has a direct effect on the business's

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value capture (Biloshapka & Osiyevskyy, 2018) because more efficient value delivery results in
higher value capture.

Further, it has been shown that it is crucial for the business model to be appropriate for the new
product or service that a company has developed. Multiple cases examined by Chesbrough and
Rosenbloom (2002) and Teece (2018) showed that even if a company had developed a digital
solution of great value, it was the business model that determined whether it ultimately
succeeded or not. This is strengthened by Schief and Buxmann (2012), who claim that the
effectiveness of innovations in this current digital economy is largely determined by the chosen
business model, clearly showcasing the importance of the three sub-concepts in the business
model. Additionally, in the long term, all companies strive to achieve and retain profits, which,
in other words means captured value.

2.1.2 Interdependencies between the sub-concepts of the business model

The business model could be described as a system of interdependent activities (Zott et al., 2011)
and due to the fact that the value capture concept is part of the business model, the choice of
the business model will have a direct impact on the possibilities to capture value from an AI
digital solution. If a company does not find the right business model for their newly developed
innovation, it would result in less value captured from the innovation than it would otherwise
(Chesbrough & Rosenbloom, 2002). Furthermore, it is important that the chosen business
model strikes a balance between delivering value to customers and capturing value for the
provider (Teece & Linden, 2017).

Researchers agree that external business relationships will play a much greater role and have a
significant impact on value delivery (Parida et al., 2015: Parida et al., 2019; Metallo et al., 2018).
This is due to the fact that relationships will become more intense, interdependent, and globally
dispersed, which in turn will require increased collaboration among firms, leading to heightened
information transparency. This increased need for collaboration is particularly relevant for new
firms as their success depends on successful partnerships (Metallo et al., 2018). Therefore, new
companies must identify necessary partners and supporting players to deliver, and ultimately
capture value (Kiel et al., 2017). Further, Moore (1993) strengthens this and emphasizes that the
industrial competition has changed, where the number of traditional firms competing against
one another one on one is decreasing, while the number of partnering companies competing
against each other is increasing. This results in an increased importance of collaboration between

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partners whereas Teece and Linden (2017) claim that the business model needs to be adapted to
balance the profits between the focal firm and its partners. However, collaboration in one part
of the business model can have adverse effects on the other parts. In other words, a collaboration
between firms that for example would affect the sub-concept of value creation or value delivery
will likely have a direct impact on the sub-concept of value capture. Another example of these
adverse effects on other sub-concepts is according to Chesbrough & Appleyard (2007) a
collaboration with an industrial partner, often results in the partner's involvement in the value
proposition, a key part of the business model, which then reduces the value capture for both
partners. Chesbrough et al. (2006) further elaborate on this and claim that collaboration may
cause opportunism or conflicts of intellectual property which also could negatively affect the
value capture.

2.1.3 A deeper look into the value capture concept

As mentioned, value capture can be referred to as the procedure of obtaining profits from value
creation and distributing these profits among relevant stakeholders, such as providers, customers,
and partners (Chesbrough et al., 2018; Dyer et al., 2018; Sjödin et al., 2020). The term “value”
can however be interpreted in different ways, and represent either monetary or non-monetary
measures. Value capture can hence be viewed in different ways. One of the more common ways
to see value capture is the economical aspect, which includes the monetary aspects, such as
profits. Another way to view value capture is the relational perspective, which according to
Dyer et al. (2018) can be identified as the value that firms derive from alliances when they
identify partners with complementary resources, build high levels of informal trust and engage
in knowledge sharing and investments customized to the partner. All perspectives of value
capture are important. However, the long-term goal for companies is to maximize the
economical value captured, where relational value capture can be a way of achieving this.

When a company or entrepreneur has developed a new digital solution, the value of the solution
remains latent until it is commercialized (Chesbrough & Rosenbloom, 2002). However,
launching the developed solution, whether within a start-up or an established company, must
be supported by a strategy for capturing value (Teece & Linden, 2017). This is evident for
companies with tangible costs involved in the product creation. However, Teece and Linden
(2017) argue that it is not as self-evident for digital and pioneering born-digital companies,
where the software part of the developed digital solution usually has close to zero marginal costs
associated with the product delivery. Researchers have identified that digital start-ups experience

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increased difficulties in establishing a value capture strategy. However, more specifics on what
challenges a start-up faces when capturing value and how they should act to maximize value
capture, is still lacking in the literature. Additionally, research within general practical
applications is limited, and even more deficient regarding AI digital start-ups.

2.2 Digital solution business models

In comparison to the broader subject of business models, more limited research has been
conducted within the context of digital business models (Veit et al., 2015) and therefore a
comprehensive definition has not yet been established (Malmmose et al., 2015; Rajala, et al.,
2003; Schief & Buxmann, 2012). Furthermore, researchers emphasize that the digital industry is
undergoing significant changes as established vendors are switching to more service focused
business models to compensate for the declining product revenue (Cusamano, 2008; Kohtamäki
et al., 2019). This could for example include regular maintenance, patches, upgrades, and
technical support. This has resulted in the rise of new business models, including Product Service
Systems (PSS), and Software as a Service (SaaS) shifting the focus towards the “service” aspect
and introducing new ways to package and deliver solutions, thereby impacting the captured
value.

2.2.1 Software as a Service (SaaS)

As mentioned, an increasing number of digital solution companies are moving from traditional
business towards the SaaS model. One key reason behind the popularity of the SaaS model is its
ability to improve operational efficiency for users by eliminating the need for initial investments
and ongoing infrastructure maintenance. In comparison to the traditional business model, SaaS
provides access to the digital solution remotely, usually over the internet, where the user does
not need to specifically purchase the license. Instead, the solution is often bundled together with
other services such as maintenance, installation and support and is sold using a rental model or
pay-per-use model (Sun et al., 2007).

Banerjee et al. (2010) found that a significant portion, typically 70-80% of a company's IT budget
is devoted to infrastructure maintenance, leaving little or no room for continuous product
innovation. In contrast to the traditional model, where users are responsible for owning the IT
infrastructure, hardware, and support services, Loukis et al. (2019) and Xin et al. (2008) argue
that the SaaS model enables end-users to pay only for the required software which, in many

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cases, can be more efficient than owning and maintaining internal IT systems. Hence, SaaS
increased momentum is driven by advantages such as increased efficiency, scalability, and
enhanced user experience. An industry example demonstrating the financial viability of these
models is the customer relationship management platform Salesforce, a cloud-based SaaS.
According to Dubey and Wagle (2007), Salesforce’s success stems from their ability to gain a
competitive advantage among mid- and large-cap companies by responding quickly to the
customers' changed demand and adopting a service-based approach.

