Modelling e-Business Models CAISE’2001 Interlaken Yves Pigneur HEC Lausanne [email protected]...

Modelling e-Business ModelsModelling e-Business Models

CAISE’2001Interlaken

Yves PigneurHEC Lausanne

[email protected](+41 21) 692.3416

© 2001 Pigneur, HEC Lausanne e-business 2

Université de Lausanne

SYLLABUS | AGENDA | FIN

Agenda

• Strategy pages

– Value creation– differenciation

• Business model components > Model 8

– Product innovation10

• Value proposition, target and aptitudes

– Customer relationship 22• Feel, serve and protect customer

– Infrastructure & logistics 48• Logistics, process and alliances

– Finance & revenue67

• Measure > Measure 77

• Simulation– scenarios for uncertainty > Scenario 91




General context

technologytechnology

Electronic commerceElectronic commerce

StrategyStrategy

Business modelsBusiness models

IndustryIndustry

IT strategyIT strategy

allows

Levier to change

Allows

impact

impact

IntermediaryIntermediary

CommunityCommunity

standard

infrastructure

integration

Brand

Promotion

Customer service

Brand

Promotion

Customer service

Costs

Diffusion time

Learning

Costs

Diffusion time

Learning

New products

New channels

New businesses

New products

New channels

New businesses

... improve

reduce

create

CustomerRelationship


ProductInnovation

ProductInnovation

logisticsinfrastructures

logisticsinfrastructures

FinanceRevenue

FinanceRevenue

[Bloch, 1999]




Models and ontologies

• The Enterprise Ontology > html– Collection of business terms and definitions

(activities, organization, strategy, marketing, time …)

• Toronto Virtual Enterprise Ontology (TOVE)

• Ontology Interchange Language (OIL)– Primitives for modelling (frame & logic) and automatic reasoning (consistency)

Still to conceive for (e-) business models

XML

is co

min

g




Buyer

seller

info

rmat

ion

Identifyproduct

Promoteproduct

influ

ence

Negotiate

Negotiate

paym

ent

BUY

SELL

good

s

Consume

Serve

info

rmat

ion

Query

Answer

Findsource

Findcustomer

info

rmat

ion

Transaction phases

The information systems have to support:

catalog payment logistics After-saleorder




«How the Internet influences industry structure»[Porter, 2001]




Strategic positioning

1. Correct goal2. Attractive value proposition 3. Differentiated value chain4. Priorities5. Integration (coordination)6. Continuity (of direction)

STRATEGY « ABSENCE OF STRATEGY »

Profit Revenue, market sharecustomer acquisition

Value & direct revenue (higher price) Indirect revenue (advertising)

Priority and focus All opportunities

Differentiated value chain Imitation and reproduction (cloning)

Control of internal resources Partnerships

Differentiation Price wars

[Porter, 2001]

diffe

rent

iatio

n




Innovationproduit

Gestion desrelations-clients

Gestion desinfrastructures

Aspectsfinanciers

Business model

Financialaspects

Financialaspects

HOW MUCH?What is the revenue model? the profit model? designed to last?

WHO?How to manage relationships with customers, satisfy them and generate revenues to be on the winning side?



WHAT?What is the scope of products and services, its value (its benefits) for the customer, the capabilties to deliver them in an innovating way?

Productinnovation

Productinnovation

HOW?How to organize the infrastructure, its resources, the knowledge and the structure of resulting costs, manage the value chain and processes, build alliances to achieve performance?

Infrastructurelogistics





Elements of a business model

CUSTOMER

personalization

distribution

community

PRODUCT

Target

Value proposition

Capabilties

INFRASTRUCTURE

Resources

Activities/processes

Alliances/networks

value for resources for

Revenue Value added + Costs Revenue Value added + Costs

Profit

On-line sales

Electronic markets

Info-mediation

Value chain

Decision processes

Markets

get a feel

serve

protect

CRM

channels

dis-intermediation

Price




Value proposition

To characterize product innovation, the value proposition

• defines,

• the actual product or service, and

• the value or benefits perceived by customers of the products and services offered by the firm.

• In the case of e-business this offer naturally includes a strong information system component, principally the Internet.

VALUE PROPOSITION CAPABILITESTARGET

Targeted customers Competencies, aptitudes

ProductInnovation

ProductInnovation




Value proposition - examples

• Facilitate research– and reduce transaction costs

• Speed up distribution– particularly digital goods (written, music, image, software)

• Improve the quality of service– by personalization, for example

• Improve facility and experience of buying– capitalizing on game aspects

• Improve the transparency of information– by opening up the information system

• Develop a sense of community– and improve the diffusion of knowledge,

contacts and trust

• Bind complementary products

ticketless

Yield Management

Barcelone Loterie Romande

reservation

easyCar

Illustrations




Classification of business models (I)

• Brokerage Brokerage– Buy/sell fulfillment, market exchange, business trading community, buyer aggregator,

distributor, virtual mall, metamediary, auction broker, reverse auction, classified, search agent

• Advertising Advertising– Generalized portal, personnalized portal, specialized portal, attention/incentive marketing,

free model, bargain discounter

• Infomediary Infomediary– Recommender system, registration model

• Merchant Merchant– Virtual merchant, catalog merchant, surf-and-turf, bit vendor

• Manufacturer Manufacturer

• Affiliate Affiliate

• Community Community– voluntary contributor model, knowledge networks

• Subscription Subscription

• Utility Utility http://ecommerce.ncsu.edu/business_models.html




Classification of business models (II)F

un

ctio

nal

in

teg

rati

on

Degree of innovationlower higher

Sin

gle

fun

ctio

ns

Inte

gra

ted

fun

ctio

n

e-shope-shop

e-procuremente-procurement

e-malle-mall

e-auctione-auction

Info brokerageInfo brokerage

Trust serviceTrust service

value chain service providervalue chain service provider

Virtual communityVirtual community

Collaboration platformCollaboration platform

Third party marketplaceThird party marketplace

Value chain integratorValue chain integrator

Le Shop

Saci

Buy.com

Ricardo

Swisskey

Reuters

FedExp Intership

iVillage

AssureNet

Gofish

eMerge

Business-to-business

[Timmers, 1998]




