Monday, December 06, 2010

An Extended Business Model Canvas for Co-Creation and Partnering

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.

Sunday, December 05, 2010

Alternative business model canvasses: A Partnering Canvas example

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.

Saturday, December 04, 2010

Increasing interest in business model innovation

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.

Saturday, November 27, 2010

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

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).

Tuesday, November 23, 2010

Describing and analysing the public discourse on business models

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.

Friday, November 12, 2010

Testing Business Model Hypotheses: The BM/H Matrix

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.

Tuesday, November 09, 2010

IDEO on Business Model Visualisation

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.

Tuesday, November 02, 2010

The business model: An organization or network perspective

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).


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
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?

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 ;-)

Saturday, October 30, 2010

Slides: Business Models and the Business Model Canvas

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.

Thursday, October 28, 2010

Testing Business Model Hypotheses: Going beyond Customer Development

In an interesting post of Steve Blank, where he relates Customer Development to the Business Model Canvas, he states that ‘Customer Development is the standard for testing business model hypotheses.’ While I understand the central role of being customer-driven, as a business model’s primary focus is on creating customer value, this seems to address only one side of the coin.

While the customer-facing part of the business model is of extreme importance, the other parts should not be neglected. It is the whole system that enables the creation of customer value and creates an incentive to do so. This is also why business models are multi-disciplinary bringing together marketing, operations, finance, etc. So in addition to testing the customer hypotheses, we also need to test, for example, the operational hypotheses related to can we produce the kind of offering required at the expected quality and for the targeted costs?

In addition, in my view a business model has the power of being an integrative conceptualization of value where value creation and capture are linked and where the customer and provider perspectives are merged. This means that the most important hypotheses are the once that say something about the relations in the business model. For example, how can the Value Proposition be turned into a Revenue Stream? How can the Key Activities, Key Resources and Key Partners deliver a compelling and unique VP? How can we make sure that we it is all worthwhile (Revenue Streams >> Cost Structure)?

Saturday, October 23, 2010

Start-ups and business model discovery: A talk by Mike Maples

In a talk about ‘thunder lizards’ and ‘pivots,’ Mike Maples discusses the topic of business model discovery. In his view a start-up exists for one reason only: to find a business model that turns its innovation into economic value.

Mike Maples pictures a business model as flows between the company and the customer (see example). Red flows go towards the customer and represents what costs the company money. Green flows come back to the company and represent what the company gets paid for. The more the green is larger than the red, the better the business model. While this is straight forward, most start-ups are not able to draw their business model.

Business models matter according to Mike Maples because there are maybe 20 to 30 flows and every flow is a strategic hypothesis that the company has to validate. If these hypotheses do not hold then the company has to ‘pivot’ and make a discontinuous change to the business model. Therefore, start-ups need to be dynamic and in a discovery mode.

The ultimate goal of business model discovery is to get product/market fit, meaning that the product can be offered to the market in a scalable and profitable way. Alter a start-up has discovered its business model it transitions to a real company. So a start-up is not a small version of the large company, it exists to discover the business model with the highest potential. Mike Maples discussed three forms of pivots and an example for each: pricing pivot (ngmoco), product pivot (Chegg), and an entire company pivot (Odeo/Twitter).

The start-up needs the tactical ability to iterate and the strategic ability to pivot. The dangerous is that start-ups get stuck in iteration after iteration and do not take aggressive, creative pivots. However, taking pivots should not be underestimated, it can be hard and painful, requiring to throw away what has cost a lot of effort and sacrifices. This means letting go of some things that are precious, like a product, a group of customers, a website, revenues, a strategy, etc.

These ideas have a strong relation with innovation theory. However, where innovation theory often discusses the inability of established companies to change radically, Mike Maples stresses that this problem is as relevant for a start-up who run the risk of iterating instead of pivoting. In addition, it shows that next to tools and techniques for product and process design and innovation, there is a strong need to support business model innovation, both for the content and for the process.

See also an earlier post on Business model shift.

