fieltnotes: Business Models & Business-IT research

The morphology of service bundling settings

2012-01-06T02:24:00.002+01:00

The purpose of this paper is to advance our understanding of what contextual factors influence the service bundling process in an organizational setting.

Although previous literature contains insights into the mechanisms underlying bundling and the artefacts for performing the bundling task itself, the body of knowledge seems to lack a comprehensive framework for analysing the actual scenario in which the bundling process is performed. This is required as the scenario will influence the bundling method and the IT support. We address this need by designing a morphological box for analysing bundling scenarios in different organizational settings. The factors featured in the box are systematised into a set of four categories of bundling layers which we identify from reviewing literature. The two core layers in the framework are the service bundling on a type level and on an instance level (i.e. configuration).

To demonstrate the applicability and utility of the proposed morphological box, we apply it to assess the underlying differences and commonalities of two different bundling scenarios from the B2B and G2C sectors which stress the differences between bundling on a type and instance level. In addition, we identify several prospects for future research that can benefit from the proposed morphological box.

See here for more information.

Business Model Canvas 2.0

2011-10-25T04:53:00.003+02:00

The Business Model Canvas, as described in Business Model Generation by Osterwalder and Pigneur (2010), is quickly becoming the dominant business model framework (see here for an overview of different frameworks). While the Business Model Canvas is a useful and easy-to-use tool for generating business models, it has certain limitations that I think need to be addressed in the future.

Below is my ‘wish list’ with what I consider the three major areas for improvement.

Moving from a product logic to a service logic
Moving from firm focus with partnering to constellation focus with networking
Moving from a static approach to a dynamic approach

I will address each of these areas in future posts.

Business model archetypes

2011-09-09T03:06:00.003+02:00

How familiar are you with different business model archetypes or patterns, such as the 'free' model? Do you always start with a blank sheet when designing a new canvas or would/should you reuse existing models? Or when you analyse an exiting model, would/should you look at what is unique or what it has in common with other models?

Whatever your approach, it is good to be familiar with the individual archetypes that have been identified so far and the classifications (in the form of lists or typologies) used to describe multiple archetypes. Most of this started with trying to describe and understand different e-business models, for example Timmers (1998), Rappa (2000) and Weill & Vitale (2001). Later the specific focus on e-business models became less, although many of the newer models are still associated with the Internet as driver or enabler. Osterwalder & Pigneur (2010) and Johnson (2010) are examples of newer lists that are not e-business focussed.

Next to presenting different lists or typologies and their underlying criteria, some authors also address the application of business model archetypes for business model design and management via, for example,business model composition (Weill & Vitale, 2001), business model decision-making (Morris et al.,2005) and business model maturity (Chesbrough, 2006).

For a more detailed description and discussion see the whitepaper ‘Understanding business models.'

The impact of software-as-a-service on business models of leading software vendors

2011-08-26T05:14:00.003+02:00

One of the prominent topics in Business Service Management is business models for (new) services. Business models are useful for service management and engineering as they provide a broader and more holistic perspective on services. Business models are particularly relevant for service innovation as this requires paying attention to the business models that make new services viable and business model innovation can drive the innovation of new and established services. Before we can have a look at business models for services, we first need to understand what business models are. This is not straight-forward as business models are still not well comprehended and the knowledge about business models is fragmented over different disciplines, such as information systems, strategy, innovation, and entrepreneurship. This whitepaper, ‘Understanding business models,’ introduces readers to business models.

This whitepaper contributes to enhancing the understanding of business models, in particular the conceptualisation of business models by discussing and integrating business model definitions, frameworks and archetypes from different disciplines. After reading this whitepaper, the reader will have a well-developed understanding about what business models are and how the concept is sometimes interpreted and used in different ways. It will help the reader in assessing their own understanding of business models and that and of others. This will contribute to a better and more beneficial use of business models, an increase in shared understanding, and making it easier to work with business model techniques and tools.

See here for more information.

A business model approach for moving tele-monitoring and tele-treatment from promise to practice

2011-07-18T13:06:00.003+02:00

The availability of new information and communication technologies creates opportunities for new, mobile tele-health services. While many promising tele-health projects deliver working R&D prototypes, they often do not result in actual deployment. We aim to identify critical issues than can increase our understanding and enhance the viability of the mobile tele-health services beyond the R&D phase by developing a business model. The present study describes the systematic development and evaluation of a service-oriented business model for tele-monitoring and -treatment of chronic lower back pain patients based on a mobile technology prototype. We address challenges of multi-sector collaboration and disruptive innovation.

