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Aside from grappling with technological advancements, enterprises in the industrial internet era are embracing business model innovation to align with the evolution of the industrial internet. However, a gap persists in the existing research regarding the strategies and methods available to small and medium-sized enterprises (SMEs) for executing business model innovation. Therefore, this paper aims to explore the connotation, characteristics and logic of business model innovation for SMEs in the industrial internet era.

To explore the business model innovation logic of small and medium-sized enterprises in the era of industrial internet, the paper adopts a longitudinal single-case study approach, with PAYA, a medium-sized enterprise in the electromechanical industry, serving as the subject of research. It systematically analyzes PAYA’s business model innovation, centering on four key elements of the business model: value proposition, value creation, value delivery and value capture.

The study proposes two types of business model innovation, namely, “Migration” and “Expansion”, and explains the logic of business model innovation for SMEs in the industrial internet era: faced with a rapidly changing market environment, entrepreneurs put forward the value proposition through the insight of the market environment, then enterprises conduct technological innovation to support the value creation by their own unique experience and knowledge, and then improve the legitimacy of the market by expanding the influence of market acceptance of the new business model to promote the value delivery, and finally capture the economic value and ecological value.

The types and logic of business model innovation proposed in this paper contribute to supplementing and developing the theory of business model innovation and meanwhile have important reference value for SMEs in the industrial internet era.