Tuesday, October 19, 2010

New book: Collaborative Consumption

What's Mine Is Yours: The Rise of Collaborative Consumption addresses the key forces driving the next evolution in our consumer economy and the opportunities it presents. The book looks into the future highlighting the next generation of collaborative systems from Zipcar (car sharing) to Zopa (social lending) to Swap (swap trading) that are reinventing out dated modes of business and transforming not just what we consume but how we consume.

See here for more information.

Thursday, October 07, 2010

The Razors-and-Blades Myth(s) - The story of Gillette

The razors-and-blades model, which name and origin is contributed to Gillette, is one of the most common examples to introduce the idea of a business model. It is also often cited as one of the archetypical business models next to others like free or long-tail.

In a working paper, Randal Picker discusses the origin of Gillette's model and argues that there are some peculiar aspects that are hard to explain which are often left out in the popular story about the model.

Wednesday, October 06, 2010

Charles Baden-Fuller on business models

Professor Baden-Fuller explains that the business model is about creating and capturing value and that both can be relatively simple or more complicated. He than differentiates between the business model today and in the future. For a robust future business model it needs to offer sustainable competitive advantage (value creation side) and there should be any chance that it will grow and become big (the value capture side, the scaling question).

Professor Baden-Fuller also discusses the talent of making the explanation of a business model come alive, like an artist making a decent picture. This helps businesses getting a grip on their current and future situation, and it gives them a story to tell to their stakeholders. Finally, he discusses the meaning of the term 'model' in terms of a working model telling the essence and an iconic model (like on the catwalk) people can refer to. He also links it to the code of corporate governance.

Professor Baden-Fuller is Professor of Strategy and leader of the Strategy Group at Cass. He is internationally known for his strategy research. Most famous for his work on the rejuvenation of mature firms. He was one of the co-editors of a special issue on business models in Long Range Planning (see also here or here).

Thursday, September 30, 2010

Business Model Canvas vs. Four-Box Framework

It is surprising that Johnson in developing and presenting the four-box business model framework does not make the connection with earlier business model frameworks, in particular the business model canvas with its four pillars and nine building blocks, which was already widely published in Osterwalder’s earlier work.

Here I will focus on comparing the elements of the two models without making too much of a judgement. Next to these differences in elements, the business model canvas makes the use of a graphical template which is not the case for the four-box framework. For a more extensive review of Johnson's book 'Seizing the White Space' I refer to Anders Sundelin's review on his Business Model Database blog, which also includes an interesting comment of Johnson.

A preliminary comparison of the elements of the two models shows that they overlap substantially. I have identified five main differences so far:

  1. The most prominent difference seems to be that that the four-box framework does not have a separate customer box as the canvas has a customer pillar, but includes this to some extent in the value proposition box, where customer segments are identified based on the job-to-be-done and the offering also include the access, which relates to the channels.
  2. The value proposition box also includes a financial aspect in terms of the payment scheme, which is in the revenue stream building block of the canvas.
  3. The profit formula box is more extensive than the financial pillar of the canvas including two key metrics: target unit margin and resource velocity. Whether or not this should be positioned in the business model or in the financial analysis of a more elaborated and detailed business plan following the business model, will depend upon the purpose and situation when using the models.
  4. The same can be said about the business rules, behavioural norms and success metrics, which Johnson discusses as part of the processes box and also as connection to the day-to-day operations.
  5. While the business model canvas has key partnerships as one of its nine building blocks, the four-box framework puts it under key resources and does not distinguish it as an explicit business model element.

Wednesday, September 29, 2010

Understanding and defining the value proposition

One of the most important elements of the business model is the value proposition. But while we intuitively all know what it means, writing it down for a concrete case can be a challenging and confusing exercise. So I decided to do some research to get some advice and ideas on this. Surprisingly, while value propositions are widely discussed, I found it hard to find literature discussing more in depth what a value proposition actually is. Most interestingly, the most prominent hit is Kaplan and Norton from the Balanced Scorecard.

