Business model innovation is generally thought of as a challenging exercise for organizations. While prior research has highlighted novelty per se as a key driver for high-performing business models, some recent studies further suggest that novelty does not always lead to an effective business model due to complexity. How can business models be developed and scaled based on novelty? We explore this question by investigating the case Freshippo—a novelty-centric business model in online fresh food industry, from its inception to successful scale. Drawing on an activity system lens, our theoretical framework shows how activities are developed based on novelty and the relationship between novelty and business model architecture. Our results highlight a dynamic perspective of interdependency between activities for the effectiveness of the business model and the flexibility of quick trial-and-error. We suggest a systemic view to help achieve an “architectural innovation” in which co-evolutionary activities in a business model can form positive feedback loops of value.
