INTRODUCTION BUSINESS MODEL Product Customer Infrastructure BUSINESS/IT ALIGNMENT Alignment

1. Université de Lausanne Ecole des Hautes Etudes Commerciales (HEC) Table of content • INTRODUCTION • BUSINESS MODEL • Product • Customer • Infrastructure • BUSINESS/IT • ALIGNMENT • Alignment • Enterprise model • Applications & platform • BUILDING • ONTOLOGY • CONCLUSION Interop > CAISE-EMOI’05 > June 2005 e-business model ontology for improving business/IT alignment BFSH1 - 1015 Lausanne - Switzerland - Tel. +41 21 692.3416 - yves.pigneur@unil.ch - http://www.hec.unil.ch/yp

2. BUSINESS MODEL | BUSINESS/IT ALIGNMENT | BUILDING ONTOLOGY Agenda • BUSINESS MODEL • Product • Customer • Infrastructure • BUSINESS/IT ALIGNMENT • Alignment • Enterprise model • Applications & platform • BUILDING ONTOLOGY • Logic • Protégé (& PAL) • Protégé OWL/DL (Description Logic)

3. Business model > evolution Occurrences of the term « business model » in business and academic journals(in Business Source Premier) compared to the NASDAQ BUZZWORD or MEANINGFUL ARTIFACT?

4. Business model: buzzword or meaningful artifact? • A buzzword with no precise definition? • […] Executives, reporters and analysts who use the term don't have a clear idea of what it means. They use it to describe everything from how a company earns revenue to how it structures its organization or … • An artifact aggregating … • the value a company offers to one or several segments of customers, and • the architecture of the firm and its network of partners • for creating, marketing and delivering this value and relationship capital, • in order to generate profitable and sustainable revenue streams. [Linder, 2000]

5. A company that defines it’s business model can... • Understand • The process of modeling social systems or ontologies– such as an e-business model – helps identifying and understanding the relevant elements in a domain and the relationships between them • Share knowledge • The use of formalized e-business models helps managers communicate and share their understanding of a business among other stakeholders • React to rapid change • Mapping and using e-business models facilitates change. Business model designers can easily modify certain elements of an existing e-business model Document Formal

6. A company that defines it’s business model can… (continued) • Measure • A formalized e-business model can help identifying the relevant measures to follow in a business, similarly to the Balanced Scorecard Approach • Simulate & learn • e-business models can help managers simulate businesses and learn about them. This is a way of doing risk free experiments, without endangering an organization BSC System thinking

7. Why a business model approach to e-strategy? Conceptual architectureof a business strategy Business Model Strategy Information & Communication Technology (ICT) pressure Business Processes Planning level Architectural level e-Business opportunities & change Implementation level e-Business processes e-Business Technology layer

8. Evolution of research in business model define & classify business models list businessmodel components describe business model elements model business model elements apply business model concept activity outcomes definitions & taxonomies "shopping list" of components components as building blocks reference models & ONTOLOGY applications & conceptual tools authors Rappa 2001 Timmers 1998 Tapscott, 2000 Linder & Cantrell 2000 Magretta 2002 Afuah & Tucci 2001 Hamel 2000 Weill & Vitale 2001 Gordijn 2002 Osterwalder & Pigneur 2002 Geerts and McCarthy, 2002 Modelling Rigour (towards a business model ontology) TOVE

9. BUSINESS MODEL | BUSINESS/IT ALIGNMENT | BUILDING ONTOLOGY BUSINESS MODEL Who are our customers? How do we reach them? How do we get and keep them? What do we offer to our customers? WHAT? VALUE proposition WHO? HOW? Value configuration Customer group Partnership Distribution channel Core capability Revenue Relationship Cost  Trust HOW MUCH? How do we operate and deliver? How do we collaborate? What are our key competencies? What are our revenues? Our pricing? What are our costs?

10. Product Innovation Product innovation Who are our customers? How do we reach them? How do we get and keep them? What do we offer to our customers? WHAT? VALUE PROPOSITION WHO? HOW? Value configuration Customer group Partnership Distribution channel Core capability Revenue Relationship Cost HOW MUCH? How do we operate and deliver? How do we collaborate? What are our key competencies? What are our revenues? Our pricing? What are our costs?

11. refined by Value proposition What do we offer to our customers? 1 • To characterize product innovation, the value propositiondefines • the actual product or service, and • the value or benefits perceived by customers of the products and services offered by the firm requires targets Core capabilities Customer group Value proposition • Reasoning (use, risk, effort) • Life cycle (creation, appropriation, use, renewal, transfer) • Value level (me-too, innovation/imitation, innovation) • Price level (free, economy, market, high-end) • Category(barter, sale, market, buy)

12. Value proposition > price/value Exec jet PRICE High-end High-end Quality, comfort … Value frontier Underperformers market Major airlines economy EasyJet Low cost (frequent flight, on-time schedule, service) free VALUE Me-too Imitative innovation excellence innovation [Kambill, 1997]

13. Value proposition > Montreux Jazz Festival CUSTOMERS MJF concerts Festival visitors MJF off Shops MJF frequentation Sponsors MJF sponsoring Record, TV, artists MJF recordings Franchisees MJF brand & franchise

14. Value proposition > Montreux Jazz Festival

15. Customer relationship Customer relationship Who are our customers? How do we reach them? How do we get and keep them? What do we offer to our customers? WHAT? Value proposition WHO? HOW? Value configuration Customer group Partnership Distribution channel Core capability Revenue Relationship mechanisms Cost HOW MUCH? How do we operate and deliver? How do we collaborate? What are our key competencies? What are our revenues? Our pricing? What are our costs?