According to Kaplan and Norton (2000) the customer value proposition describes ‘the unique mix of product and service attributes, customer relations, and corporate image that a company offers.’ It defines how the organization can differentiate itself from competitors to establish and develop relationships with its target customers. Kaplan and Norton argue that a value proposition is critical for linking the internal organization to improved customer outcomes. They differentiate between three types of differentiators based on the value disciplines of Treacy and Wiersema(1993): operational excellence, customer intimacy, and product leadership.

Anderson, Narus and Van Rossum (2006) state that when value propositions are properly constructed, ‘they force companies to rigorously focus on what their offerings are really worth to their customers’. This will also enable companies to make smarter choices about where to allocate their scarce resources in developing new offerings. Anderson et al. discuss a classification of three types to sort the value elements of a company’s offering: points of parity, points of difference, and points of contention. They have identified the three ways in which companies use the term ‘value proposition’: all benefits, favourable points of difference, and resonating focus. In the first approach companies simply list all the benefits the target customers receive from the company’s offering. In the second approach the company explicitly recognize that the customer has an alternative and they list all favourable points of difference that the company’s offering has relative to the next best alternative. In the third approach the company shows a full understanding of the critical issues of their customers who are often managers with ever-increasing levels of responsibility and pressured for time. The company makes their offering superior on a few elements that matter most to target customers and convey this in a communicative and evidence-based way.

Anderson, J. C., Narus, J. C., & Van Rossum, W. (2006). Customer value proposition in business markets. Harvard Business Review, 84(3), 91-99.
Kaplan, R. S., & Norton, D. P. (2000). Having Trouble with Your Strategy? Then Map It. Harvard Business Review, 78(5), 167-176.
Treacy, M. E., & Wiersema, F. D. (1993). Customer Intimacy and Other Value Disciplines. Harvard Business Review, 71(1).

Saturday, September 11, 2010

Business model shift or drift?

It has been recognized that business models need to be adaptive and may change incrementally or radically, in particular in the early stages of a new venture, and need to be transformed when faced with disruptive innovations or changes in the environment.

However, how would one differentiate between the need to change the business model and the fact that often events take their own way and start drifting? And how to make a choice between sticking to the initial model or committing yourself to the new emerging model?

For example, in my work with a start-up company developing a potentially very innovative product, they need to do consulting to keep a cash flow. This consultancy is very successful but also time consuming, keeping then away from making major progress with their product. Should they maybe become a consultancy company?

In this area we can probably learn from strategic management, so a quick check of Wikipedia brings us to ‘strategic change’. Relevant concepts discussed there are ‘strategic drift’, a gradual change that occurs so subtly that it is not noticed until it is too late (Handy, 1989) and ‘strategic inflection point,’ a time in the life of a business when its fundamentals are about to change (Grove, 1999).

However, while this literature and the cases may give us some insight on how business model transformation for more established companies, it seems less suited for the more entrepreneurial start-up companies who operate much more in a greenfield scenario and have to deal with the fact that there is no proven, established business model to start with.

Here are some initial thought that may be considered in making a choice for a business model or business model change in a start-up scenario when it is it is hard to predict which business model is better in terms of profit or success and when you have to decide whether you should stick to your initial business model or commit yourself to a new business model.

First think about consistency (and synergy). Are the elements of the business model consistent with each other. Do they fit together and if possible reinforce each other so that they create synergies. This follows the age-old credo that the whole is more than the parts. [updated 15 October 2010]

Second think about scalability: Choose the one that has the biggest potential in terms of what can happen if it really takes off. In the previous example, it is the product model that can turn the start-up into a large company much faster than the consultancy model.

Third think about flexibility. Choose the business model that still keeps the most options open and is most easy to adapt until you know more about your customers, see also Osterwalder’s post on customer development.

Fourth think about innovativity. Choose the business model that differs most from existing business models, in particular if you need to differentiate yourself or what you want to achieve or offer is very different from the existing situation.

Fifth think about simplicity. Choose the business model that is the most straight forward. Complexity will follow automatically when you start going into the implementation details.