2.2.2 Result-oriented Product Service System

Over the past few years, the Product Service Systems (PSS) business model has witnessed
significant growth and has been the subject of over 20 years of scientific discourse (Haase et al.,
2017). In the literature, various types of PSS exist, but three distinct categories of PSS business
models appear to be the most common (Baines et al., 2007; Reim et al., 2015; Tukker, 2004),
where the logic behind the result-oriented PSS can be seen as particularly interesting. According
to Baines et al. (2017), Foss and Saebi (2017), and Sjödin et al. (2020) one of the most important
forms of business model innovation today is the transition from product sales to outcome-based
service sales. Result-oriented PSS is a good example of this transition, where instead of selling a
product, a result or capability is sold. In this business model, the outcome is agreed upon without
specifying the physical product(s) used to achieve it. Here, the provider is fully responsible for
the performance outcomes of the products and services regardless of how they are used (Baines
et al., 2007), as well as accepting all the penalties for any shortcomings (Visnjic et al., 2017).
This division of responsibility between the provider and the customer makes the outcome-based
service a high-gain and high-risk innovation strategy for business models (Kohtamäki et al.,
2019; Sjödin et al., 2020).

2.2.3 AI Digital solution business models

Throughout the years, organizations have increasingly turned to AI to gain business value, due
to the abundance of data and advancements in computational power (Enholm et al., 2022). As
proof of this, the rapid emergence of AI start-ups that use AI technology as a key component
of their product or service was observed by Weber et al. (2022) who refer to the database
Crunchbase, where over 27,900 “Artificial Intelligence” start-ups were listed as of September
2021. For such start-ups, finding a sustainable business model is important to ensure long-term
success (Böhm et al., 2017; George & Bock, 2011).

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When examining business models for AI start-ups further, Weber et al. (2022) found that the
main characteristics of an AI business model can be divided in two dimensions: core AI value
and continuous learning. The core AI value represents the actual value created by the AI
solution, for example, by analyzing large amounts of data or automating tasks through
autonomization and robotics (Kaplan & Haenlein, 2019; Pannu, 2015). The other dimension,
continuous learning, represents the AI solutions' capability to learn from new data and adapt
accordingly over time. In comparison to a traditional product, service or software, AI continuous
learning has the capability to change the AI solutions' accuracy over time which can be included
as part of the value proposition. However, knowledge regarding the use of business models to
capture value from AI digital solutions are lacking, which further indicates the need for
additional research.

2.3 Digital solution revenue models

2.3.1 Revenue models in digital businesses

Several terms are commonly used to describe how AI companies generate revenue by selling
their goods or services, with the most common ones including licensing, revenue logic, earning
logic, and revenue models (Sainio & Marjakoski, 2009). Digital revenue models are interesting
because they provide insight into the concept of value delivery and value capture of a digital
solution.

Rajala et al. (2003) found the four categories Product Strategy, Distribution strategy, Revenue
logic, and Services and implementation as important to identify key characteristics of digital
businesses. Both Rajala et al. (2003) and Schief and Buxmann (2012) have identified that aspects
such as sources of revenue and cost structure, all part of the categories “Revenue” respectively
“Revenue logic”, usually are different in the digital industry where the revenue strategies of
software-based products and services can be seen as highly unique in comparison to other more
traditional industries. The main reason for this, which many researchers have agreed on, is due
to the fact that software part of digital solutions are information-intensive products, they are
characterized by high initial costs and almost negligible marginal costs due to almost nonexistent
reproduction costs (Bakos & Brynjolfsson, 1999; Mahadevan, 2000; Ojala, 2012; Rajala et al.,
2003; Sainio & Marjakoski, 2009).

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Digital solutions regardless of whether it is based on AI or not, can be offered and sold using
several revenue models, all of which would have an effect on value capture (Ferrante, 2006;
Rajala et al., 2003; Sainio & Marjakoski, 2009). The three main revenue models identified in
the literature were licensing, rental and pay-per-use. There is general research within the usage
of these different revenue models and their part of the business model concept. Nonetheless,
how an AI start-up could use these models to maximize value capture is nonexistent in literature.

2.3.2 Licensing model

Licensing refers to the process by which an organization or individual can acquire, install, and
utilize a software on a device or network, in accordance with the terms and conditions
established by an agreement (Ferrante, 2006). In the traditional licensing revenue model, the
software is often sold through packaged or server-based licensing (Ferrante, 2006), but can also
be sold using a network-based model (Ojala, 2012). When purchasing software under packaged
licensing, a consumer buys a single license for a single user or computer, but under server-based
licensing, the program is purchased for a limited number of processors. The network-based
licensing model is not as common but works fairly similar; it employs a centralized system to
allocate licenses to network users (Ferrante, 2006). Regardless of licensing model, the software
can only be used on a specific number of computers but usually for an unlimited time (Ferrante,
2006). Therefore, from the customer’s point of view, this traditional licensing can be
advantageous over alternative models when software is required for extended usage and forms a
crucial part of the company's daily operations. Buying the license opens up the opportunity to
store and secure everything on their own servers which further can lead to a lower total cost for
the customer in comparison to a rental or pay-per-use model (Ojala, 2012).

Before choosing the licensing model, it is important to consider the strength of the intellectual
property regime. If the innovation is easily imitable and IP protection is weak, licensing may
not be an option, and the innovator may need to integrate the solution in order to capture value
(Teece & Linden, 2017).

2.3.3 Rental model

In the rental model, clients pay a pre-agreed subscription fee to access the license for a specific
and limited duration (Armbrust et al., 2010). This revenue model offers high pricing flexibility,
as the total price can be based on factors such as the agreement duration, the organization's user

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count, the software functions, or the company's size. The rental model provides several
advantages from the provider´s viewpoint, making it a preferable choice compared to many
other revenue models. For example, it allows for flexible pricing strategies, enables a diversified
customer base, and promotes network externalities. Additionally, if customers remain loyal, this
model often leads to increased profits and offers the potential for cumulative profits (Ojala,
2015).

2.3.4 Pay-per-use model

When using the pay-per-use revenue model, customers are charged based on the units they used
(Ojala, 2015). These units can be measured in various ways, such as time duration, commonly
found in the SaaS model (Lowe & Galhotra, 2018), the number of times the software is used,
the volume of transactions handled, or a combination of these factors (Ojala, 2015). This model
opens up the opportunity to attract a more diversified customer base, due to the fact that early-
stage customers may not require a significant upfront investment as they would with the
traditional licensing model. This revenue model can therefore be beneficial for customers who
only need to use the software at certain times, on a more sporadic basis (Gebauer et al., 2017;
Ojala, 2015). Furthermore, Cusumano et al. (2015) found that companies that infrequently use
specific software, are more attracted to use pay-per-use services.