See here for more information.

Business model frameworks

2011-06-26T20:47:00.003+02:00

How familiar are you with different business model frameworks? What framework will suit your needs best?

Selecting the right framework may depend upon, amongst others, the purpose (e.g. communication, brainstorming, business plan, system development), the setting (e.g. start-up or established company, organization or network, social or technical) and the type of support required (e.g. modelling language, visualisation, templates, tool support, etc.).

Below you find a list of some of the more well-known and published frameworks:

The Business Model Canvas (Osterwalder & Pigneur)
The Four-Box Business Model (Johnson)
The STOF model (Bouwman, De Vos & Haaker)
Business Model Schematics (Weill & Vitale)
Technology/market mediation (Chesbrough & Rosenbloom)
Entrepreneur’s business model (Morris, Schindehutte & Allen)
e3-value (Gordijn & Akkerman)

For a more detailed description and discussion see the whitepaper ‘Understanding business models.'.

A business model definition

2011-05-24T14:29:00.007+02:00

A business model describes the value logic of an organization in terms of how it creates and captures customer value (Fielt, 2011).

The definition is related to Osterwalder and Pigneur (2010), but with 'customer' value and without 'delivering' value. The definition is well aligned with Chesbrough (2006), Johnson (2010), and Teece (2010).

While most authors are not very explicit about what they mean with value, most definitions seem to refer to mean 'customer value' (i.e. value for the customer). We excluded 'delivering' value from the definition as we see delivering value as part of creating value. Customer value implies use value, which cannot be created without being delivered.

We see the identification of the different elements of a business model, such as the value proposition, resources or revenues, not as part of the business model definition, but as part of the business model framework. A framework operationalizes the definition and makes it more concrete and specific. This creates some flexibility as there can be multiple, different specific frameworks while adhering to a single, generic definition. This caters for the use of the concept for multiple purposes and in different contexts, and the development of the concept over time.

While the business model has a specific organization as its focus, we want to make explicit that often this focal organization operates in an organizational network and that the organizational network can play a prominent role in creating and capturing value. If this is the case then the network will be included in the business model. However, the network will still be from the perspective of the focal organization.

An organization can have multiple business models, either in time (sequentially) or at the same time (simultaneously). While outside the scope of the current discussion, this requires understanding of synergies and conflicts between business models and creates a need for business model portfolio management and business model lifecycle management.

We also leave open the possibility that the organization is a profit or non-profit organization. Capturing value will often be about financial revenue models that contribute to the monetary bottom-line of the organization. However, we do not want to exclude a broader perspective than profitability including also social responsibility and environmental sustainability.

See the 'Understanding business models' whitepaper (pdf here) for more information.

References

Chesbrough, H. (2006). Open business models: How to thrive in the new innovation landscape. Boston, MA: Harvard Business School Press.
Fielt, E. (2011). Understanding business models (Business Service Management whitepaper volume 3). Brisbane, Australia: Smart Services CRC. Available via: http://eprints.qut.edu.au/41609/
Johnson, M. W. (2010). Seizing the white space: Business model innovation for growth and renewal. Boston, MA: Harvard Business Press.
Osterwalder, A., & Pigneur, Y. (2010). Business model generation: A handbook for visionaries, game changers, and challengers: (self-published).
Teece, D. J. (2010). Business Models, Business Strategy and Innovation. Long Range Planning, 43(2-3), 172-194.

Alternative Business Model Canvas templates – The two-sided business model

2011-05-18T05:47:00.008+02:00

I have been exploring the use of the BMG Business Model Canvas and possible alternative canvas templates that do not change the core concepts or the language of Business Model Generation (BMG) (Osterwalder and Pigneur, 2010). A first experiment with respect to co-creation can he found here and a second experiment with (service) bundling can be found here.

One of the patterns in the BMG book is the multi-sided platform, The core idea is that there are distinct types of customers, e.g. eBay has buyers and sellers. Note that this should not be confused with differentiating between different customer segments. Because the value proposition, channels, relationships and customer segments can be quite different per group, it may sometimes be useful to use a canvas that more explicitly differentiated between different groups. This is most easily for two-sided markets (a specific type of multi-sided platform), like eBay, where there will be two different customers groups. Two examples of an alternative canvas templates are provided below.