Sixth think about repeatability. Will it be possible to turn the business model into a formula that can be repeated. This makes it possible to grow outside of the current product/market combination. It may even be possible to enter completely unrelated industries where the same business model can be applied. [updated 15 October 2010]

Tuesday, August 31, 2010

Innovating Your Business Model

Mark Johnson, Innosight chairman, on how you can seize the white space. See also the book "Seizing the White Space: Business Model Innovation for Growth and Renewal," more information can be found here.

Friday, August 27, 2010

Business models: Earlier/related concepts

While the term business model gained prominance in relationship with e-business and the Internet from the 1990s onwards, it was not exclusively used in this context. Moreover, related concepts have appeared for longer in management literature. Some examples by prominent management scholars are ‘theory of business’ (Drucker 1994), ‘business idea’ (Normann 1977 cited in Hedman and Kalling 2003) and ‘business concept’ (Hamel 2000).

Magretta (2002) refers to Peter Drucker’s ‘age-old questions’ when discussing what good business models are: Who is the customer? And what does the customer value? In his 1994 HBR article, Peter Drucker (1994) refers to the notion of a ‘theory of the business,’ which is very similar to the idea of organizations having a business model.

Drucker's theory of business refers the assumptions on which an organization has been built and is being run. These assumptions shape any organization's behaviour, dictate its decisions about what to do and what not to do, and define what the organization considers meaningful results. Drucker also warns that organizations run the risk that these assumptions no longer fit reality and that therefore their theory of the business no longer works.

See also earlier posts on Drucker's Theory of Business and Humphrey's TAM.

Drucker, P.F. 1994. "The Theory of the Business," Harvard Business Review (72:5), pp 95-104.
Hamel, G. 2000. Leading the Revolution: How to Thrive in Turbulent Times by Making Innovation a Way of Life. Boston, MA: Harvard Business School Press.
Hedman, J., and Kalling, T. 2003. "The Business Model Concept: Theoretical Underpinnings and Empirical Illustrations," European Journal of Information Systems (12:1), pp 49-59.
Magretta, J. 2002. "Why Business Models Matter," Harvard Business Review (80:5), pp 3-8.
Normann, R. 1977. Management for Growth. Chichester: John Wiley & Sons.

Tuesday, August 03, 2010

Business models 101

Watch Alexander Osterwalder, the creator of the Business model Canvas, explain the basics of business models, the three steps of why, what and how, in this video.

Saturday, July 31, 2010

Sourcing business and software services

With the advancement of Service-Oriented Architecture in the technical and business domain, the management & engineering of services requires a thorough and systematic understanding of the service lifecycle for both business and software services.

However, while service-oriented approaches acknowledge the importance of the service ecosystem, service lifecycle models are typically internally focused, paying limited attention to processes related to offering services to or using services from other actors.

In this paper, we address this need by discussing the relations between a comprehensive service lifecycle approach for service management & engineering and the sourcing & purchasing of services. In particular we pay attention to:

  • the similarities and differences between sourcing business and software services,
  • the alignment between service management & engineering and sourcing & purchasing,
  • the role of sourcing in the transformation of an organization towards a service-oriented paradigm,
  • the role of architectural approaches to sourcing in this transformation,
  • and the sourcing of specific services at different levels of granularity.

See here for more information.

Tuesday, June 29, 2010

On the ‘value’ in business model definitions

As ‘value’ is one of the most common term in business model definitions, the obvious question is what is meant with value? Surprisingly, it is almost never further elaborated or discussed in business model books or articles. In general the term ‘value’ is used to refer to ‘the quality (positive or negative) that renders something desirable or valuable’ (Wordnet 3.0) or ‘something (as a principle or quality) intrinsically valuable or desirable’ (Merriam-Webster).

It seems that when business model definitions refer to value, they mostly mean customer value (such as, Afuah, 2004; Dubosson-Torbay, Osterwalder, & Pigneur, 2002; Tapscott, 2001), while some refer to value for both the customer and the company (e.g., Bouwman, De Vos, & Haaker, 2008; Johnson, 2010). Mostly the value for the company (and other providers in the case of an inter-organizational network) seems to be implicit in the definition by referring to capturing (customer) value. This raises the question what is meant with customer value.

