As enterprises face the impact of a complex, dynamic, and uncertain digital environment, business models constitute a firm-specific operating environment that enhances future predictability and is an important means of addressing the challenges of managing in the digital era. Creating a viable business model is an iterative process, which is due to the dynamic characteristics of the external environment as well as the difficulty of decision makers to design a perfect business model at the early stage of start-ups. In the digital era, many enterprises have gone through one or more rounds of business model iteration in a short period of time, but the results of the iterations are very different, so how to provide enterprises with a viable business model iteration path and strategy has attracted a lot of attention from scholars and practitioners.
This paper first defines the business model as a cognitive schema, a formal expression, and a real entity from the perspective of business model rules and functional boards. The business model as a cognitive schema is the designer's conjecture of the real business model, which is based on the individual's established business logic and cognitive framework. It is often composed of one or multiple functional modules governed by fuzzy rules. The business model as a formal expression refers to the representational artifacts (e.g., diagrams, canvases, or narratives) that articulate business conjectures and realities through words, images, or symbols. It typically consists of a set of functional modules defined by specific rules. The business model as a real entity describes the actualized outcome of configuring these functional modules within a real-world business context, governed by relational and operational rules.
Second, the CFR model is established as a fundamental analytical framework for business model iteration. Finally, by introducing sense-behavior and resource action theory and taking YouNong as a case study, this research explores the critical roles of sense-behavior and resource action in the formation and transformation of the three business model forms:cognitive, formal, and real-entity,and deduces their interrelationships and integrated model during iterative processes, thereby addressing how to facilitate the development of a viable real-entity business model and its specific weaving pathways.
The study finds that (1) Business model iteration constitutes a feedback loop comprising "cognitive schema— formal representation—real entity —new cognitive schema." (2) Sense-giving behavior and resource action play a critical role in the transformation across the three forms of business model. The external context triggers managers' sense-making, which serves as the logical starting point for business model iteration. The business model as a real entity forms the unique operating environment of the enterprise, which in turn influences the external context. Sense-giving acts as a key guarantee for transforming the cognitive-form business model into the representational form, while resource actions aligned with the representational form are essential for constructing the business model as a real entity. (3) The transformation process among the three business model forms is simultaneously a process of weaving and shaping the rules and functional modules of the business model.
In conclusion, this paper delineates three distinct states of the business model—the cognitive schema, the formal expression, and the real entity—based on the framework of business model rules and functional boards. It elucidates the transformation between these business model forms and the evolution of business ideas into mature business models, shedding light on business model essence and functions. It also highlights sense-making, sense-giving, and resource-action in business model iteration, offering insights into the "environment-cognition-action" mechanism. The findings of this study provide guidance to businesses, especially for specialized, refined, differential, and innovative SMEs within agriculture. They suggest that managers should continuously update their understanding in response to external shifts, which helps in refining business models. This process not only aids in the development of organizational consensus through effective sense-giving by managers but also underscores the importance of the adaptability and pertinence of resource deployment. By doing so, it enables the realization of a viable business model and the establishment of a competitive edge.