What do we mean with business model?

2011-05-12T01:04:00.001+02:00

While the growing attention for business models and business model innovation is a positive development, it also stresses the need for better understanding what we mean with the business model concept. This is not straight-forward as business models are still not well comprehended and the knowledge about business models is fragmented over different disciplines, such as information systems, strategy, innovation, and entrepreneurship. We need to further develop our conceptualisation of business models by discussing and synthesising business model definitions, frameworks and archetypes from different disciplines.

I tried to contribute to this development by the whitepaper ‘Understanding business models.' After reading this whitepaper, the reader will have a well-developed understanding about what business models are and how the concept is sometimes interpreted and used in different ways. It will help the reader in assessing their own understanding of business models and that and of others. This will contribute to a better and more beneficial use of business models, an increase in shared understanding, and making it easier to work with business model techniques and tools.

Why is business model innovation challenging?

2011-04-25T10:59:00.002+02:00

Business model innovation is challenging because it is a form of innovation that has not been often explicitly recognized and presents significant challenges for organizations.

‘When executives think of innovation, they all too often neglect the proper analysis and development of business models which can translate technical success into commercial success’ (Teece, 2010).

Chesbrough and Rosenbloom (2002) warn that the current business model as dominant logic can hinder organizations in defining new business models because ‘the choice of business constrains other choices, filtering out certain possibilities, even as other prospects are logically reinforced.’ In line with this, Zott and Amit (2007) state that more established firms may be more constrained by path dependencies and inertia than more entrepreneurial firms.

According to Johnson et al. (2008) companies are confronted with two challenges. Firstly, there is a lack of understanding into the dynamics and process of business model development in general. Secondly, most companies do not understand their existing business model well enough to determine when they can leverage it and when a new model is required.

References

Chesbrough, H., & Rosenbloom, R. S. (2002). The role of the business model in capturing value from innovation: Evidence from Xerox Corporation's technology spin-off companies. Industrial and Corporate Change, 11(3), 529-555.

Johnson, M. W., Christensen, C. M., & Kagermann, H. (2008). Reinventing your business model. Harvard Business Review, 86(12), 50-59.

Teece, D. J. (2010). Business Models, Business Strategy and Innovation. Long Range Planning, 43(2-3), 172-194.

Zott, C., & Amit, R. (2007). Business Model Design and the Performance of Entrepreneurial Firms. Organization Science, 18(2), 181–199.

Service-oriented business models: A holistic perspective

2011-02-18T11:31:00.004+01:00

The Business model Canvas below illustrates effectively that when we think about service-orientation from a business model perspective, we have a more broader view than just the service offering itself.

Alternative Business Model Canvas templates – The Bundling Business model

2011-02-12T02:56:00.013+01:00

I have been exploring the use of the BMG Business Model Canvas and possible alternative canvas templates that do not change the core concepts or the language of Business Model Generation (Osterwalder and Pigneur, 2010). A first experiment with respect to co-creation can he found here.

My second experiment is the use of the template for (service) bundling, where two core services (can also be applied to products) are sold as one package to the customer. For simplicity I focus on pure bundling where the customer only has the option to buy the package, not separate services in the package. Below you find two simplified business model canvasses, one that stays within the existing template and one with an alternative template.

The first, traditional canvas seems to be most useful when although the two bundled services are separate, the activities, resources and partners for those services still overlap. The second, alternative canvas seems to be most useful that when the two bundled services are really independent of each other with separate activities, resources and partners.

Service-oriented business models: Service as process

2011-01-30T05:00:00.003+01:00

This post is part of a series that explores service-oriented business models based on different perspectives on service. In a previous post we discussed the service as product perspective. In this post we address the service as process perspective.

Subsequent to the service product approach and the IHIP characteristics, many newer definitions emphasise services as processes and focus more on the interactions between the customer and provider and the role of the customer as co-producer. Grönroos (2007) and Johnston and Clark (2004) stress state that, from the customers’ perspective, service is the combination of the customers’ direct experience of the service process and their perception of the outcome of that process. Grönroos (2006) defines service as ‘a process consisting of a series of more or less intangible activities, that normally, but not necessarily, take place in interactions between the customer and service employees and/or physical resources or goods and/or systems of the service provider, which are provided as solutions to customer problems.’ Teboul (2006) differentiates between processes in the front-stage (service) where the interaction with the customer takes place, and processes in the back-stage (production).

