Panel > Bled e-Commerce Conference > June 2004 The Business Model Concept and Information Systems BFSH1 - 1015 Lausanne - Switzerland - Tel. +41 21 692.3420

Panel > Bled e-Commerce Conference > June 2004

The Business Model Concept and Information The Business Model Concept and Information SystemsSystems

BFSH1 - 1015 Lausanne - Switzerland - Tel. +41 21 692.3420 – [email protected] - http://www.hec.unil.ch/aosterwa

Université de LausanneEcole des Hautes Etudes Commerciales (HEC)

Introduction

Research question

• Origins, literature, evolution• Research question

The Business Model Ontology

• Elements & relationships• XML application

Product

• Value Proposition• Example

Customer Interface• Channels• Relationships• Example

Conclusion

Table of content

Alex Osterwalder, University of LausanneAlex Osterwalder, University of [email protected]@hec.unil.chhttp://www.hec.unil.ch/aosterwahttp://www.hec.unil.ch/aosterwahttp://businessmodels.blogspot.comhttp://businessmodels.blogspot.com

home | agenda | fin Université de Lausanne

2 © 2004 Pigneur

Agenda

• Research Question – Origins, literature and evolution of the concept

– Research question

• The Business Model Ontology– Elements & Relationships

– More formal approaches, e.g. XML

• Product– Value Proposition

– Example

• Customer Interface– Channels

– Relationships

– Example

• Conclusion


3 © 2004 Pigneur

Origins of the Term and Concept of Business Models

Year in title in abstract

in keywords

in full text

2003 30 159 10 667

2002 22 109 2 617

2001 11 100 7 609

2000 16 67 1 491

1999 3 42 1 262

1998 1 19 0 128

1997 1 14 0 66

1996 0 14 0 57

1995 0 4 0 36

1994 0 2 0 18

1993 0 5 0 18

1992 0 2 0 15

1991 0 1 0 10

1990 0 4 0 7

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Nasdaq

Business Models

S&P

Occurrences of the term « business model » in peer-reviewed journals (in Business Source Premier)

Occurrences of the term « business model » in business journals (in Business Source Premier)compared to the NASDAQ

BUZZWORD or MEANINGFUL ARTIFACT?

BUZZWORD or MEANINGFUL ARTIFACT?


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Business Models in Literature: A Place of Confusion

INDUSTRYANALYSIS

BUSINESS MODELANALYSIS

Porter’s five forcesmodel

Apple: iTunes, iMode…

Transaction Cost Economics

Transaction Cost Economics


5 © 2004 Pigneur

Research Question and Assumptions

ASSUMPTIONS

1. The business model concept has the right granularity to study business design issues

2. If explicitly defined it should improve business design, management & innovation

RESEARCH QUESTION

3. What does a reference model or ontology of business models look like - for subsequent modelling, design and visualization?

specially meaningful in e-business situations

A business model is a conceptual tool containing a set of objects, concepts and their relationships with the objective to express the business concept of a firm. It is a simplified description and representation of the business idea of a company – how it will make money

DEFINITIONDEFINITION


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Evolution of Business Model Research

define & classify business models

list businessmodel components

describe business model elements

model business model elements

apply business model concept

Rappa 2001Timmers 1998

Linder & Cantrell 2000 Magretta 2002Amit & Zott 2001

Afuah & Tucci 2001Hamel 2000Weill & Vitale 2001

Gordijn 2002Osterwalder& Pigneur 2002

definitions & taxonomies

"shopping list" of components

components as building blocks

reference models & ontologies

applications & conceptual tools

acti

vity

outc

omes

auth

ors

Modelling Rigour (towards a business model ontology)

[Osterwalder and Pigneur, 2004, Clarifying Business Models: Origins, Present and Future of the Concept, Communications of the AIS]


7 © 2004 Pigneur

Objectives of the Research: Formalize Business Models

Build 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


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computer-assisted tool

Computer Aided Business Design/Engineering (CABD/CABE)

• Business Model Design & Communication (i.e. the drawing board)• Business Plan Generation• Measurement Systems (Balanced Scorecard)• Visualization

visualizationIndicators/measuresrequirementscommunication

xy

modelling &formalizationlayer

applicationlayer

usagelayer

which model?

which artefact?

Has management improved?