Classification of business models (III)

Integration

AGORAeBay, PriceLine …

AGORAeBay, PriceLine …

ALLIANCEAOL, iVillage …

ALLIANCEAOL, iVillage …

AGGREGATIONAmazon, Chemdex …

AGGREGATIONAmazon, Chemdex …

VALUE CHAINDell, Cisco …

VALUE CHAINDell, Cisco …

low high

Con

trol

hier

arch

y

auto

-org

aniz

atio

n Dynamic pricing creativity

Process integrationSelection and convenience

[apscott, 2000]

Distributive networkFedExp, UPS …

Distributive networkFedExp, UPS …




Classification of business models (IIIb)[apscott, 2000]

www2.actnet.com/pdf/2410671.pdf




Classification of business models (end)

Influence of sellerlow high

Influ

ence

of

buye

r

low

high

Electronicbarter

Electronicbarter

SwapBarterAlaxis

Onlinesale

Onlinesale

Products:Amazon LeShop Brun Passot

Services:AutoWebE*tradeeasyJet

aggregation:

EMB

Onlinebuy

Onlinebuy

Portals:AOL, Yahoo Zdnet

Group buying:Cendant MercataAccompany

Pressure of seller

Pressure of buyer

competition

cooperation

Electronicmarket

Electronicmarket

search:Acses

auction:eBay PriceLine Ricardo

plate-form:TPN Register, linkom goFish

POWER




Multi-role models - syndication

ROLE SOURCES SYNDICATORS DISTRIBUTORS CUSTOMER

Missions Create the content

Assemble the content

Manage the relationship between the sources and the distributors

Deliver the content to the consumers

Explore the content

Create revenues by subscription, payments or advertising

Internet Inktomi

Quote.com

iSyndicate

Linkshare (e-comm)

Screaming Media

Women.com

Yahoo!

E*Trade

[Werbach, 2000]product infrastructure customer

iSYNDICATE1’200 editors

270’000 sites web

• Delivery of an information that will be reused and integrated in an other one,

• for a payment generally in the form of asubscription

• with a complicated content management

> ICE

Illustrations




Multi-function model & ASP

• Complete coverage of process or a value system• Deep knowledge of the profession• High added value• High differentiation

• ASP (application service provider)

Illustrations

Target

Value proposition

Aptitudes

professional

multiple

difficult




• Voice• Voice • Internet• Internet • WAP• WAP

Auctions Portals

Multi-technology model – wireless Illustrations




Capabilities

VALUE PROPOSITION

Capabilities

TARGET

Customers

Competencies

[Bagchi, 2000]




Capabilities Network[IBM, 1999]

Forumwith authors

attractpeople

• A capability depends on another• When its performance depends on the another’s




• Interactive order by the customer– selection of the model, personalization, receiving of price, receiving of a

confirmation

• delivery of the model– without having it in stock, by assembling the order, on time with a minimum cost

In-house corecompetencies

Rigidprocesses

Products/services

channels Customers

Manufacture and sale products

Customers’needs

Integratedchannels

Products/services

Flexibleprocesses

Outsourcing/In-house

competencies

Feel and serve customers

Feel and serve customer

Build

to o

rder

[Kalakota, 2001]

Customerrelationship

Customerrelationship




CRM – Customer Relationship Management

MARKETING

SALES

SERVICE

Customer care

– Call center, messaging, web …

– Self-service

– Pro-active, quality of service, …

– Sales force (SFA - Sales Force Automation)

• Prevision, contacts, estimate, proposition, follow up …

– Convert a visitor to a customer and keep the customer

– initiative, campaign

– from telemarketing to messaging

– one-to-one marketing

personalization

Customer Base




Cost(shirt)

% profit

Added value

CustomerRetailerDistributorProducer

$20.91$11.36$20.45

Price $52.72$31.81$20.45 $52.72

Producer RetailerDistributor Customer $52.72 0%

Producer CustomerRetailerDistributor $41.34 28%

Producer CustomerRetailerDistributor $20.45 62%

[Benjamin, 1995]

Dis-intermediation




Functions of intermediaries

Facilitate • Matching between an offer and a demand• the research of products (& their sellers)• the aggregation of products (& of sellers)• the aggregation of customers (& and their needs)

– buying clubs, customer associations, group buying

• the protection of the private sphere and the management customer profiles• putting sellers under pressure• evaluation of needs and the suggestion of the adequate product• the management of risk (insurance)• the distribution of the articles• the diffusion of information on products• influence on the buying act (Marketing)• the transmission of information about the customer

Intermediaries improve the efficiency of the exchange between producers and consumers, by aggregating transactions and creating economies of scale or scope




Distribution channels

Airline Travel AgencyReservation S.

80% by Internet!