Frequently, the service encounter is the service from the customer’s point of view (Bitner, Booms, & Tetreault, 1990). This makes it the moment of truth for the provider. While some service marketing use a broad definition for service encounter encompassing any interaction element (e.g., Shostack, 1985), many focused on the personal interactions between customers and employees in the service encounters (e.g., Bitner et al., 1990). However, nowadays this ‘high-touch, low-tech’ paradigm is expanded to include technology-based (enabling employees) and technology-supported (enabling customers) services (Bitner, Brown, & Meuter, 2000). The service as process perspective also has a strong relation with the customer relation as the provider-customer interaction offers opportunities for building a relationship, even in a single encounter (C. Grönroos, 2007).

For business models based on the service as process, the Value Proposition is more targeted at the interaction as perceived by the customer, for example, the service quality and the customer experience. This has also a strong relation with the Key Activities and Key Resources of the core organization, as these have to be targeted at delivering the Value Proposition. The Key Activities and Key Resources are also affected by the role of the customer as co-producer. This means taking into account the Activities and Resources of the Customer Segments and the opportunities and challenges that come with this kind of customer involvement. Moreover, because of the role of the service encounter and the customer relationship in the service as process perspective, the Channels and Relationship elements will also be important for business models based on this perspective.

According to Grönroos (2007) the basic service package (as discussed in the service as product above) is not the same as the service offering from the customer’s viewpoint. The service package considers primarily what the customer receives from a service in terms of outcome related features. However, it neglects how the customer receives the service in terms of process related features. The latter should be seen as an integral part of total service offering. Grönroos refers to the ‘augmented service offering’, which includes next to the outcome features (i.e. the service package consisting of core, enabling and enhancing services), three process related features: accessibility of the service, interactions with the service organization, and customer participation. This augmented service offering can the starting point for a business model pattern that provides an integrated approach to service-oriented business models with respect to the outcome and process features of a service offering.

In addition, the different aspects of service as a process in relation to the business model framework, customer experience, customer relationship and co-production, can also be used as service-oriented business model patterns. For example, a customer experience pattern can support in envisioning a business model for an online service where the value proposition is based on, or enhanced by, the experience, design-based activities and resources that enable developing and delivering this experience, and, if possible, a revenue model based on or levering the experience (e.g. using freenium). A well-known example on an organization having a strong customer experience pattern in its business models is Apple.

Moreover, the growing importance of the Internet has opened up new opportunities and requires rethinking traditional service logic based on the ‘high-touch, low-tech’ paradigm. In particular we see a growing rise of the technology-enabled self-service model at the expensive of the traditional, people-focussed full service model. However, there may also be a rise in new, technology-enabled full service model, as the SaaS example introduced earlier.

References

Bitner, M. J., Booms, B. H., & Tetreault, M. S. (1990). The Service Encounter: Diagnosing Favorable and Unfavorable Incidents. Journal of Marketing, 54(1), 71-84.
Bitner, M. J., Brown, S. W., & Meuter, M. L. (2000). Technology Infusion in Service Encounters. Journal of the Academy of Marketing Science, 28(1), 138-149.
Grönroos, C. (2006). Adopting a service logic for marketing. Marketing Theory, 6(3), 317-333.
Grönroos, C. (2007). Service Management and Marketing: Customer Management in Service Competition (3 ed.). Chichester, UK: Wiley.
Johnston, R., & Clark, G. (2004). Service Operations Management (2 ed.). Harlow, UK: Prentice Hall.
Shostack, G. L. (1985). Planning the Service Encounter. In J. A. Czepiel, M. R. Solomon & C. F. Surprenant (Eds.), The Service Encounter: Managing employee/customer interaction in service businesses (pp. 243-254). Lexington, MA: Lexington Books.
Teboul, J. (2006). Service is front-stage. New York: Palgrave Macmillan.

Service-oriented business models: Service as a non-product offering

2011-01-23T04:15:00.001+01:00

This post is part of a series that explores service-oriented business models based on different perspectives on service.