Weinstein and Johnson (1999) state that the concept of customer value is as old as ancient trade practices and refer to the early barter transactions where buyers would carefully evaluate the offerings of sellers. Buyers would only agree to close a deal when the benefits (products received) compared to the cost (items traded) were perceived as being a fair (or better) value. Hence, customer value is ‘the satisfaction of customer requirements at the least total cost of acquisition, ownership, and use’ (De Rose, 1994 cited in ; Weinstein & Johnson, 1999)

Woodruff (1997) defines customer value as ‘a customer's perceived preference for and evaluation of those product attributes, attribute performances, and consequences arising from use that facilitate (or block) achieving the customer's goals and purposes in use situations.’ Woodruff proposes a ‘customer value hierarchy,’ which is a means-end type of model where the desired customer value moves from desired product attributes and attribute performances, via desired consequences in use situations, to customers’ goals and purposes. Woodruff also notes that the use situation plays a critical role in customer evaluation as well as in desires. This means that customer value is highly subjective and contextualized.

Customer value is also described as value-in-use (or use value), which is value created with and determined by the user during the consumption process (Bowman & Ambrosini, 2000; Grönroos, 2006; Lusch & Vargo, 2006). This is differentiated from value-in-exchange (or exchange value), which is value embedded in the product itself (i.e. added during the production process) and determined at the point of exchange (Bowman & Ambrosini, 2000; Grönroos, 2006; Lusch & Vargo, 2006). This brings us back to the definition of business models, as creating value relates to value-in-use and capturing value relates to value-in-exchange (Priem, 2007).

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Bouwman, H., De Vos, H., & Haaker, T. (2008). Mobile service innovation and business models. Heidelberg, Germany: Springer.
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Johnson, M. W. (2010). Seizing the white space: Business model innovation for growth and renewal. Boston, MA: Harvard Business Press.
Lusch, R. F., & Vargo, S. L. (2006). Service-dominant logic: Reactions, reflections and refinements. Marketing Theory, 6(3), 281-288.
Priem, R. L. (2007). A consumer perspective on value creation. Academy of Management Review, 32(1), 219-235.
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Woodruff, R. (1997). Customer value: The next source for competitive advantage. Journal of the Academy of Marketing Science, 25(2), 139-153.

Wednesday, March 24, 2010

Understanding Shared Services : An exploration of the IS literature

In a competitive environment, companies continuously innovate to offer superior services at lower costs. ‘Shared services’ have been extensively adopted in practice as one means for improving organisational performance.

Shared services is considered most appropriate for support functions, and is widely adopted in Human Resource Management, Finance and Accounting; more recently being employed across the Information Systems function. IS applications and infrastructure are an important enabler and driver of shared services in all functional areas. As computer based corporate information systems have become de facto and the internet pervasive and increasingly the backbone of administrative systems, the technical impediments to sharing have come down dramatically.

As this trend continues, CIOs and IT professionals will need a deeper understanding of the shared services phenomenon and its implications. The advent of shared services has consequential implications for the IS academic discipline. Yet, archival analysis of IS the academic literature reveals that shared services, though mentioned in more than 100 articles, has received little in depth attention.

This paper is the first attempt to investigate and report on the current status of shared services in the IS literature. The paper presents detailed review of literature from main IS journals and conferences, findings evidencing a lack of focus and definitions and objectives lacking conceptual rigour. The paper concludes with a tentative operational definition, a list of perceived main objectives of shared services, and an agenda for related future research.

See here for more information.

Sunday, February 21, 2010

Business models for integrated solutions

A while ago there was an interesting article titled 'Charting a Path Toward Integrated Solutions' (Davies, Brady & Hobday, 2006). An integrated solution provides 'innovative combinations of technology, products and services as high-value unified responses to their business customers' needs.'

While the article gives a good overview of the required organizational capabilities and structures, and addresses the path to maturity, I had the impression that it may add value to view the paper from a business model perspective. Therefore, I used the Business model Canvas of Osterwalder (via the BMDesigner tool) to create a visual business model presentation (see below).