Otopenia …

Illustrations

[Klein, 2001]




Scenarios for intermediation[Sakar, 1995]

I. Direct market reinforced by Internet

ultra-intermediation

II. Threatened intermediary

dis-intermediation

III. Cyber-mediairy

extra-intermediation

IV. Intermediary reinforce by the Internet

re-intermediation

tcPC < tcPI + tcIC tcPC > tcPI + tcIC

tc’PC < tc’PI + tc’IC

tc’PC > tc’PI + tc’IC

Supplier Consumer

Intermediary

tcPI tcIC

tcPC

Pre-internet

Post-internet

The intermediaries augmentthe efficiency of the exchanges between suppliers and consumers,When they aggregate transactions for creating scale or scope economies




Intermediaries

I. Direct market reinforced by the Internet


III. Cyber-mediary IV. Intermediary reinforce by the Internet

More expensive with intermediary Cheaper with intermediary

Pre-internet

Pos

t-in

tern

et

Expedia …

Illustrations

More expensive with intermediary

Cheaper withintermediary

[Sakar, 1995]

ultra-intermediation

extra-intermediation

dis-intermediation

re-intermediation




Moves of threatened intermediaries

I. Direct market reinforced by the Internet > SCOTT


> SCOTT

III. Cyber-mediary

> SCOTT

IV. Intermediary reinforce by the Internet > SCOTT

tcPC < tcPI + tcIC

tc’PC < tc’PI + tc’IC

tc’PC > tc’PI + tc’IC

Pre-internet

Pos

t-in

tern

et

[Scott, 2000]

tcPC > tcPI + tcIC

Integration capabilities(direct access)

Perpetual innovation capabilities(new entrants, spin-off)

Collaborative SCM capabilities(virtual enterprise)




Distribution channel conflict

For established companies (incumbents, bricks-and-mortars)

• Risk of cannibalization• Difficulty to reconcile to ways of selling

– on the sales force level

– Compaq and its resellers and the advent of direct sales

• Former competencies, advantage or disadvantage?– unusable or contra-productive, in case of radical innovation

– Capitalization possible, if innovation incremental

• QUESTION: start doing e-commerce:– Integrated entity?

– Separated company?

[Afuah, 2001]




Personalization

2

3

4a

5

4b

Establish the configuration Establish the configuration

Planing of production

Listen to the customerListen to the customer

Distribution

CRM

Production (internal)

ERP Outsourcing (external) SCM

One-to-one

Mass-customization




Mass customization

stable dynamic

stable

dynamic

Change of processes

Cha

nge

of p

rodu

ct

Mass productionContinuousamelioration

Mass customization

Mass customization

Invention

[Piller, 2000]

Production of a product or service for a large market which satisfies the needs of every single customer on one or the other characteristic of the product at a cost close to mass production




One-to-one marketing

• perceive every customer as an individual• win his confidence and loyalty (and keep it for a long time)

• by satisfying his needs in a personalized way• on the basis of information you have on the customer

– without abusingin the line of direct marketing and database marketing Attract

retain

Attractretain

startdialogue

startdialogue

Motivateaction

Motivateaction

Conducttransaction

Conducttransaction

[Peppers, 1993]




Personalization strategies in e-business

low high

low

hig

h

Degree of digitalization of customized components

Deg

ree

of c

usto

mer

inte

grat

ion

requ

ired

[Piller, 2000]

Housingwww.streif.de

Computerwww.dell.com

Fitnesswww.efit.com

Cosmeticswww.reflect.com

Jewelry www.expressions.com

Flowers1.800-flowers.com

Skiwww.myski.com

Configuration Innovation

Add-on Attention

Watcheswww.idtown.com

Printwww.iprint.com

Videowww.kideo.com

Presswww.individual.com




Recommending techniques

• Non-Personnalized Recommendations– Same for all the customers– Based on customer’s notices

• Attribute-Based Recommendations action-to-item affinities

– Based on syntactical elements (search)

• Item-to-Item Recommendations item-to-item affinities

– Based on the products the customer was interested in or bought

• People-to-People Recommendations people-to-people affinities

– Based on other customers advice who had a previous similar commercial behavior– Collaborative Filtering (correlation)

Entrées: buy data | Ranking [likert] | Text | Choice

[Schafer, 1999]




Taxonomy for recommending techniques

manual automatized

Automatization (intervention of customer)

Ephemeral(one session)

persistent(many sessions)

pers

iste

ncy

[Schafer, 1999]

Non-Personalized

Customer comments

Amazon Delivers

Attri

bute

-Bas

ed

Customer who Bought

Item-to-Item

Book Matcher

People-to-People

1. Non-Personalized2. Attribute-Based3. Item-to-Item4. People-to-People




• Suggest a personalized content• maintain a privileged relation with the customer• preserve a track of each visit and a customer profile• manage an individualized interaction

– promotion, action, catalogue, historic, ...

– from business rules (if … then)

– and from the client's profile– without interfering (too much) with his private life

Recommending system – rule basedConversion

prospect client




Recommending system - Collaborative filtering

• anticipate customers needs– recommend products

• from his preferences– as if we knew him for a long time

• and from preferences of other clients with similar tastes– word of mouth & correlation (if you liked this, then you should also like this …)

– learn by experience

– agents (intelligent)• big mass of information rating

book 1 book 2 book 3 book 4Isabelle 1 1 5 ?Thomas 5 2 1Mathieu 5 2Catherine 2 2 4 5Benoît 3 3 3Fabian 1 1 3 4

Catherine and Fabian seem to have a similar judgement to Isabelle's for the books 1, 2 (& 3);their rating (explicit) is used for Isabelle's (implicit) for the book 4: between 4 and 5




Comparaison[Fink, 2000]




Trust

TRUST

SECURITY

PRIVACY

Contribute to the establishment of

BRAND

Notoriety …

Fear: financial losses

Fear: loss of intimacy

INFO- MEDIARY COMMUNITY

Certification

Verification et authorization

Escrow

Notary, payments

Expertise

Guarantee of quality

Rating

Reputation of actors

Insurance

Risk management

Contribute

QUALITY




Trust factors[McKnight, 2000]

TRUST

propensity

To trust

mechanisms

3d party seal

Reputation

Perceived quality

Of the meerchant

Of web site

de confiance

For trust (encryption …)

intention

belief

of e-business

Exploratory phase

Commitment phase

To buy

To trust

Web experience




Community

Group of people or entities– that share values or interests

– and use the le Net regularly & at the same place

transaction Business, trading, occasions, barter …

interest Idea sharing,communication …

fantasy Role games, fantasy world…

relation Assistance (disease), sharing of experiences …

[Hagel, 1997]

