The Business Model Ontology a proposition in a design science approach PhD Defense February 4 2004...

The Business Model Ontologya proposition in a design science approach

PhD DefenseFebruary 4 2004

HEC/UNIL, Lausanne

Alexander OsterwalderHEC Lausanne

[email protected]://www.hec.unil.ch/aosterwa

(+41 21) 692.3420

© 2003, Osterwalder business model concepts 2

Université de Lausanne

HOME | AGENDA | FIN

A Short Reflection on Science

The origin of the word science comes from the Latin scire, which simply means "to know."

observe phenome

na

explain phenome

na

develop theory

test theory

refute theory

Social or natural phenomena

theorize

justify



HOME | AGENDA | FIN

A Short Reflection on Science - Story of the Village... An Analogy

Pressure to explore: fast moving complex environment with new threats and opportunities (Outsourcing, SCM, CRM, ...)

Search: New business models & introduction of the concept of business models as a new unit of analysis (ad hoc, explorative)

Plan & Build: Instrumentalizing the business model concept by building tools on the basis of an ontology



HOME | AGENDA | FIN

Research Question

How can business models be described and represented in order

to build the foundation for subsequent concepts and tools,

possibly computer based?



HOME | AGENDA | FIN

Methodology: Design Science (March and Smith 1995)

Design Science Natural Science

Build Evaluate Theorize Justify

ConstructBM Building

BlocksComplete?

Model BM OntologyFidelity with Real World

Phenomena?

Method XML Appropriate?

Instantiation BM2L Applicable?

RESEARCH ACTIVITIES

RE

SE

AR

CH

OU

TP

UT



HOME | AGENDA | FIN

Main contributions

1. Update of the knowledge in the business model domain

2. Consolidation into a business model ontology– Provide a specification of a conceptualization in the business model domain

3. Software tool prototype: Business Model Modeling Language BM2L– A tool to capture and represent business models

4. Outlook on possible business model tools– How can the business model concept be applied

5. Proposition of Business / Information Systems alignment tool– Align in an environment underpinned by ICT and e-business

• This is not about modeling the whole enterprise• It is not an attempt to explain business model success• The goal is not to re-write strategy.



