The business model dilemma of technology shifts

•Studies the dynamics of the intersection between technology shifts and business models.•Illustrates how manufacturing companies of the facing a potential technology shift becomes captured in a business model dilemma, between technology innovation and servitization.•Based on a longitudinal case study from the automotive industry with focus on the electric road system, ERS.•Shows the explanatory power of a business model perspective applied on technology shifts.•Suggests survival of technology shifts requires technological innovation and service innovation in order to gain a viable business model.

Technology shifts are lethal to many manufacturing companies. Previous research indicates that this is not purely a problem of technological innovation, but is also closely related to the inertia of business models and business model innovation. This paper inquires into the dynamics of this intersection between technology and business models. Anchored in a case study in the automotive industry, it reveals how a potential technology shift constitutes a business model dilemma for firms leading in the existing technology. The paper illustrates why technology shifts are so difficult to master and contributes to theory by suggesting that managing technology shifts does not require either technology or service innovation in order to create a viable business model, but instead a compound of both. Furthermore, the paper applies a business model perspective to illustrate the explanatory power of analyzing the challenges of technology shifts faced by incumbent firms.