Put pressure on sellers

Meeting ofsellers/buyers

Target customers

BuyUnion(mass)

BuyUnion(mass)

Marketmix

(informed)

Marketmix

(informed)

BarterNew age

(unselfish, elitist)

BarterNew age

(unselfish, elitist)

Sale target

(spendthrift)

Sale target

(spendthrift)




Types of communities

Communityvirtual

[Schubert, 1999]

Communityinterest

Communitybusiness

Communityleasure

Communityinternet

Communitynetwork

Communityresearch

Communityrelationhip

Communityfantasy

Communitymerchant

Communitytransaction

Communitycommerce

SkiRando

Ultima Online

EMB

Ricardo

TPN Register

ISworld

Social interest

Commercial interest

goal

media




one-to-tribe marketing• target a group statistically homogenous• so that the member of the community feels the company • and can discuss with his congeners• to avoid the isolation feeling due to personalization

• from profiles (mimetic)– in considering the eventual

demultiplication of personalities

• model of the television (themes) ?– we watch programs– we assist events– we comment them in groups– in real time …

• major stake for media groupsOne-to-TribeOne-to-TribeOne-to-OneOne-to-One

Community and marketing




• Datawarehouse and data mining– to study client behavior and anticipate his needs

• The client grumbles when the vendor exaggerates (or doesn't explain)• But the client gives information if he is « rewarded » (miles, …)

– loyalty program (M-CUMULUS, Qualifyer, …)

• This information belongs to the client– Cookies & web, Intuit, SmartCard (CASH)…

• allows tracking the client's behavior on DIFFERENT sites• unlike loyalty cards (specific to a shop)

– he can reinforce it

– sell it or authorize - or not - access to vendors

– leave it to an intermediary for a good use ...

Battle for information & privacy

PASSEPORT (OPS)




Open Profile Standard (OPS)

• protocole• passport containing the client's profile

– with his personal information • name, address, credit card,…

– and his preferences• explicitly specified• assigned after his visits on WEB OPS sites

– in possession of the client

– who can authorize the access to vendors• the whole of it or parts only• during his visits on their site

> definition




• Receives, merges and manages the buyers information• protects the buyer • supplies information to vendors• puts the vendors under pressure• obtains advantages for the buyer on the behalf of the vendors

– for the information given to the vendors

• prefigured by Portals, buying clubs, associations of consumers …• requires skills and rare technologies

• Who can become info-mediary?– Fiduciaries– Merchants– buying clubs & consumer associations– databases– media, portals, …

Infomediary

brand

traficemotion

[Hagel, 2000]




Infrastructure and logisticsInfrastructuremanagement

Infrastructuremanagement

Computerized system

Buyer

seller

info

rmat

ion

Identifyproduct

Promoteproduct

influ

ence

Negotiate

Negotiate

paym

ent

BUY

SELL

good

s

Consume

Serve

info

rmat

ion

Query

Answer

Findsource

Findcustomer

info

rmat

ion

catalog payment logistics After-saleorder

logistics

standards




Reference model

IT infrastructureIT infrastructure

Informationservices

searchdirectories

online catalogsproduct evaluation

request for proposalconditions

Informationservices

searchdirectories

online catalogsproduct evaluation

request for proposalconditions

Business modelsBusiness models

Agreementservices

contractingbrokerageexchangee-market

setting pricesnegotiation

Agreementservices

contractingbrokerageexchangee-market

setting pricesnegotiation

Settlementservices

authenticationcertification

escrowlogisticspayment

dispute resolution

Settlementservices

authenticationcertification

escrowlogisticspayment

dispute resolution

[Schmid, 1997]




Standards - BizTalk

• Microsoft

> definition > framework

• XML framework– Simple Object Access Protocol (SOAP)

> soap

• XML tags for inter-application exchanges– Enterprise Application Integration (EAI)

– Business to Business (B2B)

• Software & Repository

www.bizTalk.orgwww.microsoft.com/biztalk/

[Haifei Li, 2000]




Standards - Common Business Library (CBL)

• CommerceOne

• Public collection of XML DTDs– Can be assembled and

– Or integrated in XML-basedapplications

• EDI legacy– ISO codes

• Countries, currencies, …

– X12 components• Catalog, order, invoice …

• Trans-industries …www.xcbl.org




Standards - Common Business Language (CBL)

Glushko, R., Tenenbaum, J., Meltzer, B. (1999)An xml framework for Agent-based E-commerce

Comm. ACM, 42 (3), Marc: 106-114

Inter-opératbilité …

Scénario ABC




Standards - Commerce XML (cXML)

• Ariba

• Collection of business components– Product, supplier, order, …

• And standard processes– For order fulfillment, invoicing,

delieving …

– Possible integration with the BizTalk framework

http://www.cxml.org/




Standards - Other emerging standards

• Internet Open Trading Protocol (IOTP)– by Internet Engineering Task Force (IETF)

• Open Application Group Integration Specification (OAGIS)– by Open Applications Group (OAG)

– Collections of 90 Business Object Documents (BODs)

• Open Catalog Format (OCF)– Language for the Open Catalog Protocol (OCP)




Standards - ebXML

www.ebxml.org/documents/documents.htm

Initiative OASIS & UN-CEFAC (Edifact)

UML




Logistics (warehousing)

• Shop– department and/or stock (eventually separated)

• Franchise or partnership– fragmented sector: multitude of small shops

• Multi-channel distribution center existing– mail order business with a certain volume

• Ad hoc distribution centers– mail order business with a high volume

and also• Virtual warehouse (partnership with third party)

– outsourcing– use of distribution centers FedEx, for ex.