Early service definitions are influenced by a strong need to differentiate services from products as market offering. This resulted in defining services based upon the ‘IHIP’ characteristics for services: Intangibility, Heterogeneity (or non-standardisation), Inseparability (of production and consumption), and Perishability (or exclusion from inventory) (Zeithaml, Parasuraman, & Berry, 1985). However, nowadays this approach is heavily criticized because it provides a contra-view of service (e.g. as non-goods), overly emphasizing the view of the provider (Vargo & Lusch, 2004), and it does not capture the essence of services; in particular their process and interactive nature (Edvardsson, Gustafsson, & Roos, 2005). Moreover, goods and services should not be seen as two extremes, it is more a continuum comprising a range of hybrid offerings (Shostack, 1977).

Service as a specific kind of (non-product) market offering is important because it directly relates to the Value Proposition, the core of the business model. It will affect the other elements, such as the Revenue Streams, for example, it may come with a subscription fee. The IHIP characteristics can also be assessed in terms of their impact on the business model and its elements. In addition to the Value Proposition there will be other specific relations with elements, for example, intangibility will affect the Relationship and Channels and the inseparability will affect the Costs (e.g. it is harder to synchronize supply and demand). This has similarities with many traditional publications about strategy and management in service organizations addressing the impact of the IHIP characteristics on managerial and organizational elements (e.g., Bowen & Ford, 2002).

Service as a non-product offering would mean that there are two archetypical business models: product models and service (non-product) models. These should be seen as extremes on a continuum where different combinations of product and service are possible, maybe giving rise to other, hybrid business models based upon specific kinds of combinations, e.g. a ‘core product with added value services’ model. This also opens up opportunities for business innovation with respect to transforming products into services (‘servitization’) and the industrialization of services (‘productization’). A business model perspective is important here as these kind of radical business innovations affect the whole business model, not just the market offering, as for example the ‘Power by the Hour’ model Roll Royce uses for its aircraft engines and the ‘Care for Life’ model KONE uses for its elevators. In the IT industry we see servitization in the rise of ‘as-a-Service’ business models addressing the delivery of IT services over the Internet, such as ‘Software-as-aService’ (SaaS). The idea of SaaS is that that instead of buying the software as a product and deploying it yourself, the user can use the software on demand via the Internet, for example CRM software form Salesforce. With service as market offering, there is also the option of bundling services, i.e. offering and selling services as a package. A common example of a service bundle model can be seen in the telecommunication where a triple play offer includes telephone, TV and Internet.

References

Bowen, J., & Ford, R. C. (2002). Managing service organizations - Does having a “thing” make a difference? Journal of Management, 28(3), 447–469.
Edvardsson, B., Gustafsson, A., & Roos, I. (2005). Service portraits in service research: a critical review. International Journal of Service Industry Management, 16(1), 107-121.
Shostack, G. L. (1977). Breaking free from product marketing. Journal of Marketing, 41(2), 73-80.
Vargo, S. L., & Lusch, R. F. (2004). The Four Service Marketing Myths: Remnants of a Goods-Based, Manufacturing Model. Journal of Service Research, 6(4), 324-335.
Zeithaml, V. A., Parasuraman, A., & Berry, L. L. (1985). Problems and Strategies in Services Marketing. Journal of Marketing, 49(2), 33-46.

Different perspectives on service-oriented business models

2011-01-23T04:03:00.008+01:00

For some time I have been interested in business models for services and service innovation (see also here) and service-oriented business models (see also here and here). However, understanding the business models of services requires first understanding what services are and there is little agreement on that in literature. Based on an extensive exploration of service marketing and, to a lesser extent, service operations literature, I came to the following five perspectives on service:

Service as non-product offering
Service as process
Service as benefits
Service as capabilities
Service as value logic

In the following weeks I will be posting on an exploration of service-oriented business models based on these perspectives. For each perspective I will explore firstly how they affect the different building blocks of the The Business Model Canvas, as described in Business Model Generation by Osterwalder and Pigneur (2010). Secondly, I will try to identify different business model patterns related to that perspective.

An Extended Business Model Canvas for Co-Creation and Partnering

2010-12-06T00:19:00.005+01:00

The Business Model Canvas, as described in Business Model Generation by Osterwalder and Pigneur (2010), presents an easy and very general usable business model framework. I have been working on the idea that it may be required to sometimes innovate the Business Model Canvas itself to describe or discover new business models based on different kinds of value creation or capture logic.