DESIGN SCIENCEDESIGN SCIENCE


9 © 2004 Pigneur

Modelling: The Business Model Ontology

ChannelValue Configuration Value PropositionCapability Customer

LinkActivity OfferingResource Criterion

RelationshipPartnership Actor

MechanismAgreement

RevenueCost Profit

PricingAccount

INFRASTRUCTUREMANAGEMENT

CUSTOMERINTERFACEPRODUCT

FINANCIALASPECTS

[Osterwalder and Pigneur, 2002, An e-Business Model Ontology for Modeling e-Business, Bled Electronic Commerce Conference]DESIGN SCIENCE

DESIGN SCIENCE


10 © 2004 Pigneur

Computer Aided Business Design/Engineering (CABD/CABE)

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

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 for a company’s business plan

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

XML-based document management

[Ben Lagha, Osterwalder and Pigneur, 2001, Modelling e-business with eBML, CIMRE, Tunisia]DESIGN SCIENCE

DESIGN SCIENCE


11 © 2004 Pigneur

Modelling: The Business Model Ontology

ChannelValue Configuration Value PropositionCapability Customer

LinkActivity OfferingResource Criterion

RelationshipPartnership Actor

MechanismAgreement

RevenueCost Profit

PricingAccount

INFRASTRUCTUREMANAGEMENT

CUSTOMERINTERFACEPRODUCT

FINANCIALASPECTS

[Osterwalder and Pigneur, 2002, An e-Business Model Ontology for Modeling e-Business, Bled Electronic Commerce Conference]DESIGN SCIENCE

DESIGN SCIENCE


12 © 2004 Pigneur

Value proposition

• Name• Description• Reasoning (use, risk, effort)• Life cycle (creation, purchase, use, renewal, transfer)• Value level (me-too, innovation/imitation, innovation)• Price level (attractive, market, high-end)

Value Proposition

Offering

setOf isA

Target CustomersCapabilities

What we offer?

Target CustomersCapabilities Value PropositionCapabilities Bird’s Eye View

Offering 1

Target CustomersCapabilities Value PropositionCapabilities

Offering 2 Offering 3 Offering 4

Detailed View


13 © 2004 Pigneur

Value Proposition Attribute – Reasoning on Value

• Use– When a value proposition mainly creates value through its usage, e.g.

electricity

• Risk (reduction)– When a value proposition diminishes risks, e.g. derivative financial products,

e.g. utility computing

• Effort– When a value proposition makes a customers life easier, e.g. online

shopping, e.g. car leasing (financial effort)


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Value Proposition Attribute – (Product) Life Cycle

• Creation– The moment the value is created, e.g. participatory sport shoe design (Web)

• Purchase– The moment the ownership of the value is obtained, e.g. one-stop-shopping

• Use– The moment the value is consumed, e.g. reading a book or turning on a light

• Renewal– The moment the value is renewed, e.g. software updates

• Transfers– The moment the value is transferred, e.g. recycling


15 © 2004 Pigneur

Value Proposition Attribute – Value Level (how much?)

• Me-too – My value proposition is the same as others

• Innovative imitation– My value proposition is similar to others but with innovative elements

• Excellence– Create the most valuable customer experience

• Innovation– My value proposition is the completely new


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Value Proposition Attribute – Price Level

• Attractive– I am cheaper than the market

• Market– I am priced like the market

• High-End– I am more expensive than the market


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Offerings: easyMoney.com Illustration

Offering

setOf isA


offerings

attributes


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Application: The Value Map (Kambil et al. 1997)p

rice

value

easyMoney.com

free

economy

market

high-end

me-too

Imitativeinnovation

excellence innovation

major credit cards


By seizing the value level and price level of the competitors on a certain market their competitive positioning becomes comparable and visualizable


19 © 2004 Pigneur

Formalizing Customer Relationships

Value Propositionitin

Distribution Channel

LinkElementary Value

Proposition

Target Customer

Criterion

Relationship

Mechanism

Revenue

Pricing

Value Proposition

Pricing

CUSTOMER RELATIONSHIP

BLOCK


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Target Customers

Value Proposition

Target Customer

Criterion

setOf


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Distribution Channels

Value Proposition Distribution Channel

Target Customer

setOf

Actorby

Elementary Value Proposition

Distribution Channel Link

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

isA


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Visualizing Channels at Nokia