• Direct sending by manufacturer – outsourcing– integration of information systems

transportation

warehousing




Order fulfillment (warehousing)

centralized distributed

self-operated

outsourced

Structure

Ope

ratio

n DedicatedFulfillment

Center

DedicatedFulfillment

Center

DistributedDeliveryCenters


Third-PartyFulfillment

Center


Center

PartnerFulfillmentOpération


Build-to-order

ManufacturerDirectShipment

In-store

[Kalakota, 1999]




Changing the warehousing approach

centralized distributed

in h

ouse

outs

ourc

ed

Structure

Ope

ratio

n DedicatedFulfillment

Center

DedicatedFulfillment

Center




Center


Center



Exemples

VolumesInvestmentFlexibility




Value chain & activities

infrastructure

Human resources

Technology development

Procurement

inboundlogistics

production outbound logistics

marketing &sale

After-sale

Main activities

Support activities

Value

e-SCMe-procurement

e-alliance




Configuration of activities

Laminer (1)

Presser (13)

Découper (14)

Souder (9)

Concevoir (16)

Rechercher composants

(17)

Assembler (8)

Stocker (15)

Livrer (10)

Gérer les stocks (11)

Livrer (12)

Presser (2)

Découper (3)

Alusun

Aerotech

Stocker (4)

Livrer (7)

Metalu

Tôles laminées

Tôles pressées

Toits

Capots moteurs

Landcar

ToitsCapots moteurs

Toits

Capots moteurs

SkyStar

Composants

Composants

Panneaux alu

Alliages reçus

Tableaux de bord

Rechercher alliages (5)

Suivre les contrats (6)

Propositions émises Contrats

Commandes

Informations alliages

Montants encaissés

Emettre des propositions

Conclure des contrats

E1

E2

Tôles pressées

Tôles découpées

Eléments soudés

Tôles laminées

Tableaux de bord

Plans

Panneaux alu

Eléments soudés

Eléments soudés

Tôles pressées

Informations

Informations

Tableaux de bord

Nouvel alliage

Commandes

Cartel

[Revaz, 1995]




FAP f1

Possible contact

s1

s1

Contact searcher c1

Ad Association

Read ad

$

$

Ad

$Ad

$

Checkedad

Ad

$

Ad $

Submittedad

Read an ad

Submit an ad

Publish an ad

Place an ad

Distributean ad

Check an ad

[Gordijn, 2000]

Value-oriented model

Legend:

ActorValue activity

Valueinterface

Valueport Value

exchange

Flows:

AND Scenariodelimiter

ScenarioPath (x)

OR (x)

• Place an ad

• Read an ad

• Redistribute an ad

Solution:

• The FAPs offer the service.

• The Ad Association redistributes the ads.

• FAPs add most value




[Gordijn, 2000]

Value-oriented model – second configuration

Flows:

• Redistribute an ad

Possible contact

s1

s1

Contact searcher c1

Ad Association

Read ad

$

$Ad

$

Checkedad

Brand

$

Submittedad

Read an ad

Submit an ad

Publish an ad

Place an ad

Maintainbrandnam

e

Check an ad

FAP f1

Check an ad

• Read an ad

• Place an ad

Legend:

ActorValue activity

Valueinterface

Valueport Value

exchange AND

Scenariodelimiter

ScenarioPath (x)

OR (x)

Solution:

• The Ad Association performs most activities.

• The Ad Association adds most value

• Shift in power




[Gordijn, 2000]

Value-oriented ontology

assigned-to

has-in

between

contains

requestsoffers

Valueinterface

Valueport

Value exchange

Value offering

Valueobject

has-out

1..n 0..1

0..n 0..n

1 1

0..n0..n2..n0..n

1..n

1

Valueactivity

1..n

0..1has

assigned-to

1

1..n

Composite Actor

Elementary Actor

decomposed-into

is-a

is-a

2..n 0..n

Actor

withsimilar

Market

segment 1..n0..n

Composite Object

Elementary Object

decomposed-into

is-a

is-a

2..n 0..n




Orderprocessing

Orderconfirmation

Planing ofrealization

destockingloading

Planingdelivery

Customerservice

Prevision

Planing ofstock

Planing ofcapacity

MRPchoice supplier

Availability stockScheduling

Stock allocationorder of priorities

Schedulingmanufacturing

Schedulingdistribution

Process

Order planning

Process

Replenishment

Process

Production & assemblage

Process

Distribution

• profitable?• available in the inventory?• can be manufactured?

• integration with shipping companies• tracking by the customers• return of goods

• flexibilityy•integration

• BPR (business process reengineering)•INTEGRATION WITH ERP & SCM

[Kalakota, 2001]

Coordination (& integration)




Alliances et partnerships

Authormarketing

Authormarketing

Distributorinventory

Distributorinventory

Amazon.comsales

Information systemscoordination

contents

Amazon.comsales

Information systemscoordination

contents

Shippingtransporttracking

Shippingtransporttracking

Affiliatesales

Affiliatesales

Customerbuy

content

Customerbuy

content

Bankpayment

Bankpayment

deliver deliver

order

sale order

sales

critics

Credit cardclearance

returns




ECRECRECRECREDIEDIEDIEDI

Efficient customer Response

from to

Electronic Data Interchange

OrderOrder

BUYBUY

ReceptionReception

PaymentPayment

Company A

SupplySupply

SALESALE

DeliveryDelivery

InvoicingInvoicing

Company B

Bank ABank A Bank ABank AClearingClearing

selection, comparaison, ...

order or statistics

Delivery

invoice

paiement confirmation

Before sale

sale

production & distribution

After-sale




e-SCM, e-procurement and e-market

Electronicmarket

suppliersbuyers

supply chain

Power of buyers

Reduced transaction costs Improved information access group buying …

Reduced selling costs bigger market access Dis-intermediation …

Power of suppliers

Market Vs. relation

Customers’needs

Integratedchannels

Products/services

Flexibleprocesses

Outsources/In-house

competencies

procurement




HIERARCHY

MAKEMAKE

Supply chain

MARKET

BUYBUY

Production cost

Coordination costlow

high

low

NETWORKNETWORK

high

[Malone, 1993]