HOME | AGENDA | FIN

The Business Model Ontology

ChannelValue Configuration Value PropositionCapability Customer

LinkActivity OfferingResource Criterion

RelationshipPartnership Actor

MechanismAgreement

RevenueCost Profit

PricingAccount

INFRASTRUCTUREMANAGEMENT

CUSTOMERINTERFACEPRODUCT

FINANCIALASPECTS



HOME | AGENDA | FIN

The Nine Elements Compared to the Business Model Literature

Business model ontology

Value Proposition

Target Customer Distribution Channel

Customer Relationship

Value Configuration

Capability Partnership Cost Structure

Revenue Model

Hamel √ √ √ √ √ √ √ √ √

Linder and Cantrell √ √ √ √ √

Tapscott, Ticoll et al. √ √

Afuah and Tucci √ √ √ √ √ √

Gordijn √ √ √ √ √ √Petrovic, Kittl et al. √ √ √ √ √ √

Weill and Vitale √ √ √ √ √ √

Stähler



HOME | AGENDA | FIN

Have we Made any Progress: Modeling Rigor

Mentioning Elements Describing Elements Modeling Elements



HOME | AGENDA | FIN

Modeling Distribution Channels

Value Proposition Distribution Channel

Target Customer

setOf

Actorby

Offering Distribution Channel Link

•Reasoning•Customer Buying Cycle•Value Level•Price Level

isA

isA

deliveredthrough

deliveredto

ChannelValue Configuration Value PropositionCapability Customer

LinkActivity OfferingResource Criterion

RelationshipPartnership Actor

MechanismAgreement

RevenueCost Profit

PricingAccount

INFRASTRUCTUREMANAGEMENT

CUSTOMERINTERFACEPRODUCT

FINANCIALASPECTS



HOME | AGENDA | FIN

Capturing Business Model Information

A model to...– Define– Seize– Describe– Store

...the logic of what a firm does and how it does it

Application

bla bla

formal modelmanager seize

unstructured

information

Semi –structured information

formalization



HOME | AGENDA | FIN

Business Model with XML: Conceiving BM2L

ValueProposition

ValueProposition

Characteristics

SetOfOfferings

SetOfOfferings

OfferingCharacteristics

Description

Name

Offering

ValueLevel

Reasoning

LifeCycle

PriceLevel

Risk

Use

Effort

InnovativeInnovation

MeToo

Excellence

Innovation

Economy

Free

Market

HighEnd

Description

Name

ValueLevel

Reasoning

LifeCycle

PriceLevel

InnovativeInnovation

MeToo

Excellence

Innovation

Economy

Free

Market

HighEnd

Risk

Use

Effort

element

element

element obligatory element

optional element

choice between

sequence of

1 - n elements

Legend

ValuePropositionIDAddressesCustomerIDREFBasedOnCapabilityIDREF

LifeCyclePhase{Creation, Purchase, Use,Renewal, Transfer}

LifeCyclePhase{Creation, Purchase, Use,Renewal, Transfer}

OfferingID

Computer-aidedbusiness modeling

Capability Value Proposition Target Customer

Offering

setOf isA



HOME | AGENDA | FIN

Application Prototype: The Business Model Modeling Language BM2L

<Product><ValueProposition ValuePropositionID="vp1" BasedOnCapabilityIDREF="cp4 cp3 cp1" AddressesCustomerIDREF="tc4"><ValuePropositionCharacteristics><Name>MJF Concerts</Name><Description>The main attraction and VALUE PROPOSITION of the MJF are its prestigious concerts with stars from jazz, pop, rock, hip-hop and more. The MJF has made itself a name with the regular by unforgettable jazz musicians like Miles Davis, Keith Jarett, Charlie Mingus, Ella Fitzgerald and later from other fields like Bob Dylan, Phil Collins or Guru's Jazzmatazz. The 2003 event featured artists across the musical range, such as George Benson, Joao Gilberto, Simply Red or Cypress Hill. </Description><Reasoning><Use>For the customer the value essentially lies in going to the concert of the artist of his choice.</Use></Reasoning><ValueLevel><MeToo>The MJF may be special because of its quality but it is not substantially different from other jazz festivals throughout the world.</MeToo></ValueLevel><PriceLevel><Market>The MJF ticket prices are comparable to the market prices of what is paid for other concerts.</Market></PriceLevel></ValuePropositionCharacteristics>



HOME | AGENDA | FIN

Application Prototype: Generating documents from a BM2L document

XSLProcessor

BM2LDocument

XSL StylesheetDocument

HTML Document

SVG Document

PDF Document

Word Document

e.g. a two page overview of a company’s business model

e.g. a ten page report of a company’s business model

e.g. a detailed n-page description of the company’s business model

e.g. a graphical view of a business model issue such as the channel strategy

BM2LSchema



HOME | AGENDA | FIN

VALUE PROPOSITIONs

MJF Concerts MJF off

Frequentation MJF Sponsorship

Festival recordings MJF Brand & Franchise

CAPABILITYies

Atractive MJF venue Contract stars Attract people

Mobilize volunteers Atmosphere & Experience

CUSTOMERs

Festival visitors Shops

Sponsors Record, TV, artists

Franchisees

RELATIONSHIPs

PARTNERSHIPs

Artists, sponsors, shops, F&B, volunteers, media,

infrastructure, general festival partners, "Friends of the Festival", musical

partners, Montreux municipality

ACTORs

Artists, Media, Sponsors, Montreux, Volunteers,

F&B, Merchants, Montreux Sounds, Sunset Music, Swiss Tourism, IJFO,

SMPA

REVENUE MODEL

Ticket sales {41%} Sponsoring {20%}

F&B {28%} Merchandising {5%}

Recordings {4%} Diverse {2%}

COST STRUCTURE

Infrastructure {20%} Artists {29%} F&B {10%}

Merchandising {2%} Production {16%} Fixed costs {15%} Marketing {4%}

Divers {4%}

PROFIT/LOSS

INFRASTRUCTURE MANAGEMENT

CUSTOMER RELATIONSHIP

PRODUCT INNOVATION

FINANCIAL ASPECTS

CHANNELs

Montreuxjazz.com MJF event

TicketCorner bricks&clicks MJF program

Media Sponsors

MontreuxSounds.com Swiss tourism TEOS

VALUE CONFIGURATION

Contract musicians, contract sponsors, ticketing,

advertising / concerts, F&B, commerce, merchandising, selling recordings / manage

MJF infrastructure, production, manage JAZZ, manage volunteers, record

concerts

THE MONTREUX JAZZ FESTIVAL BUSINESS MODEL (A BIRD'S EYE VIEW)