Advertising of new mobile phone models

Mobile phone catalogue

Advertising of new Nokia and other mobile

phones

Phone subsidies by operators, in store sales

force

Promotion of state-of-the art Nokia equipment

Mobile phone catalogue Only Nokia USA Support, games, cartoons, ring tones

Profile evaluator, phone comparison, product

catalogue

Support, games, cartoons, ring tones

Nokia.com

Nokia.xy(Country websites)

Telecom operators

Club Nokia(Web site per

nation)

Nokia Concept Stores

Awareness Evaluation Purchase After sales

Nokia Snowboard World cup, Beach

volleyball

Nokia Events

Personalized support, games, ring tones,

editors

Qualified Nokia sales personnel

In store sales of Nokia equipment

In store sales of Nokia and other

equipment

Promotion of state-of-the art Nokia equipment

Courses on the use of Nokia phone features

Advertising of new mobile phone

technology & models

Advertising of new mobile phone

technology & models

Purchase of games, images, ring tones

Support

Support, games, SMS, MMS, ring

tones

Nokia Academy

Cha

nnel

s

Links


23 © 2004 Pigneur

Relationships

Value Proposition

Target Customer

Relationship Mechanism

setOf

Relationship

Elementary Value

Proposition

Distribution Channel

Channel Link

basedOn

•Personalization•Trust•Brand

•Acquisition•Retention•Add-on Selling


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value value value value value valuevalue

Goal Acquisition Retention Add-on selling

Relationship description

Orange tries to make new phone models affordable and tries to be present in the market as a young brand for communicating human emotions.

Orange rewards loyalty and communications of its customers with points, which can be used to buy a new mobile phone or pay bills.

Orange tries to make customers use data services, such as WAP, SMS and MMS as much as possible (especially teenagers).

Name of the relationship mechanism

Phone subsidies Orange World portal Habbo Hotel Loyalty points Location based services

SMS Publisher Orange Heartbreak

Relationship mechanism description

Orange pays a part of or the whole price of a new phone a customer wants to buy in exchange for a 12-month contract with Orange

A portal that provides a mixture of news, sports, entertainment and mobile phone features, such as games. Customer login for Orange phone account management

A virtual meeting place with public and private rooms where people can gather and chat, handle e-mail, instant messages and SMS’

- Location based services for places of interest, route planning, traffic and cinema guides

A tool that allows customers to create their own SMS-channel to send information to channel-subscribers

SMS-based services that allow (teen) customers to flirt anonymously by using their mobile phone

Reasoning Risk: Minimizes the risk to be stuck with an expensive phone that is soon outdated.Use: Customers can afford the newest mobile phones with the newest phone features (e.g. MMS)

Use: Provides customers and prospects with an information portal and mobile entertainment services. Allows customers to manage their phone account

Use: Provides potential (teen) customers with a place to hang out and manage their e-mail, instant messages and SMS’.

Risk: Minimizes the risk to be stuck with an expensive phone that is soon outdated.Use: Customers can afford the newest mobile phones with the newest phone features (e.g. MMS)

Efforts: minimizes the efforts for finding useful and location-based information

Use: Allows customers to send information to a list of people that are interested in the same topics (e.g. info for the members of a hobby soccer team)

Use: Allows teenagers to resolve the most pressing problems of their age - love issues – without losing their face.

Customer Buying Cycle

Evaluation Awareness Awareness After Sales After Sales After Sales After Sales

Value level/ price level

Function - Brand Brand - Personalization Personalization -

Channel Orange shops Internet Internet - Mobile phone Mobile phone -

Retailers Internet

Target customer

All prospects Customers and prospects Teen customers and prospects

All current customers Nomad customers Active teen customers

Teen customers


25 © 2004 Pigneur

Conclusion I: Evaluating Business Model Usage

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

[Osterwalder and Pigneur, 2004, Investigating the Use of the Business Model Concept through Interviews, ICEB, Beijing]QUALITATIVE RESEARCH

QUALITATIVE RESEARCH


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Conclusion II

We build Business Models in order to

• better understand business– What do I offer / to whom / how do I do this & with which partners

• be able to better understand how concepts are related– Navigate through different business perspectives and angles

• Build software-based business design tools– Computer assisted business engineering/design (CABE/CABD)

• Create new business model-based management tools– Management under uncertainty– Business Model comparison– Writing business plans


27 © 2004 Pigneur

Questions or Demo

Documents

Panel > Bled e-Commerce Conference > June 2004 The Business Model Concept and Information Systems BFSH1 - 1015 Lausanne - Switzerland - Tel. +41 21 692.3420