the business model ontology a proposition in a design science approach phd defense february 4 2004...
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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
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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
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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
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Research Question
How can business models be described and represented in order
to build the foundation for subsequent concepts and tools,
possibly computer based?
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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
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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.
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The Business Model Ontology
ChannelValue Configuration Value PropositionCapability Customer
LinkActivity OfferingResource Criterion
RelationshipPartnership Actor
MechanismAgreement
RevenueCost Profit
PricingAccount
INFRASTRUCTUREMANAGEMENT
CUSTOMERINTERFACEPRODUCT
FINANCIALASPECTS
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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
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Have we Made any Progress: Modeling Rigor
Mentioning Elements Describing Elements Modeling Elements
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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
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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
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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
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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>
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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
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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
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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
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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
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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.
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Compare with Literature
Revenue Model
Cost Structure
PartnershipCapabilityValue Configuration
Customer Relationship
Distribution Channel
Target Customer
Value Proposition
Business model ontology
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
Customer Relationship
Distribution Channel
Target Customer
Value Proposition
Business model ontology
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?
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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?
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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
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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
fidelity with real world phenomena?
is the business model concept applicable?
appropriateness of the building block concepts?
MyChocolat
Masters Students’ Class Work
Masters Thesis
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Montreux Jazz Festival Case Study
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)
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)
fidelity with real world phenomena?
applicability of ontology?
applicability of prototype?
completeness?
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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
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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
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Discussion?
THE END...
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