Montreux Jazz Festival Business Model illustration



HOME | AGENDA | FIN

Distribution Channel Strategy at the Montreux Jazz Festival

illustration

Value Proposition Distribution Channel

Target Customer

setOf

Actorby

Offering Distribution Channel Link

•Reasoning•Customer Buying Cycle•Value Level•Price Level

isA

isA

deliveredthrough

deliveredto



HOME | AGENDA | FIN

Value proposition, capabilities and customers at the MJF

MJF concerts Festival visitors Attractive MJF venue

MJF off

MJF frequentation

MJF recordings

Sponsors

Record, TV, artists

Shops

Value Proposition Target Customer Capability

Contract stars

Attract people

Atmosphere & Experience

MJF sponsorship

Mobilize Volunteer Staff

MJF Brand & Franchise Franchisees

illustration



HOME | AGENDA | FIN

Evaluating the Business Model Ontology

Evaluation

Compare ontology with literature

Test ontology in the field

Test ontology vs. other model in the field

Evaluate ontology by practitioners

Test ontology with case studies

Interest by the research community

Positioning the ontology to the existing business model literature shows which domains are covered or not and is an indicator of completeness.

Letting managers and consultants pronounce themselves on the ontology gives an indication on its ability to describe the business logic of a firm.

Describing a real world business model through the ontology's rigorous formalism tests its applicability to a case.

Observing the research community's interest in the ontology demonstrates certain aspects of its validity.

Testing the ontology in the field would take place indirectly through applying an instantiation of it to a real-world business setting.

Testing two models' performance would also be indirect by applying them to a real-world business setting and compare the outcome.



HOME | AGENDA | FIN

Compare with Literature

Revenue Model

Cost Structure

PartnershipCapabilityValue Configuration


Distribution Channel

Target Customer

Value Proposition


Stähler

√√√√√√Weill and Vitale

√√√√√√Petrovic, Kittl et al.

√√√√√√Gordijn

√√√√√√Afuah and Tucci

√√Tapscott, Ticoll et al.

√√√√√Linder and Cantrell

√√√√√√√√√Hamel

Revenue Model

Cost Structure

PartnershipCapabilityValue Configuration


Distribution Channel

Target Customer

Value Proposition


Stähler

√√√√√√Weill and Vitale

√√√√√√Petrovic, Kittl et al.

√√√√√√Gordijn

√√√√√√Afuah and Tucci

√√Tapscott, Ticoll et al.

√√√√√Linder and Cantrell

√√√√√√√√√Hamel

is the ontology complete?

have we made any progress?



HOME | AGENDA | FIN

Semi-Structured Interviews with Practitioners

Question Domain Questions

Questions on the use of business concepts & tools

How do you plan the general business objectives of your company? Do you use any conceptual tools to plan your business or to sketch the general direction in which your firm is heading?

If yes, do you use any specific formalism(s) to do this?

If yes, do you use any specific software tool to do this? If yes, which one(s)?

Demonstrations & Explanation of the Ontology

easyJet.com, ColorMailer, Barnes & Noble, Nokia

Questions on the fidelity with real word phenomena

In your opinion, what elements are missing in the model presented before?

In your opinion, what elements should not belong to the model presented before?

How could such a model help you define business indicators?

How could such a model help you or a group of managers make better decisions?

How could such a model improve some parts of strategic planning?

How could such a model make it easier to chose and design appropriate information systems (e.g. software purchases like Customer Relationship Management or Supply Chain Management...)

How would it be able to foster innovation in a company with such a model?

How do you think such a model could improve business process design and engineering?

How could it be helpful to have such a model to communicate your business model. (when making decisions, to communicate with employees)

Final discussion Do you have any final comments?

fidelity with real world phenomena?

potential applications of the business model concept and ontology?

use of concepts and tools?



HOME | AGENDA | FIN

Interview Outcome

employees

use of concepts

use of tools

trial & error

defining indicators

improving decision

making

improving strategic

planning

helping in the design of IS

s

increasing innovation

improving process design

improving com

munication

Retail over Internet 3 little no yes q1 q2 q3 q4 q5

Software in the mobile industry 5 little no yes q6 q7 q8 q9 q10

Service over Internet 15 no no yes q11 q12 q13 q14 q15

Service in Finance 31 no no no q16 q17

Internet Industry Platform 80 yes no yes q18 q19 q20 q21

Industry 400 yes no no q22 q23 q24 q25 q26

Entertainment10-

1200no no yes q27

Transport 3'315 no no yes q28 q29 q30 q31

Consultant 1 yes no - q32q33, q34

q35 q36 q37 q38

Consultant 2 yes no - q39 q40 q41 q42 q43

Consultant 3 yes no - q44

green = positive answers, red = negative answers, grey = neutral answers, white = not answered q = quotes

ability to create a transparent big picture

creation of a commonly understood language

helps addressing fundamental questions



HOME | AGENDA | FIN

Case Studies & Use by Others

Company & industry sector Company information

Logifleet – Fleet management systems provider Swiss startup founded in 2002

Factory121 – personalized Swiss watch retailing over the Internet Swiss startup founded in 2003