However, utilizing the pay-per-use revenue model is usually a struggle for companies. For
example, tire manufacturer Michelin recognized that their premium tires could be sold using
this model, due to their high quality, and could therefore offer competitive prices using a pay-
per-kilometer model. However, Michelin struggled for several years until it became a
commercial success after it had set up an independent business as well as embedded technology
to track tire wear (Gebauer et al., 2017). Another disadvantage of using this model based on the
providers' viewpoint, is that it is, in general, easier for a customer to change providers when the
switching costs are low. However, from the customer’s point of view this revenue model can
be beneficial, as it does not require as much capital and resource investments which lowers the
short-term financial risks for the customer (Ojala, 2015). For a list of advantages and
disadvantages of the three revenue models, both from the provider´s as well as customer’s point
of view see Table 1 respectively Table 2.

11
Table 1: Comparison between revenue models from the provider’s point of view based on the findings
by Armbrust et al. (2010), Choudhary et al. (1999), Ferrante, (2006), Gebauer et al. (2017), Ojala (2015),
and Rajala et al. (2003).

Table 2: Comparison between revenue models from the customer’s point of view based on the findings
by Armbrust et al. (2010), Choudhary et al. (1999), Ferrante (2006), Gebauer et al. (2017), Ojala (2015),
and Rajala et al. (2003).

12
3 METHOD

In this chapter, the methods used in this study to achieve the research goals are defined. This
includes methods for the research approach, the data collection, and the data analysis. Lastly, the
chapter will be concluded by describing the measures taken to enhance the study's quality.

3.1 Research approach

This study employs an abductive approach, allowing for an iterative process that involves
moving between theoretical concepts and empirical observations (Dubois & Gadde, 2002). This
approach was appropriate as the goal of the study was to expand upon existing literature on
digital business- and revenue models within AI start-ups by uncovering new knowledge, instead
of generating new theory and testing it in practice. Moving between theory and empirical
observations involved going back to the literature between interviews, to further develop and
adapt the interview guide to collect accurate and relevant data. Furthermore, previous research
was compared and combined with the analysis of the primary data which later laid the
foundation for this study’s discussion and contributions. Therefore, this study aims to build upon
existing literature on currently used digital revenue models and explore how start-ups could use
these to maximize the value captured when selling AI digital solutions to other companies.
Therefore, to better comprehend the topic from both theoretical and practical standpoints, the
current study integrates past research with newly collected data.

A qualitative approach was chosen for this study to gain a deeper understanding and insight into
the subject, rather than focusing on collecting a large amount of numerical data as in a
quantitative approach (Hollstein, 2011). This study aims to reach an understanding of a specific
group within a specific industry, hence, the qualitative approach was considered appropriate,
since it provides a detailed and in-depth understanding of the participants' perspectives and
experiences (Denzin et al., 2011; Kelle, 2006). Given the research question and overall purpose
of this study, an AI start-up represents the unit of analysis. Since the potential customers to an
AI start-up are relevant companies within the wind energy industry, respondents from these
companies are the unit of observation. For a more comprehensive perspective, the study
incorporates different actors such as wind turbine manufacturers, wind turbine owners and wind
park operators.

13
3.2 Research process

To ensure a systematic and profound approach, a four-phase process was followed, as illustrated
in Figure 1. The first phase involved researching the literature to reach a deeper understanding
of the topic and was used as a foundation when creating the interview guide for the next phase.

Phase 2 consisted of the data collection and was divided in two waves. The first part of phase 2,
referred to as wave 1, focused on collecting and analyzing secondary data obtained from a pre-
study conducted by LTU Business. The secondary data was together with the knowledge
gathered from phase 1, used to create the interview guide used in wave 2, primary data
collection, which consisted of semi-structured interviews. During wave 2, the abductive
approach was used where the interview guide was modified based on the answers from earlier
interviews as well as the insights derived from theory. More on this in chapter 3.4.2.

Furthermore, phase 3 consisted of the primary data analysis, where the interviews were analyzed
using the thematic analysis method. Last, but not least, in phase 4 all the collected primary data
was together with the knowledge gathered in the literature review summarized and analyzed
which later resulted in this study's discussion and conclusions.

14
 Figure 1: Research process overview

3.3 The case study

3.3.1 The case company

The company used in this study, referred to as the case-company is a start-up who has developed
a new AI digital solution. This digital solution can be described as an ice-detection and prognosis
system that, when installed on wind turbines, can have several purposes, where one is to
optimize anti-icing systems and increase production efficiency. Furthermore, other identified
usage areas are better estimations on future production, detection of damages to blades and
detection of ice throws (ice thrown from the wing). The product is based on AI software and is
together with a camera installed on a wind turbine. The innovation has been developed by a
researcher at Luleå University of Technology and has not yet been commercialized.

15
3.3.2 The case industry

The wind energy industry is part of the larger energy sector, which has a key function in society.
It is a fast-growing industry, mainly due to worldwide efforts to address climate change and the
increasing need for sustainable energy (Mordorintelligence, 2023; Doshi & Prasad, 2022).
Additionally, it is an evolving industry with a high pace of technology development. Moreover,
the fact that the industry is young and research within it is limited makes this study even more
relevant, since it can help to improve insights into new emerging trends.

3.3.3 The choice of a single in-depth case study

This study was designed as a single in-depth case study, with the main purpose of reaching a
rich and detailed understanding of AI start-ups and how they can maximize value capture, and
ultimately answering the research questions. Single case studies are, according to David & Sutton
(2011) suitable for conducting in-depth examinations which is why it was deemed appropriate
for this study. The goal of the study was further to examine, in-depth, how actors within the
wind energy market are thinking when considering an AI digital solution that for this case could
increase the efficiency of wind turbines. This can contribute to valuable knowledge that can
help this study reach an understanding of how value can be captured from an AI digital solution,
what challenges may occur, and how it can differentiate when the company selling the digital
solution is a start-up. Regarding these objectives, a single case study was also deemed
appropriate, as the case company's digital solution was easy to understand and could be used as
an example in discussions with respondents.

3.4 Data collection

3.4.1 Wave 1: Secondary data collection

During the process of gathering secondary data, the information was obtained from a market
study carried out by LTU Business in 2022. This study aimed to explore and further understand
the potential market for the developed AI digital solution and identify key potential customers
and was hence interesting to explore since it gave insights into who could be relevant
respondents for this study.

16
3.4.2 Wave 2: Primary data collection

This study takes a qualitative approach, making semi-structured interviews an appropriate

choice. As per Rahman (2020), semi-structured interviews are a prevalent technique in
qualitative studies. The choice of collecting data using interviews was motivated by the need to
reach an in-depth understanding of the potential customers to the case company within the
wind energy industry, as well as gaining further insight into the respondents' way of thinking.
Furthermore, semi-structured interviews involve direct interaction between the researcher and
the respondents which further led to a more detailed and subjective data collection (Dudwick
et al., 2006; Rahman, 2020). This allowed the researchers to ensure certain results using
predetermined questions, but at the same time allowing extra questions to avoid the possibility
of missing important discussions that could contribute to answering the research questions.