Co-production

partnership

Externalization

Virtualization

Holding

Strategic network




Value creation

«The creation of an economic value stays the measure of success»

• PROFIT

= (P – VC).Q – FC

P the unit price of a product

VC the variable cost of a unit

Q the number of products sold

FC fixed costs

Aspectsfinanciers

Aspectsfinanciers




Income models

REVENUE

one time

recurrent

sale

registry

subscription

advertisement

use

Income of the subscription fees to become a memberPaid by the buyer and/or the vendor

transaction

commission Income, percentage of a transaction made by the settlement(affiliate program)

Income of online sales paid by the buyer

Income of the ad banners posted on the shopfrontPaid by the vendor

Phone• registry• subscription• Usage

• Time• Services

combination




Income models - examples

Business models Revenue model

Virtual community (iVillage) Subscription, ad, sponsoring

Online sale (Dell) Transaction (sale)

Auctions (eBay) Commission, Subscription, ad

Buying clubs (cendant) Subscription, ad, commission

Infomediation (netZero) Transaction (content)

Affiliation (millicent) Commission

buy:

advertisementsubscriptioncommission

buy:

advertisementsubscriptioncommission

market:

commissionsubscription

ad

market:

commissionsubscription

ad

barter:

-advertisement

subscription

barter:

-advertisement

subscription

sale:

transactioncommission (intermediary)

sale:

transactioncommission (intermediary)




Pricing

• Based on a catalog• Resulting of the negotiation between the seller and the buyer

– With its back-and-forth and its protocol

• Result of an auction– With its models and reputation mechanisms

• Result of a request for proposal (RFP)

• Barter




Pricing - Dutch Flower Auction

[Kambil, 1999]

Illustration




Auction software - objects[Kumar, 1999]




Auction software - process[Kumar, 1999]




Transforming the pricing

• « good bye to fixed pricing »?– Suppliers enjoy price differenciation in order to avoid comparison

– Customers enjoy low price and gaming using comparison

• Trends towards dynamic and online pricing– Adopted in the air transportation industry

– Renewed on Internet

Yield Management • Allows to calculate in real time (online if on the Internet)

• the best prices

• for maximazing the profit generated by the sales

• based on a forecasting model of sale behavior(for micro-segments)

[Klein, 2000]

Yield Management




Yield Management

– Air Transportation (American Airline since 1978 + 1.4 billion in 1989-1991)– Hotel industry (Marriott + 30 million en 1991)– Car renting (Hertz 1989)– Leisure parc (Futuroscope)– Rail road (TGV Suisse-Paris)– Cyber-cafe (EasyEverything)

[Phillips, 2000]




Yield Management - conditions

• Perishable product– No value after a given date (seat onboard, room, …)

• Variable demand and rigid production capacity– Demand changes (high, low, …)

– Offer is fixed

• Reservation– Before the use of the service

• Price differenciation– Elasticity (demand/price) is variable according to the segment

– Attract customer with high sensity to price with low prices (apex)

– Keep demanding people with price barriers (1st class)

• High fixed cost & low variable cost• Price leverage

– Small increase of revenu causes significative increase of profit




Intangible assets measuring models[Sveiby, 2001]

http://www.sveiby.com.au/intangibleMethods.htm

MEASURE




Intangible Assets Monitor, Balanced Scorecard and Intellectual Capital

Value

Tangibles assets Intangible assets

Growth/Renewing

Efficiency

Stability

Clients Processes Training/Learning

Supplierpartner

SystemsPatentsknowledge

AptitudesExperienceformation

Growth/Renewing

Efficiency

Stability

Growth/Renewing

Efficiency

Stability

Individualprofit generator

Knowledge perspective

Customer capital Organizational capital Human capital

Structural capital

Logisticsmanagement

Logisticsmanagement

Customermanagement

Customermanagement

Productinnovation

Productinnovation

External structure Internal structure Individual competencies

IAM[Sveiby, 2001]

BSC[Nolan, 1995]

IC[Edvinsson, 1997]




Intangible assets in Celemi




Intellectual capital in Skandia[Edvinsson, 1997]




Customermanagement

Customermanagement

Productinnovation

Productinnovation

Logisticsmanagement

Logisticsmanagement

FinancialAspects

FinancialAspects

Balanced scorecard

CUSTOMER RELATION

Goals Measures

How do the customers perceive us?

INFRASTRUCTURE

Goals Measures

In which process do we have to prove excellence?

PRODUCT INNOVATION

Goals Measures

How to improve our services and our quality?

FINANCE

Goals Measures

How do shareholder perceive us?

& initiatives

& initiatives

& initiatives

& initiatives

Scope

Scale

talent

Value




BALANCED SCORECARD software

From cause to effect




BALANCED SCORECARD for IS

Learning and InnovationLearning and Innovation

Internal ProcessesInternal Processes

Customer PerspectiveCustomer Perspective

Value ContributionValue Contribution

Increase ofend-user productivity

Increase ofend-user productivity

IT Staff Mr. xyz

IT Staff Mr. xyz

ObjectivesKey Performance Indicators (KPI’s)

Targets (Baseline/Year n) Initiatives

Account-ability

% hidden / unproductivity

costs

% hidden / unproductivity

costs

• Implement and conduct Acadys-Survey

• Set up education program

• Set standards

• Implement and conduct Acadys-Survey

• Set up education program

• Set standards

A statement of what is critical to the success of

the vision

How success in achieving the objectives will be measured and tracked

Do Wellsrequired to achieve

objectives

What group or person is

responsible for the measure

56 % byAcadys

56 % byAcadys

Reduc-tion by5 %p.a.

Reduc-tion by5 %p.a.