Up till now I have mainly focussed on extending the Business Model Canvas, not on radically changing it. I tried to do it in such a way that these alternative canvasses do not change the core concepts or the language of Business Model Generation. I have been using the examples of partnering (see here) and co-creation (see here).

However, I was not very happy with the resulting templates as they miss the elegance of the original. So I started redesigning the alternative templates to come up with an extended template that is more closely aligned with the original, but still has the additional elements for focussing on co-creation and/or partnering. The result is the Extended Business Model Canvas for Co-Creation and Partnering as presented in the figure below.

Alternative business model canvasses: A Partnering Canvas example

2010-12-05T00:26:00.005+01:00

In an earlier post I discussed the need to sometimes innovate the business model canvas itself to describe or discover new business models and introduced a Co-Creation Business Model Canvas as example. In this post I will introduce another variety targeted at the Key Partners. Note that these alternatives do not change the core concepts or the language of Business Model Generation as introduced by Osterwalder and Pigneur (2010) nor do they replace the basic template. I see them as complementary; they can be used to highlight different value creation approaches when needed.

The Partnering Business Model Canvas is extended with the activities, resources and cost structure of the Key Partners. I adapted the template as shown in the figure below. In addition, there is also the option to also add partner relationships and channels if this is required. However, this may blow up the canvas too much, making it less easy to understand and communicate.

I see two reasons for the use of this alternative canvas. Firstly, in some business models the business network is very prominent and some of the key resources are owned by the partners or some of the key activities are performed by partners. In particular in business models where the core organization manages the customer relationships and coordinates the value creation but is not so much involved in the supply chain.

Secondly, the (out)sourcing decision is often a very important decision in the business model influencing creating and capturing value (e.g. IMB outsourced the PC operating system to Microsoft). By making the activities and resources of providers more explicit, it becomes more prominent what would be the specific activities and resources of providers that could or should (not) be outsourced.

Increasing interest in business model innovation

2010-12-04T03:34:00.002+01:00

According to a recent survey amongst HBR readers, business model reinvention/innovation is the most pressing concern. A HBR interview on business model innovation with Rita McGrath, Columbia Business School professor, is available as HBR IdeaCast.

One of the topics discussed is the drivers of the increasing interest in business model innovation. According to McGrath there are three major drivers: (1) the increasing speed of everything and the need to be looking for the next big thing (2) intra-industry competition (e.g. electronic gadgets as Christmas gift instead of handbags) requiring companies to rethink their offerings, and (3) the disruptions caused by new business models that create better and more complete customer experiences (instead of just selling products) and that have an increasing number of revenue streams.

McGrath goes into more detail by discussing three signs/stages one should be looking for to know that your business model is overdue: (1) early evidence that gets dismissed or denied (e.g. the gap between your product and the innovations in the market) (2) customers start voicing that alternatives become increasingly acceptable and (3) it hits the financial performance and KPIs.

McGrath mentions three reasons why evidence is often ignored or dismissed: (1) the faith (?) in the assumptions of the current model made by the people in power in the organization (they are not motivated to undermine their own power basis) (2) the evidence is often provided by people who are not central to the strategy process or are seen as not credible (3) either it is threatening or the current business model is so successful that there is a complacency reaction and they feel they do not need to do anything.

McGrath also discusses the relation between business model innovation and change and the investment models and markets.

Finally, McGrath addresses the business model definition, which should include two key dimensions: (1) what are you selling (i.e. the unit of business) and (2) what are the web of activities you are involved in that show up as key metrics that drive performance.

To what extent is the Business Model Canvas constraining? A Co-Creation Canvas example

2010-11-27T10:46:00.011+01:00

The Business Model Canvas, as described in Business Model Generation by Osterwalder and Pigneur (2010), presents an easy and very general usable business model framework. However, a question that rises is will (should) each business model fit into this template? Is it sometimes required to innovate the template itself to describe or discover new business models?

An example that I used for experimenting with an alternative template is (service) co-creation. Simply stated, the idea of co-creation is that the separation between a producer and consumer becomes less strict. It is not the producer any more who is the only active party while the consumer is passive. This means that the consumer brings in resources and performs activities to create value together with the producer and has associated costs. To reflect this in the business model canvas, I adapted the template as shown in the figure below.