Based on the purpose of this study it was deemed appropriate to mainly focus the interviews
towards the potential customers in this industry, identified from the secondary data collection.
The sample of wind turbine owners selected was primarily limited to the Swedish market due
to data availability. Representatives from as many companies as possible owning wind turbines
have been contacted to get as many perspectives as possible. Furthermore, all of the wind
turbines that are used in Sweden are manufactured by a foreign company and therefore the
primary data collection also includes interviews directed towards foreign based companies whose
wind turbines are used in Sweden.

In total 20 interviews were conducted with representatives from 12 different companies. No

more interviews were conducted because the answers became repetitive and the amount of new
insights was limited. Additionally, all interviews followed an interview guide, see Appendix I
which followed a general structure, beginning with questions about the respondent and the
company background to get a general understanding. This was followed by their procurement
and implementation process which contributed to further understanding how a digital solution
could be packaged and what revenue models could be used, with the purpose to further increase
the knowledge regarding economical value capture. After that, questions regarding company
relationships were asked to understand how the company thinks about business relations and
how these are affected by the fact that the counterpart is a start-up. This contributed with
knowledge regarding relational value capture.

17
The abductive research approach of the study allowed continuous improvement of the interview
guide. This was, as mentioned, done by comparing the literature with the answers received, to
see if they aligned with the overall purpose of the study. An example, after a couple of interviews
it was shown that the respondents did not have relevant insight into questions regarding pricing
models. Furthermore, based on the study’s purpose and the theory gathered, the decision was
made that these questions were irrelevant to the research questions, and, as a result, they were
therefore excluded from the interview guide. The changes to the interview guide resulted in a
better flow during the remaining interviews and facilitated the informants’ understanding of the
questions which led to more in depth and high quality answers.

The respondents were mainly selected based on their knowledge and experience, where
respondents with managerial positions were prioritized due to their insight in several areas such
as procurement processes, operations, company relations and technical understanding.
Additionally, some respondents were also chosen based on snowball sampling. All of the
interviews were conducted through video calls, either via Zoom or Microsoft Teams. This was
deemed the most beneficial way to conduct the interviews, due to the large geographical
distances with no possibility for face-to-face interviews. Furthermore, all interviews were
recorded and transcribed where the average duration was 36 minutes, the shortest was 30
minutes and the longest was 50 minutes. For a complete overview of all the interviews see Table
3.

18
Table 3: Overview of all the interviews

3.5 Data analysis

3.5.1 Secondary data analysis

The secondary data, gathered from a pre-study conducted by LTU Business in 2022 was mainly
analyzed through brainstorming and discussion where the most important aspects to this study
was acknowledged. The brainstorming session was done using digital post it notes in the software
Mural. The analysis of the data indicated that the primary target market and potential customers
for this AI digital solution consist of wind turbine manufacturers and owners. Additionally, a few
wind turbine operator companies were also found interesting as they could hold a lot of valuable
knowledge and were therefore seen as additional respondents for the interviews. The pre-study
indicated that the wind turbine owners in the Swedish market would be most viable to
interview, mainly due to the better accessibility. When it comes to the manufacturers, the
secondary data collection revealed that the number of potential companies to interview are more
limited.

19
3.5.2 Primary data analysis

When analyzing the gathered data from the interviews the thematic analysis method was used,
which is a widely qualitative research method used for analyzing and interpreting data from
texts, usually interviews or transcripts (Braun & Clarke, 2006; Braun & Clarke, 2010). This
method was chosen because it was deemed appropriate for this qualitative study due to the
possibilities for a flexible approach to the analysis. This was applicable since it sought to advance
the existing theory on business- and revenue models within AI-driven companies by iteratively
analyzing empirical data with the existing research. This study mainly follows the thematic
analysis process developed by Braun & Clarke (2006) using a five-step process as followed.

Step 1: Familiarizing with the data

Step 2: Generating initial codes
Step 3: Searching for themes
Step 4: Reviewing themes
Step 5: Defining and naming themes

Due to the abductive approach of this study the interview data was analyzed parallel with the
literature review. By going back to the literature as well as conducting analysis of the interview
data before all interviews were conducted, the type of respondents interviewed could be altered
to further contribute to the acquiring of accurate and relevant data. For example, the analysis of
the first couple of interviews indicated a strong need to interview manufacturing companies,
which the focus later shifted to, even though the contributions from the other types of
interviews still were deemed valuable. Due to this, the study managed to get further perspectives
from respondents with a more diverse knowledge base. Additionally, in phase 4 of this study,
the findings were combined and compared with the theory, which also demonstrates the
abductive approach to this study.

3.5.3 Step 1: Familiarizing with the data

The first step when conducting the thematic analysis was to familiarize ourselves with the data,
which consisted of transcripts from all of the interviews. To get a better grasp of the data, Braun
and Clarke's recommendation was acknowledged, and the transcripts were re-read several times
both with and without the recorded audio file in the background (Braun & Clarke, 2012). Both
authors read the transcripts separately, and where there were uncertainties it was re-read with

20
audio as well. The main goal of this phase was to gain a thorough understanding of the content
of the data and to be able to identify elements that could be relevant to this study’s research
question.

3.5.4 Step 2: Generating initial codes

The second step began by breaking down the gathered data into smaller units and arranging it
in a logical manner, with the goal of creating codes to characterize the content of the data. The
transcriptions were once again studied where interesting parts and quotes were coded. The
marking of interesting quotes and codes were first done separately by the researchers, and then
compared together. The purpose of this was to utilize the benefit of being two and having an
extra perspective. For example, the quote

“My experience is that it is more difficult for small software start-ups to pass an approval, as the
risk is much higher because they might not be on the market tomorrow.”

were together with similar quotes, deemed relevant to identify a potential challenge for a start-
up and could hence form the code Start-ups have increased risk of going bankrupt.

Furthermore, according to Braun and Clarke (2012), the codes could be seen as the building
blocks of the analysis and should be concise and descriptive. To make sure of this, the researchers
made sure that all codes were understandable and did not overlap other codes. The clear coding
in this study resulted in the capture of the core essence of the content as well as helped prepare
the data for the next step of searching for themes.

3.5.4 Step 3: Searching for themes

In the third step, the generated codes were together analyzed to identify both similarities as well
as differences. The codes that were found to be similar to each other were in Microsoft Excel
color coded in the same color to help visualize the differences and similarities between the codes.
Just as in step 2, this was also done separately at first and then combined and compared. This
phase was the longest phase, where recoloring had to be done several times to find the type of
codes that had the best correspondence. At the end of this step, the colored groups of codes
were grouped into relevant sub-themes and overarching themes.

21
The code “Start-ups have increased risk of going bankrupt” together with two other identified
codes, “Start-ups can grow at a high pace over which customers have low control over” and
“Wind turbine owners are bound to low risk in business operations” later formed the sub-theme
Difficulties selling as a start-up. This sub-theme together with the sub-theme Difficulties getting
access to partnering companies, which was created in the same way, then formed the overarching
theme of Challenges when capturing value.