The level of performance or

rate of improvement

needed

Train end-users efficiently and

quickly

Train end-users efficiently and

quickly

Capability or activity needed

to develop, improve or

secure in order to reach strategic

objectives

Value Drivers

[Bader, 2000]

Illustration





Objectives

Increase End-user

Productivity V3.3 Speed up upgrade of infrastructure products and services and equipment/ connection of new users or partners

Key Performance Indicators (KPIs)

SLA fulfillment rate % problems/requests solved within 1 h, 1h to 6h, 1 day, more /

total help-desk problems/requests

Value Drivers

Provide Cost-Efficient

Services at Quality

V3.1 Ensure reliable environment (availability, performance, security)at SLAs

V3.2 Provide quick and effective problems/requests solving

V3.6 Develop prospective capacity planning

V3.7 Assess new technologies to increaseend-user productivity

V4.10 Align ’IT factory’ costs on best in class providers

Average lead and execution time for global desktop upgrade # Non-standard desktops / # standard desktops

SLA fulfillment rate (e.g. # interventions / # users (for the period))

Budget forecasts based on capacity planning (HW forecast, engineering and migration resources...)

# New technologies (e.g PC, OS...) assessed within the period

Fixed and variable costs / # desktops TCO for user survey vs benchmark (ACADYS): actuals vs

benchmarks (visible and user hidden costs) Costs for migration (e.g. Common Office Envirt Engineering...) # business applications / functionality (e.g. Visio, flowchart...)

V3V3

V4V4

[Bader, 2000]

EXEMPLE

Illustration





V3 - Increase End-User ProductivityMONTH

JUNE

TABLE

3

Identify and fix issues on segment 5:response time

AC

TIO

NS

Contributor: POYC

Comments:

Bi-Yearly End-Users Survey: Application and Service Quality

Quality of training

Application User-Friendly

System Response Time

System Availability

User Satisfaction (Support)

Problem Solving

Help-Desk Accessibility

Help-Desk Contact Quality

Average

# of users

% of pulled users

4.2 4.0

3.0 3.0

2.1 3.0

4.0 4.0

3.5 4.2

4.5 4.9

4.8 4.5

4.9 3.9

C P

Seg.1

800

C P

Seg.2

1.100

C P

Seg.3

650

C P

Seg.4

750

C P

Seg.5

700

END-USER ASSESSMENT (0 to 5)C: Current survey

P: Previous survey

TARGET IS 3.5 OR OVER

4.5 4.1

4.0 4.0

2.8 2.9

4.0 4.0

3.5 4.2

3.5 3.9

4.8 4.5

4.9 3.9

3.9 4.0

3.5 3.8

3.1 3.7

4.0 4.0

3.5 4.2

4.0 3.9

4.8 4.5

4.9 3.9

4.2 4.0

3.0 3.0

3.1 3.5

4.0 4.0

3.5 4.2

2.5 2.9

4.8 4.5

4.9 3.9

3.5 4.0

3.0 3.0

1.5 2.0

3.0 3.0

3.5 4.2

3.5 3.9

4.8 4.5

2.9 3.0

3.9 3.9 4.0 3.9 4.0 4.0 3.8 3.8 3.2 3.4

10 10 8 8 15 15 15 15 90 90

[Bader, 2000]

EXEMPLE

Illustration




Vision and strategy

BALANCED SCORECARD for CIOs

Corporate ContributionCorporate Contribution

• Control IT Expenses–percentage above or within budget–allocation of the different budget items–IT budget as a percentage of turnover–IT expenses per staff member

• Sell to third parties–financial benefits steeming form selling products and

services

• Business value of new IT projects–Financial evaluation based on ROI, NPV, IRR, PB–Business evaluation based on Information Economics

• Business value of the IT function–percentage of the development capacity engaged in

strategic projects–relationship between new developments /

infrastructures investments / replacement investments

• Control IT Expenses–percentage above or within budget–allocation of the different budget items–IT budget as a percentage of turnover–IT expenses per staff member

• Sell to third parties–financial benefits steeming form selling products and

services

• Business value of new IT projects–Financial evaluation based on ROI, NPV, IRR, PB–Business evaluation based on Information Economics

• Business value of the IT function–percentage of the development capacity engaged in

strategic projects–relationship between new developments /

infrastructures investments / replacement investments

Internal ProcessesInternal Processes

• Efficiency Software Development–% of changes and adjustments made throughout

different development stages–number of defects per function point in the first year of

production–number of function points per person per month–average number of delays late in delivering software–average unexpected budget increase–% of projects performed within SLA–% of code that is reused–% of maintenance activities–visible and invisible backlog

• Efficiency operations–% unavailability of the mainframe–% unavailability of the network–response times per category of users–% of jobs done within set times–% of reruns–average time between system failures–ratio operational costs/installed MIPS

• Acquisition PCs and PC software–average lead time for deliveries

• Problem management–average answer time of help desk–% of question answered within set time–% of solutions within SLA

• User Education–% of users that already perceived education (per

technology / applications)–quality index of education

• Managing IT staff–number of people hours that can be charged internally

or externally–% of people hours that are charged on projects–satisfaction index of IT staff

• Use of communication software–% of IT staff that can access groupware facilities (inter-

and intranet)–% of IT staff that effectively use groupware-facilities

• Efficiency Software Development–% of changes and adjustments made throughout

different development stages–number of defects per function point in the first year of

production–number of function points per person per month–average number of delays late in delivering software–average unexpected budget increase–% of projects performed within SLA–% of code that is reused–% of maintenance activities–visible and invisible backlog

• Efficiency operations–% unavailability of the mainframe–% unavailability of the network–response times per category of users–% of jobs done within set times–% of reruns–average time between system failures–ratio operational costs/installed MIPS

• Acquisition PCs and PC software–average lead time for deliveries

• Problem management–average answer time of help desk–% of question answered within set time–% of solutions within SLA