In a more general sense, we now work with a multi-level business model framework. At the higher level the core value logic is reflected in the specification of the template (for example, the template for co-creation in the figure below). At a lower level the value logic is reflected in the description in the template (which has not been added to the template in the figure below).

Describing and analysing the public discourse on business models

2010-11-23T13:56:00.002+01:00

Ghaziani and Ventresca (2005) published some interesting research about the public discourse on ‘business models.’ It commenced in the early 1970s and rose to prominence halfway the 1990s, at the same time as the digital economy. Their research shows that in the early discourse was framed around computer/systems modelling while the later discourse is mostly framed around value creation. In addition, the term business model is also often framed as a tacit conception where its meaning is taken-for-granted.

Ghaziani and Ventresca (2005) conclude that the business model discourse is mostly framed around value creation. Even when the meaning is framed differently these frames still embody the same idea, namely, ‘the question of how to create value in the face of a changing business environment.’ ‘The different frames emphasize different aspects of the same problem. Generating revenues and managing relationships, although ostensibly different, both have something to say about the challenge of creating value in the unsettled Digital Economy.’

Ghaziani and Ventresca also note that while different communities are sensitive to a global meaning of the term business model, they also use it in ways that suit their local needs, for example in marketing its meaning is also often framed around relationship management.

See also previous posts on earlier/related concepts, Drucker's Theory of Business and Humphrey's TAM.

Ghaziani, A., & Ventresca, M. (2005). Keywords and cultural change: Frame analysis of Business Model public talk, 1975–2000. Sociological Forum, 20(4), 523-559.

Testing Business Model Hypotheses: The BM/H Matrix

2010-11-12T11:04:00.012+01:00

As Osterwalder and Blank argue, we have to understand that a business model is often just a set of hypotheses and we have to consider alternative business models. However, how to deal with multiple hypotheses and models? This is where a Business Model/Hypotheses Matrix (see figure below) comes in handy as addition to the inspiring and colourful Business Model Canvasses.

The BM/H Matrix is relatively straight forward and provides a good overview of the relations between the business models and hypotheses. One of the main insights is to make explicit whether the same hypothesis comes back in multiple business models, something that is not that easy with just a set of canvasses.

The BM/H Matrix allows also for more advanced use, most importantly help prioritizing hypotheses for testing. It supports understanding what the most critical hypotheses are in terms of the number of business models that include them. There can even be more sophisticated ways of prioritization possible if we weigh the business models (e.g. the profitability of each model).

See also an earlier post on testing business model hypotheses.

IDEO on Business Model Visualisation

2010-11-09T00:42:00.002+01:00

IDEO first discuses the purpose of business model visualisation: Communicate it, consider the whole and be creative. They then introduce their visualisation approach. It starts with the value proposition and the markets segments. After that the channels and pricing models are addressed. These four elements constitute the consumer facing business model. Then the competitive strategy is addressed. This is followed by discussing the capabilities and partners. These two elements give the next element, costs. All these elements together constitute the static business model. The pricing model and the costs determine the profitability. Then the dynamics are added by addressing the growth strategy.

HackFwd: Business Models and How Technology is Changing Them from IDEO on Vimeo.

The business model: An organization or network perspective

2010-11-02T02:44:00.003+01:00

Whether the business model applies to an organization and/or an organizational network is often left open. I had a look at some definitions to get some clarity about this for myself. (Note that the definitions do not always cover the full conceptualization of the business model concept by the authors.)

Some definitions refer explicitly to a specific organization while others refer to the business network. Examples referring to the network level are the definitions of Timmers (1998), Mahadevan (2000), Gordijn and Akkermans (2001), Weill and Vitale ((2001) and Tapscott (2001). Examples of referring to the organizational level are Rappa (2000), Afuah and Tucci (2001) and Osterwalder, Pigneur and Tucci (2005). Rarely a definitions refers to both explicitly (see, for an example of an exception, the definition of Shafer, Smith, & Linder, 2005) and some leave out in the definition itself whether they refer to organizations or networks (see, for example, the definitions of Chesbrough & Rosenbloom, 2002; Morris, Schindehutte, & Allen, 2005).