LeLivre –book retailing over the Internet Subsidiary of book retailer Librairies La Fontaine SA

Ellipse – bricks & clicks book retailing Swiss bookstore founded in 1984

NetMovies – DVD rental over the Internet Subsidiary of Aleance (USA) founded in 2001

MNC – mobile phone services (SMS) Swiss Telecom service provider founded in 1998

Adrenalink – sports marketing and management consultancy Swiss consultancy

Phone-Plus – telecommunication services reseller Belgian venture established in 1999

ZenithVie – life insurance Swiss company

Closed interview questions rated between 1 and 5 (1 = very definitely not, 3 = to some extent, 5 = very definitely) average

Did the concepts exposed in the course "Stratégies et technologies de l'information" allow you to accurately describe the business model of the company you analyzed?

3.89

How closely do the elements of the sample document cover the aspects of the business model analyzed? 4

Was the concept "proposition de valeur" relevant to describe the business model you analyzed? 4.44

Was the concept "clients et canaux de distributions" relevant to describe the business model you analyzed? 3.78

Was the concept "relation-client et confiance" relevant to describe the business model you analyzed? 3.78

Was the concept "activités et compétence" relevant to describe the business model you analyzed? 3.89

Was the concept "partenariat" relevant to describe the business model you analyzed? 4.11

In your opinion is the business model concept useful? 4.33


is the business model concept applicable?

appropriateness of the building block concepts?

MyChocolat

Masters Students’ Class Work

Masters Thesis



HOME | AGENDA | FIN

Montreux Jazz Festival Case Study

VALUE PROPOSITIONs




CAPABILITYies



CUSTOMERs



Franchisees

RELATIONSHIPs

PARTNERSHIPs




ACTORs



SMPA

REVENUE MODEL




COST STRUCTURE



Divers {4%}

PROFIT/LOSS



PRODUCT INNOVATION

FINANCIAL ASPECTS

CHANNELs



Media Sponsors


VALUE CONFIGURATION




concerts


VALUE PROPOSITIONs




CAPABILITYies



CUSTOMERs



Franchisees

RELATIONSHIPs

PARTNERSHIPs




ACTORs



SMPA

REVENUE MODEL




COST STRUCTURE



Divers {4%}

PROFIT/LOSS



PRODUCT INNOVATION

FINANCIAL ASPECTS

CHANNELs



Media Sponsors


VALUE CONFIGURATION




concerts



applicability of ontology?

applicability of prototype?

completeness?



HOME | AGENDA | FIN

Further Research & Further Validation: Test in the Field

h1) A business model ontology based visualization tool can help business practitioners more quickly understand a business model and the relationships behind its elements.

h2) A business model ontology based tool creates a common language to address business model issues an in this regard improves communication between business practitioners.

h3) Discussing business model issues with a business model ontology based tool (to understand business models) has an impact on discussion quality.

proposition



HOME | AGENDA | FIN

STRUCTURE

STRATEGYSTRATEGY

BUSINESS/ORG.BUSINESS/ORG. IT/ISIT/IS

Exploring the Potential: Alignment

Businessmodel

SYSTEMS

GOALS

Strategic impact of IT

Impo

rtan

ce o

f IT

A

pplic

atio

ns+

-

-

StrategicHigh

Potential

Key OP Support

CUSTOMER

INNOVATION

FINANCE

PROCESSES

Balanced ScoreCard

IS roleIS sourcingIS structure

InfusionPROSPECTOR

AllianceANALYZER

UtilityDEFENDER

Alignment profile



HOME | AGENDA | FIN

Discussion?

THE END...

http://www.hec.unil.ch/aosterwa/PhD

The Business Model Ontology a proposition in a design science approach PhD Defense February 4 2004...

Documents

Transcript of The Business Model Ontology a proposition in a design science approach PhD Defense February 4 2004...