3.5.5 Step 4: Reviewing themes

Once relevant themes had been identified, an iterative approach was used by going through and
reviewing the themes once again to ensure that they represented the initial data in an accurate
way. This was done by comparing the themes against the data to see if they were relevant in
relation to the research question. If not, refining was done by discarding or relocating codes to
different themes until desired quality was obtained. This step was re-done several times. The
main times were when the researchers themselves acknowledged that all the codes were either
not relevant based on the research question or it did not fit into their corresponding theme.
These codes were either discarded or relocated. Furthermore, an additional time when this step
was re-done was after the analysis had been peer-reviewed. For example, the subject “Pilot
study” was at first characterized as a theme, but after auditing, it was deemed more relevant as a
sub-theme.

3.5.6 Step 5: Defining and naming themes

In step 5 the themes were defined as well as refined when needed. The data within each theme
were analyzed to identify the bottom line of each theme as well as to determine that the aspect
of the data each theme captures was relevant to this study. In this step several themes, sub-
themes and codes were renamed to be more easily understood by the reader. Just as in the earlier
step, this step was also re-done several times to achieve clear, coherent, and easily understood
codes, sub-themes and themes.

After this, the thematic analysis had been completed where a total of sixteen codes, six sub-
themes and three main themes had been created which are presented in Figure 2. The main
themes are logically structured according to the research questions where the first theme
Challenges to capture value are connected to RQ1, while the two subsequent themes,
Capturing relational value and Capturing economical value are connected to RQ2.

22
Additionally, the codes and their sub-themes are connected to each of the three themes seen in
Figure 2. The codes could be described as factors or activities that were found relevant through
the analysis. These factors and activities (codes) are connected to the sub-themes which can be
seen as outcomes or results originating from these factors and activities. For example, the code
“Start-ups have increased risk of going bankrupt” is a factor that results in the fact that it can be
more difficult selling as a start-up, which connects to the sub-theme “Difficulties selling as a
start-up”.

Furthermore, a detailed overview of respondents’ quotes with corresponding codes for theme
one, two and three can be found in Appendix 2, Appendix 3 and Appendix 4 respectively.

23
 Figure 2: Thematic map including codes, sub-themes, and themes.

3.6 Quality improvement measures

To improve the trustworthiness and overall quality of the research, measures of improvement
were taken. According to Lincoln and Guba (1985), there are four important factors to consider
when establishing trustworthiness: credibility that refers to the degree to which the findings are
believable and accurate, transferability that refers to the degree to which the findings can be
applied in other contexts, dependability that refers to the degree to which the findings are
consistent and stable over time and confirmability that refers to the degree to which the findings

24
are objective and free from bias. Accordingly, these four criteria were used as a basis for
improving the quality of the study.

To ensure the credibility of this study, both authors have to the greatest extent, participated in
all interviews, which were all conducted via video calls, using either Microsoft Teams or Zoom.
All the interviews were transcribed afterwards, which allowed the interviewers to solely listen
and ask follow-up questions to be able to obtain more detailed information, avoid
misunderstandings, and clarify questions that the respondents at first did not understand. The
answers received from the respondents were also thoroughly reviewed against each other, with
the goal to avoid incorrect assumptions.

The results of this study are solely based on a single case study conducted in Sweden, with a
focus on the wind energy industry. Therefore, it can be considered ambiguous whether the
results should have high transferability or not. Furthermore, information regarding the
respondents is for some part anonymous, and the degree of transferability can therefore be
further seen as limited. However, a certain level of transferability was achieved through an
interview protocol consisting of predetermined questions which provided a structure for the
semi-structured interviews increasing its replicability.

To reach a high confirmability, the authors of this study have made every effort to be as
transparent as possible and therefore have tried to account for the approach to this conducted
study. The primary data was collected from respondents from different companies, with different
roles. This contributed to the conclusions being based not only on one group's thoughts and
ideas, but also allowed a utilization of more diverse perspectives in the study. Moreover, regular
discussions with the supervisor, the case company, as well as receiving feedback from four other
students during three feedback sessions guaranteed ongoing assessment and evaluation of the
study. These discussions provided an opportunity to receive feedback and identify any potential
issues or areas of improvement. By incorporating the feedback and suggestions, we, the authors
were able to strengthen the study’s rigor throughout.

The last and fourth improvement criteria, dependability, was ensured by defining a structured
and well-defined process of data analysis. Furthermore, the results are based on the collected
primary data from interviews, combined with previous research instead of being based on the
author’s assumptions or feelings.

25
4 FINDINGS
This chapter consists of the findings from this study originating from the thematic analysis. The
findings are divided based on the three themes which are directly connected to the research
questions. Theme 1 consists of the findings that answer research question 1, What are the
challenges for a start-up to capture value? Furthermore, the answers to research question 2, How
can a start-up maximize the captured value? are divided into theme 2 and theme 3 where the
first consists of relational value capture and the second consists of the economical value capture.
In 4.3 where the findings related to economical value capture are presented, a decision tree is
presented to support start-ups attempting to capture value by highlighting the connection
between perceived risk of investment, and the use of revenue models.

4.1 Research question 1: Challenges to capture value

The theme Challenges to capture value consists of the two main sub-themes, Difficulties getting
access to partnering companies and Difficulties selling as a start-up as seen in Figure 3.

Figure 3: Overview of the first theme, corresponding to the first research question.

4.1.1 Difficulties getting access to partnering companies

For a start-up to successfully sell a new digital solution, a crucial necessity is to showcase the
value of the product. To accomplish this, the new solution must be installed on a wind turbine,
a task that presents a challenge for start-ups due to the prerequisite of accessing these turbines.
There is therefore a necessity to collaborate with either a turbine owner or manufacturer which
are the only actors who have access to wind turbines. This has proven to be a challenge, mainly
because a start-up is usually unknown, but also because the potential value of the product is hard

26
to calculate. This can especially be seen for an AI digital solution where the value of the solution
can develop over time, which is difficult to comprehend for the customer (turbine owner or
manufacturer). A turbine owner operations manager further evaluates on this:

“It might be good to have the manufacturers involved somewhere in this, and then it's
difficult. [...] But it is important to bring something to the manufacturers that can really add
value. Difficult to get in there, but can be very valuable as a wind turbine is needed to be able
to test the product.” - R13

An additional challenge in the wind energy industry stems from its immaturity, where
manufacturers maintain significant control over the wind turbines even after they have been
sold. This control is exercised through warranty of power by using and signing long-term service
agreements with turbine owners, accompanied by fairly strict policies regarding the installation
of addons or other products that affect the turbines. Turbine owners are therefore bound to the
interest of the manufacturer, who usually wants to sell their own product as add-ons, making it
hard for other actors to install or sell products that are installed on the wind turbines. Therefore,
a challenge for an AI start-up is to understand their potential customers and to whom they
should address their focus when selling their digital solution. However, if the product does not
directly affect the wind turbine, such as an AI solution which does not possess any control over
the turbine, the power of the manufacturer remains limited which a R&D engineer from a
turbine owner further evaluates:

“A physical installation is always a bit tricky because we have a warranty for the turbines.
Then it gets a bit hard to convince the manufacturers to install extra installations or products.
Software that doesn´t affect the turbines is easier.” R-9

Another significant challenge, especially for software-based products, such as AI digital solutions
in the wind energy industry, was found to be cyber security. Cyber criminality is more and
more present in the industry where one reason is the increasingly connected society. Therefore,
security around wind farms is today very high, due to several reasons, where the consequences
that could arise, for example, unauthorized people affecting the wind turbines, could be
devastating. As a result of this, it is hard to get access to wind turbines and is therefore hard to
sell a new AI digital solution which theoretically could affect the wind turbine. A technical &

27
commercial manager from a wind turbine operator further evaluates on the aspect of cyber
security:

“Cyber criminality is more and more present in the wind farm environment, and there is
actually a directive from the EU to impose on every single wind farm owner to take measures
to protect the connectivity to the site.” - R1

4.1.2 Difficulties selling as a start-up

It is evident that considering uncertainty and risk is crucial in the implementation of an AI digital
solution. One significant factor that influences the willingness to adopt a digital solution, is the
maturity of the supplier company, where a start-up is connected to a higher risk, mainly due to
the likelihood of bankruptcy. The findings show that this elevated risk can affect how a customer
approaches an AI digital solution.

Additionally, previous experiences and perceptions with a company can also have an impact on
how a company approaches new AI digital solutions. In comparison to large, and well-known
companies, start-ups usually have limited reputation. Previous experience with a supplier as well
as a positive reputation lowers the reticence towards a company’s innovative solutions, but is
something that many start-ups lack. An operations manager at a wind turbine manufacturer
exemplifies the challenge that comes with being an immature company:

We need to have stable partners that will always deliver, because the consequences of the
turbine for example going offline is very problematic. A smaller company might be gone
tomorrow and therefore the risk in this sense is higher.” - R13

Another challenge that was highlighted as a general risk when purchasing from a start-up is the
fact that start-ups have a high possibility to grow and develop at a high pace which customers
have no, or little control over which a regional innovation manager at a manufacturing company
points out:

“I guess there's also the risk that at some point the service from the start-up may change that
we have less control over” - R18

28
This may entail the start-up changing their value proposition, offerings or perhaps changing
company direction completely, leading to new ways of offering the solution that does not fit
the customer as well. This showcases the struggle that larger corporations have, in regard to not
being as agile and not being able to adapt at the same pace as start-ups. However, since changes
in the value proposition takes time, even for a start-up, this risk is arguably higher in the long-
term.

Another significant challenge identified in selling as a start-up lies in the ownership structure of
wind turbine owner companies, which are often owned by large international investors, typically
financed by pension funds. This ownership scheme introduces a considerable degree of
reluctance in purchasing decisions that involve capital risk, as these companies prioritize capital
preservation. The primary decision-making authority rests with the company owners, who
exhibit a higher degree of prudence in their investment approach. Consequently, selling an AI
digital solution with higher risk to a company whose owners prioritize capital preservation
becomes more challenging. A wind turbine operations manager further elaborates on this:

“Most of the wind farms that I know of that are not owned by [Company Name] or the really
big ones are financed with pension savers from various European funds. [...] We are often
bound by contracts which are then long-term and which are supposed to promote risk. So
you don't want to take such big risks without knowing every year what it will cost and what
you will get out of it. [...] If we take the risk, we have a greater chance of winning, but then
we also have a greater chance of losing, and many of these pension companies are extremely
afraid of loss.” - R3

4.2 Research question 2: Capturing relational value

The theme Capturing relational value consists of the two sub-themes, Collaborations through
well-developed relationships and Using pilot studies to build and develop relationships as seen
in Figure 4.

29
 Figure 4: Overview of the second theme, corresponding to the second research question.

4.2.1 Collaborations through well-developed relationships

The analysis shows that in general, it is easier to build trust with a start-up compared to a larger,
more established company. This was further elaborated as having to do with the size of a start-
up, where the number of employees and different interactions are fewer making it easier to build
a certain level of trust. The regional innovation manager from a manufacturer further elaborates
on trust:

“The amount of trust we're looking to build is no different regardless of size. But trust is
usually built through people, so maybe it is easier to build trust when there are less people in a
company.” - R18

The importance of building close relationships with other companies, emerged as another
significant finding. Building close relationships can lead to potential partnerships within certain
areas, such as co-development of existing and future products. The inherent agility and
adaptability of innovative start-ups enable them to swiftly respond to changes and co-develop
solutions that align with the specific needs of their customers. Therefore, it is crucial for a start-
up to capitalize on their small company size and agile nature, enabling them to quickly adapt
and cultivate these close relationships. These relationships can be pivotal to the start-up's success
and may pave the way for successful collaborations, such as future co-development initiatives.
This potential is exemplified by an R&D engineer at a wind turbine owner:

“You could probably create a tighter relationship with a smaller company. Well-developed
relationships can lead to co-developing the digital solution or completely new ones.” - R9

30
4.2.2 Using pilot studies to build and develop relationships

Since start-ups and their AI-based solutions often are considered entirely new, where the
solution has not yet been tested or proven on a large scale, demonstrating its value becomes a
critical requirement for potential customers. One way of proving the value is through a pilot
study where showcasing the products and its potential value is essential. Since AI digital solutions
have the potential to continuously develop, it can create value for customers that was not known
or initially planned for by the provider. The purpose of the pilot studies hence goes beyond just
proving the value, into co-creating the value together with the customer, according to their
specific needs leading to an increase in the relational value captured. The Director of Service at
a turbine manufacturing company describes his view on this:

“For us to engage in a pilot study we need to understand the product and what value it
creates. [...] We would need to understand the system or solution inside out. What it does,
what it's capable of doing and then in the end, what's the value and that can be drawn from
the product. AI software can sometimes open up new opportunities which also would be
important to understand.” - R11

A pilot study will most likely result in a collaboration with other companies, where relationships
can develop, and more relational value can be captured. However, to get to the point of
conducting a pilot study, the analysis shows that all parties involved need to get something out
of it. The analysis has shown that a pilot study can be configured in different ways. However, a
critical part of the configuration is that all the involved parties need to be winners. Therefore,
establishing these types of agreements are key to conduct a successful pilot study, develop
relationships and maximize relational value capture. An example of a pilot study configuration
is explained by a wind energy analyst from a wind turbine owner:

“For instance, one could frame it such that we receive the system for free, and the selling
company gains access to a turbine, becoming more of a collaborative partner where we can
find some form of cooperation. From there, we can explore further options.” - R10

31
4.3 Research question 2: Capturing economical value

The theme Capturing economical value consists of the two main sub-themes, Choosing revenue
model based on customer's perceived risk of investment and Packaging the offering based on
the customer’s needs as seen in Figure 5.