While the explicit inclusion of (and the implicit focus on) organization and network in the business model definitions differ, most of them do include both levels in their conceptualization based on their further discussion, operationalization and application of the business model concept (see also some of the related business frameworks and elements of these authors). A focus on a specific organization does seem to make more sense when the emphasis in the definition is on sustainable revenues, profitability and competitive advantage, as discussed above.

Those that refer to organizations (or firms) in their definition are not explicit about the organizational level, whether they refer to the corporate or business unit level. Most seem to imply the business unit level, for example, Chesbrough and Rosenbloom (2002) refer to the relation with business unit strategy. In addition, it is left open whetter a business unit has one business model or can have multiple business models sequentially and/or simultaneously.

In related work on value innovation, Kim and Mauborgne (2005) take the strategic move as unit of analysis instead of the organization, which they define as ‘the set of managerial actions and decisions involved in making a major market-creating business offering.’ This unit of analysis may be a fruitful approach for business models. In addition, there are some definitions that have a different unit of analysis than the organization or network, for example, a specific service (Bouwman, De Vos, & Haaker, 2008).

References

Afuah, A., & Tucci, C. L. (2001). Internet business models and strategies: Text and cases. New York, NY: McGraw-Hill/Irwin.
Bouwman, H., De Vos, H., & Haaker, T. (2008). Mobile service innovation and business models. Heidelberg, Germany: Springer.
Chesbrough, H., & Rosenbloom, R. S. (2002). The role of the business model in capturing value from innovation: Evidence from Xerox Corporation's technology spin-off companies. Industrial and Corporate Change, 11(3), 529-555.
Gordijn, J., & Akkermans, H. (2001). Designing and evaluating e-business models. IEEE Intelligent Systems, 16(4), 11-17.
Kim, W. C., & Mauborgne, R. (2005). Blue Ocean Strategy: How to create uncontested market space and make the competition irrelevant. Boston, MA: Harvard Business School Publishing.
Mahadevan, B. (2000). Business models for Internet-based e-commerce: An anatomy. California Management Review, 42(4), 55-69.
Morris, M., Schindehutte, M., & Allen, J. (2005). The entrepreneur's business model: Toward a unified perspective. Journal of Business Research, 58(6), 726-735.
Osterwalder, A., Pigneur, Y., & Tucci, C. L. (2005). Clarifying business models: Origins, present, and future of the concept. Communications of AIS, 16(1).
Rappa, M. (2000). Managing the digital enterprise: Business models on the Web. Retrieved 2000, February 18, from http://ecommerce.ncsu.edu/business_models.html
Shafer, S. M., Smith, H. J., & Linder, J. C. (2005). The power of business models. Business Horizons, 48(3), 199-207.
Tapscott, D. (2001). Rethinking strategy in a networked world: Or why Michael Porter is wrong about the Internet. Strategy + Business, 24, 1-8.
Timmers, P. (1998). Business models for electronic markets. Electronic Markets, 8(2), 3-8.
Weill, P., & Vitale, M. R. (2001). Place to space: Migrating to eBusiness models. Boston, MA: Harvard Business School Press.

Do we need Twitter to tweet?

2010-11-02T00:06:00.002+01:00

As Twitter is moving towards ‘new’ Twitter and they start feeling the pressure to monetize, for example via sponsored Tweets, the platform may make the world an even better place, or not? Will all these extras and commercial messages decrease the user experience and move it away from where it is good at and why people started using it in the first place?

This makes me wonder, do we need Twitter to tweet? Are there other options, for example in the peer-to-peer sense, to make tweeting a general functionality available for everyone and not being controlled by someone? People can use their own clients or portals (maybe with or without advertising), but the tweeting itself would (could/should) be a basic service implemented via some communication protocol. (Okay, here I move beyond my expertise, but I hope you get the idea ;-)

Slides: Business Models and the Business Model Canvas

2010-10-30T06:41:00.007+02:00

I uploaded a presentation containing an introduction into business models in general and the Business Model Canvas in particular. It is not the most aesthetic one or most authoritative one on BM Generation and the BM Canvas (see for that the sides of Osterwalder). However, it will provide people who are unfamiliar with the Business model topic outside of the BM Generation with a short and broader introduction.

Fieltnotes presentation: Business Models and the Business Model Canvas

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