• User Education–% of users that already perceived education (per

technology / applications)–quality index of education

• Managing IT staff–number of people hours that can be charged internally

or externally–% of people hours that are charged on projects–satisfaction index of IT staff

• Use of communication software–% of IT staff that can access groupware facilities (inter-

and intranet)–% of IT staff that effectively use groupware-facilities

Learning and GrowthLearning and Growth

• Permanent Education of staff–number of educational days per person–education budget as % of total IT budget

• Expertise of the IT staff–Number of years of IT experience per staff member–age pyramid of the IT staff

• Age of the type Applications portfolio–Number of applications per age category–Number of implications younger than 5 years

• Research and emerging technologies–% of budget spent on IT research

• Permanent Education of staff–number of educational days per person–education budget as % of total IT budget

• Expertise of the IT staff–Number of years of IT experience per staff member–age pyramid of the IT staff

• Age of the type Applications portfolio–Number of applications per age category–Number of implications younger than 5 years

• Research and emerging technologies–% of budget spent on IT research

Customer = UserCustomer = User

• Research IT supplier–% of applications managed by IT–% of applications delivered by IT–% of in-house applications

• Partnership with users–index of user involvement in generating new strategic

applications–index of user involvement in developing new

application–frequency of IT Steering Committee meetings

• User satisfaction–index of user friendliness of applications–index of user satisfaction–index of availability of applications and systems–index of functionality of applications–% of application development and operations within

the Service Level Agreement (SLA)

• Research IT supplier–% of applications managed by IT–% of applications delivered by IT–% of in-house applications

• Partnership with users–index of user involvement in generating new strategic

applications–index of user involvement in developing new

application–frequency of IT Steering Committee meetings

• User satisfaction–index of user friendliness of applications–index of user satisfaction–index of availability of applications and systems–index of functionality of applications–% of application development and operations within

the Service Level Agreement (SLA)

[van Granbergen, 1997]




Metrics for e-business[Corporate Executive Board, 1999]

FINANCE

PROCESSUS

CLIENT

CLIENT

CLIENT

PROCESSUS

PRODUIT

PRODUIT

PROCESSUS




Metrics for e-business[Corporate Executive Board, 1999]

(SALES EFFICIENCY AND TRANSACTIONAL EXCELLENCE)

Illustration




E-Performance[Agrawal, 2000]

ATTRACTION

• Visitor base• Visitor acquisition cost• Visitor advertising revenue

CONVERSION

• customer base• customer acquisition cost• customer conversion rate• nb transactions / customer• revenue / transaction• revenue / customer• customer gross income• customer maintenance cost• customer operating cost• customer churn rate• …

RETENTION

• repeat-customer base• r-customer acquisition cost• r-customer conversion rate• nb transactions / r-customer• revenue / transaction• revenue / r-customer• r-customer gross income• r-customer maintenance cost• r-customer operating cost• r-customer churn rate• …




Management Cokpit

http://www.management-cockpit.com/




1

2

3

A B

C D?

Clear-enough future

forecast

Traditional toolkit

Alternate futures

Discrete options

Game theoryDecision analysis

True ambiguity

No basis for forecast

analogiesPattern recognition

Range of futures

No natural option

Scenarioplanningsimulation

Levels of uncertainty:

[Courtney, 1997]

Scenario planningSIMULAT

E




Model• Based on (differential) equations

– Stocks and flows

– converters and connectors

• manages feed-back loops explicitely – positive (reinforcement)

– or negative (correction)

• allows simulating the behavior– In a virtual world

• in a learning perspective

DecisionSupportsystem

DecisionSupportsystem

learninglearning

Computer-aideddesign

Computer-aideddesign

inventory

+

orderrate

deliveryrate

Servicetime

Productivity

System dynamics




Customer-relationship


Product innovation

Product innovation

Infrastructureslogistics

Infrastructureslogistics

Financerevenue

Financerevenue

System dynamics




Simulation




Strategic postures

?

Shape the future

Play a leadership role

Setting standardsCreating demand

Adapt the future

With through speed,Agility and flexibility

Recognizing and capturingOpportunities in existing markets

Defend & react

Set barriers

Defensive competition

Reserve the right to play

Invest sufficiently to stayIn the game

Avoid prematurecommitments

[Courtney, 1997]




Conclusion



Productinnovation

Productinnovation Infrastructure

logistics


Financerevenue

Financerevenue

Business model What?Who?How?How much?

Measure

Simulationscenarios

=

BUSINESS PLAN

+

+

INNOVATIONGoals Measures

& initiatives

stra

tegy




Rethinking the traditional organization[Hagel, 1999]

Product innovation Customer relationship mngt Infrastructure management

Economy

Culture

Competition

Speed is the keyto be the firston the market

Employee centered

Battle for talents,low barriers to entry, many small players thrive

Economies of scope are keyto acquire a large numberof customers

Highly service orientedcustomer comes first

Battle for scope,rapid consolidation,big players dominate

Economies of scale are keyfor reducing cost inmanaging large volumes

Cost focusedstress on standardizationefficiency

Battle for scalerapid consolidation,a few big players dominate




Case-basedreasoning

• Business model• (Un-) bundled corporation• Breakthrough strategy

CUSTOMER

PRODUCT

LOGISTICS

FINANCE

Critiquingsystem

• Critical success factor• Balanced scorecard• Resource-based view

Simulationenvironment

• System dynamics• Dynamic resource system• Scenario Planning

DEFINECLASSDESIGN

ASSESSMEASURECRITIQUE

MODELFORECASTSIMULATE

BUSINESSONTOLOGY

OBSERVEDCASES

ENGINEERINGTOOL

Framework for Tool forE-BUSINESS MODELHANDBOOK

Projet

[Pigneur, 2001]

e-business model handbook

Next …

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