Figure 5: Overview of the third theme, corresponding to the second research question.

4.3.1 Choosing revenue model based on customer's perceived risk of investment

A newly developed AI digital solution comes with uncertainty, followed by an increased risk
which has shown to have an impact on how the customer wants to purchase the product,
affecting the start-up’s choice of revenue model. Companies in the wind energy industry are
more hesitant to make larger investments when the uncertainty and risk of investment are high
and would in these cases, rather purchase for a specific period of time with lower initial costs.
When the risk is low, they are in general more interested in an early larger investment if the
total long-term costs are calculated to be lower. For example, a Senior Asset Manager at a wind
turbine owner expressed their hesitation of making large initial investments when the risk is
high:

“When dealing with a new and uncertain product with unknown potential, it can be
beneficial not to make an early significant investment commitment.” - R14

Apart from the product uncertainty, the analysis also entails that revenue models need to be
adapted to the uncertainty of the start-up company. To further support start-ups in the choice
of revenue model, a decision tree has been developed, see Figure 6. The decision tree aims to
support start-ups when choosing a revenue model for their AI digital solution based on the

32
customers’ perceived risk of the investment. For example, a start-up that has no track record of
previous successful deals, has a higher level of economic insecurity from the customer’s point of
view. In this case a customer would prefer a low-risk revenue model when dealing with this
unknown company. A low risk revenue model could, as an example, be rental or pay-per-use
agreements, with minimal commitments in terms of initial investments towards the start-up
company. If the investment instead has a low risk, the power shifts towards the start-up who
then has increased power of choosing the revenue model based on their preference.

Figure 6: Decision tree for start-up economical value capture

Additionally, to enable the start-up to reduce the risk of investment, selling an outcome or a
guaranteed result is helpful. By doing this, the start-up can provide a solution that delivers a
measurable and desirable outcome and clarifies what the value of the solution is. Promising a
certain outcome, decreases the risk drastically and further opens up the opportunity to charge
more for the solution. However, failing to deliver can be costly, and it is therefore important
that the product's functionality is accurate. A wind park operator further evaluates the benefit
of being able to guarantee a result.

“Selling a result, though if you manage to do that would be fantastic cause this is what people
are looking for. But then you could sell it at a much higher price.” - R1

33
4.3.2 Packaging the offering based on the customer’s needs

To further understand how to capture economical value, there is a need to comprehend how
the customer wants to acquire an AI digital solution. In this case the term packaging refers to
what needs to be part of the product offering, for example service agreements. The analysis
shows that the packaging of the product needs to be adapted to the customer and how their
company operates and what previous knowledge and resources they have. Additionally, it has
been shown that some companies need service agreements, because they do not possess the
resources to maintain and update an AI digital solution themselves. These customers are mainly
wind turbine owners, who also purchase additional service agreements when they acquire new
wind turbines. A wind turbine owner, whose company is quite different from other owners
further elaborates this:

“We would probably prefer to buy the product, not have a rental contract with support. But
we are a bit different from many others in the industry as we have our own maintenance
company. Most others run full service agreements with the turbine manufacturers.” - R12

However, some companies, mainly manufacturers, are more keen on acquiring the complete
product and handling the updates and maintenance themselves. The analysis shows that the
amount of resources these companies have, including hundreds or thousands of engineers, is
what makes them able to purchase this kind of AI digital solution without additional service
agreement and updates. A regional innovation manager at a manufacturing company further
elaborates why they prefer to purchase the complete solution.

“Ideally, if we can buy the technology, buy the solution and incorporate it into our own
systems so that you know that any data inputs and outputs remain ours, that's always a cleaner,
better way for us to do it.” - R18

34
5 CONCLUSIONS
This study extends the research on value capture for AI start-ups, more specifically what
challenges that can arise for a start-up in the wind energy industry, and how an AI start-up can
maximize value capture. Based on previous theory, value capture was divided into relational and
economical value capture where we for each have identified opportunities that a start-up can
utilize to capture value from their newly developed solution. Furthermore, the first challenge
that this study has identified are the difficulties a start-up has in achieving necessary partnerships.
Another challenge these companies face is the challenge of selling their new product, mainly
because they are a start-up. Additionally, this study contributes to the literature with further
insights to value capture within start-ups, and builds on the literature regarding the link between
digital revenue models and the concept of value capture. Additionally, a decision tree has been
developed that can support AI start-ups in choosing a suitable revenue model to maximize the
economical value capture. This section will further discuss the theoretical and practical
contributions of the study. Finally, limitations and suggestions for future research are discussed.

5.1 Theoretical Contributions

The present study makes several theoretical contributions to the literature on the concept of
value capture, regarding AI start-ups, both through the economical as well as the relational
perspective. The concept of value capture has previously been researched, but in relation to
start-ups and AI digital solutions, research is lacking, and needs further examination from an
empirical point of view, which this study offers. Further research of value capture within AI
start-ups, could facilitate a more in depth as well widespread understanding of the concept and
how it differentiates based on the type of company.

Firstly, when referring to economical value capture, specifically revenue models, existing
literature has mainly focused on its connection to the business model concept (Schief &
Buxmann, 2012) and the differentiation among various models (Rajala et al., 2003). Previous
research has discussed the advantages and disadvantages of these models both from the customers’
and the provider’s perspective (Armbrust et al., 2010; Choudhary et al., 1999; Ferrante, 2006;
Gebauer et al., 2017; Ojala, 2015; Rajala et al., 2003), which are presented in Table 1 and Table
2. However, this study has, more in depth, studied the link between digital revenue models and
value capture, expanding the knowledge on both subjects in regard to AI start-ups. This study,
along with previous literature show that when a start-up is selling a new digital product, the

35
customer takes the risk of the investment into account. With background from existing theory,
this study elaborates on this knowledge, and shows how revenue models could be used
depending on the customer’s perceived risk, with the goal to maximize the economical value
capture for AI start-ups in the wind energy industry, as visualized in Figure 6 through a decision
tree. Additionally, this offers new insights into digital revenue models and the concept of
economical value capture, which are essential to further develop the research within value
capture in the context of AI start-ups.

Secondly, this study has refined the previous literature within relational value capture. Previous
research has shown that building trust and relationships are key when capturing relational value
(Dyer et al., 2018). This study supports those findings, and further elaborates on the relational
value capture concept for start-ups, where the results suggest that start-ups due to their size and
limited number of employees, more easily can build trust. By using this information as a basis,
future researchers could advance the understanding of trust-building connected to company size
and relational value capture.

