Business Model Innovation for Crisis Management: A Study of Pakistani Startups leveraging Dynamic Capabilities

Abstract

The COVID-19 crisis had a significant and immediate impact on business activities in every industry across the world. The pandemic severely affected startups in particular, which are typically resource-constrained. However, during these tough times, some businesses not only sustained themselves but also managed to grow significantly. This occurred because these startups were able to adapt and manage change effectively. Thus, businesses strive to survive and, in the best scenarios, profit during a crisis. This study explores how startups can use business model innovation (BMI) to survive crises and earn profit. The study also aims to explore the different types of BMI adopted by startups in response to crises. The theoretical lens of this study was centered on a dynamic capabilities lens, focusing on sensing, seizing, and reconfiguring strategies to cope with the crisis. The methodology of this study was qualitative and fifteen semi-structured interviews with founders and co-founders of Pakistani startups were conducted. The findings suggest that startups faced various challenges during the crisis, including shifts in consumer behavior, disruptions in business operations, and financial constraints. The study also highlights the value capture, value creation, and value proposition of BMI in response to these challenges. The results emphasize the importance of digital transformation as a crucial factor in customer engagement and enhancing business operations. Additionally, the study underlines the importance of strategic adaptability and market responsiveness for crisis resilience. Overall, this study contributes to exploring the role of BMI in empowering startups to transform crises into opportunities and underscores the significance of dynamic capabilities.