Thirdly, previous literature has shown that an AI digital solution distinguishes itself from a non-
AI digital solution by its ability to evolve independently over time, changing the value
proposition and how value is captured (Kaplan & Haenlein, 2019; Pannu, 2015). This study
confirms and further elaborates on the subject where it was found that digital solutions based on
AI, can be harder to grasp and predict in terms of estimated value, due to the self-evolving
nature of AI products. Additionally, Teece & Linden (2017) found that start-ups who have
developed a digital solution often encounter greater difficulty in capturing value, primarily
because the value generated from the software part of the product may not always be
immediately apparent. This study has shown that it could be an even greater challenge when
the digital solution is based on AI, due to the continuous learning. Despite these challenges,
new opportunities for start-ups have been identified including the opportunity to capture
relational value through co-creation. By leveraging these insights, researchers can further
investigate AI digital solutions, their self-evolving nature and how this further affects the concept
of value capture.

36
5.2 Practical Contributions

This study contributes with insights for start-ups who aim to enter the wind energy market with
a newly developed AI digital solution. Previous literature has shown that start-ups across many
different industries struggle to capture value from their new digital innovation. In this regard,
this study contributes to an understanding of what challenges a start-up can face when trying to
capture value based on the insights from the wind energy industry. This study also contributes
with a practical understanding on how a start-up can maximize value capture, by showcasing
important factors to consider both when it comes to relational, and economical value capturing.

Firstly, capturing relational value is neither easy nor straightforward for a start-up. It was found
that there is a greater risk of doing business with a start-up, both due to uncertainty, where both
the company and the developed product is unknown with no previous track record. This study
shows that it is critical for a start-up to work with these uncertainties, by building trust and
relationships that could lead to partnerships. Further, the results indicate that trust can more
easily be obtained by a start-up, mainly due to their limited size which start-ups, independent
of industry, should utilize if possible. In the case of the wind energy industry, partnerships are
almost a necessity for a start-up, because without access to a wind turbine, there is no way of
conducting a pilot study and achieving a track record. These findings are further strengthened
by Metallo et al. (2018) who claims that partnerships are key for a start-ups success. Therefore,
it can be assumed that these findings may apply in other similar industries as well.

Secondly, start-ups need to understand how the capturing of economical value is impacted by
the customer's perceived risk of investment. When dealing with high uncertainty and risk,
customers are more likely to prefer a low-risk revenue model. This could for example include
pay-per-use or short-term rental, which are usually being used with the SaaS business model.
Another way a start-up could mitigate the risk for the customer is by guaranteeing a certain
outcome or result, similar to the result-oriented PSS business model. This was shown to be very
beneficial, but at the same time places high demands on the AI digital solution to be accurate.
To the contrary, when the risk is low, customers may be more interested in making large
investments early on, which could include selling the whole product itself, licensing the solution
or using rental agreements as part of a SaaS.

37
To support start-ups with this, a decision tree, seen in Figure 6 was developed. The purpose of
the decision tree is to guide start-ups when choosing their revenue model based on the risk that
the customers see in buying the product. Important to consider is that the less the risk is for the
customer, the greater the power is of the start-up, both when choosing revenue model as well
as pricing their product. Therefore, the start-up should always aim to lower the risk for their
customers.

Additionally, how risk-prone companies are, have shown to be dependent on company policies
and how they are financed. In the wind energy industry, several wind turbine owners are owned
by large pension funds, making them more reluctant to high-risk investments. What is important
for a start-up is to be aware of these differences because it ultimately affects the choice of revenue
model and the start-up’s ability to capture economical value.

5.3 Limitations and Further Research

Although this study contributes both in a practical and theoretical way, there are important
limitations to acknowledge. Firstly, despite conducting interviews with various actors within the
wind energy industry, it remains a single in-depth case study. As a result, data collection from
other industries was not performed, and the findings may not be applicable to industries beyond
wind energy. To address this limitation, a proposal for further research is to conduct a multi-
industry case study, which would allow for generalization of the findings and facilitate cross-
industry comparisons.

Secondly, the findings in theme 2; Collaborations through well-developed relationships,

highlight the importance of building close relationships and why the size of a start-up matters in
this context. However, a limitation of this study is the lack of in-depth investigation into how
to build these relationships. Therefore, it would be interesting to investigate more in depth how
to create these relationships, perhaps with necessary steps that a start-up needs to take, starting
from first contact, to establish a flourishing business relationship. Future researchers could hence
dive deeper into the relationship building process for start-ups.

Thirdly, due to limited time and resources, this study does not incorporate the subject of value
proposition. Instead the focus is on the revenue model aspect of economical value capture. This
has resulted in constraints in the research design and has limited the depth of the findings and

38
contributions. Consequently, future research could incorporate and investigate the effect the
value proposition has on value capture within AI digital solution start-ups. This could be
incorporated with this study’s findings which would further develop the knowledge within the
concept of value capture.

39
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APPENDIX

Appendix I

Interview guide

Introduction
Present ourselves, and our research as part of our thesis work. Present the innovation (AI digital
solution) as an example so that the respondents get a background and understanding.

Starting questions
· What is your position within the company? In short, can you describe what you do?

Procurement & implementation process

· When you are considering a new innovation or product for improving your
products/processes, how does this process look? (procurement process, the process of
buying and implementation?) (From when you first see the innovation until you proceed
to buy it)
· What does the implementation process look like at your company?
- Is it different depending on the type of product? For example a digital software
vs a physical product? If so, how is it different?
· What factors affect whether you will make the purchase or not?
- In what way, and how do these factors affect the decision?
· Does your company have any regulations, goals, alignments that affect this choice?
- If so, how does it affect?

i
More detailed questions:
· How would you like to buy/rent/pay for the use of a digital solution based on AI
software? (For example, you can rent it, pay for what you see, purchase the complete
product etc.)
- Why?
· Does this differ depending on what kind of product it is? Digital AI software-based
solution vs physical products? If so, how?
· Would you rather pay monthly? Pay quarterly? Pay annually? Why?
· Anything else you think is important regarding the purchasing and delivery of a digital
solution?

Doing business with a start-up

· Do you see any differences in the relationship doing business with a small company
compared to a large one?
- How do these relations differentiate?
· Based on your experience, do you prefer to build a relationship with a smaller company
or a larger one? Why? What are the advantages/ disadvantages?
· When purchasing a product from a small company, is it different from buying from a
large one?
· What is required of a small business (start-up) to sell a product/service to you?
· Do you see any challenges for start-ups when doing business with your company? If so,
what are they? Why?

User experience
· How would you like to use this AI digital solution?
· What is your opinion or thoughts regarding the distribution of responsibilities when the
AI software product is in use?
· Would you like to control/operate it all yourself, or do you need help to
control/monitor it? Outsource everything?
· Anything else you want to add that you think is important regarding the usage of an AI
digital solution?
Ending question
· Do you know anyone else we can talk to regarding this?

ii
Appendix II

Detailed overview of respondents’ quotes with corresponding codes for theme one.

iii
Appendix III

Detailed overview of respondents’ quotes with corresponding codes for theme two.

iv
Appendix IIII

Detailed overview of respondents’ quotes with corresponding codes for theme three.