16. refined by Customer group Who are our customers? 2 • Categorizations of the population into social class or psychologically defined groups • Area where a firm can specialize and gain competitive advantage • By having lower costs or customer-satisfying differentiation targeted by Value proposition Customer group • Reasoning (segment, community, …) • CRITERION • Category

17. Customer group > Montreux Jazz Festival VALUE PROPOSITION MJF concerts Festival visitors MJF off Shops MJF frequentation Sponsors MJF sponsoring Record, TV, artists MJF recordings Franchisees MJF brand & franchise

18. precedes Distribution channel How do we reach our customers? 3 • A channel can be defined as a set of links or a network via which a firm “goes to market” and delivers its value proposition. Distribution link is a refined by delivers serves Value proposition Distribution channel Customer group • Customer buying cycle(awareness, evaluation, purchase, after sale) • Category(network, internet, call center, …) by Actor

19.  AFTER SALES AWARENESS   PURCHASE EVALUATION  Distribution Channel > Montreux Jazz Festival [Moriarty, 1990] [Muther et al., 2000] [Ives et al., 2000]

20. Distribution Channel > Montreux Jazz Festival

21. refined by Relationship mechanism How do we get and keep our customers? 4 Value proposition Distribution link Relationship mechanism concerns Customer group • Reasoning(acquisition, retention, add-on selling, …) • Category(trust, personalization, brand…)

22. Relationship mechanism • Customer equity • Customer Acquisition • How do we get customers? • Growing market share • Customer Retention • How do we keep customers? • Nurturing customer loyalty • Add-on selling • How do we get customers to buy more? Enhancing Average Revenue Per User (ARPU) • Relationship mechanisms • Trust • Customization (One-to-one) • Recommendation … Certification Verification et authorization Escrow Notary, payments Expertise Guarantee of quality Rating Reputation of actors Insurance Risk management [Blattberg, 2001]

23. Relationship mechanism > Montreux Jazz Festival • Relationship 1 with Sponsors & VIPs. • The MJF carefully pays attention to its relationships with sponsors and VIPs that it embraces the same way. During the Festival it makes wants them to live a unique experience. Therefore, they installed a special host and protocol service. Guests of the MJF (i.e. sponsors and VIPs) and guests of the sponsors are escorted through the venue, have access to the VIP zones and bars and even visit the backstage. …{customer equity: retention} • Relationship 2 with the Festival's visitors. • The MJF maintains an address book of over 60'000 occurrences worldwide which it uses to annually distribute the MJF program. Furthermore, visitors of the MJF website can subscribe to a newsletter that allows them to keep up-to-date and get the Festival program the instance it becomes official. {customer equity: acquisition/retention} • Relationship 3 with all customer segments. • Whereas the beginnings of the MJF in the 70s and 80s were characterized by focusing on acquisition and attracting new festival visitors it has today reached its capacity limits and directs all its efforts to brand building during and after the event. It aims at reinforcing its image of a superior festival and exports this image through franchising.{customer equity: retention}{function: brand}

24. Infrastructure management Infrastructure management Who are our customers? How do we reach them? How do we get and keep them? What do we offer to our customers? WHAT? Value proposition WHO? HOW? Value configuration Customer goup Partnership agreement Distribution channel Capability Revenue Customer relationship Cost HOW MUCH? How do we operate and deliver? How do we collaborate? What are our key competencies? What are our revenues? Our pricing? What are our costs?

25. refined by Core capabilities and resources What are our key competencies? 5 • Resource (ASSETS) • available & useful in detecting and responding to market opportunities or threats • Capability (KNOW-HOW) • Aptitude to exploit and coordinate resources to create, produce, and/or offer products and services to a market Core capability is a required by Resource Value proposition • Category (generative, transformative, …) by Actor

26. Capability > Montreux Jazz Festival VALUE PROPOSITION CUSTOMER MJF concerts Attractive MJF Venue Festival visitors MJF off Mobilize volunteer staff Shops MJF frequentation Atmosphere & experience Sponsors MJF sponsoring Contract stars Record, TV, artists MJF recordings Attract people Franchisees MJF brand & franchise

27. Value configuration How do we operate and deliver? 6 Value activity Category {principal, support …} is a refined by needs (in) implements Resource Value configuration Value proposition creates (out) • Category {Value chain, Value shop, Value network …} • activity level • activity nature by Actor

28. Value configuration > Montreux Jazz Festival

29. Value configuration > Montreux Jazz Festival

30. refined by Partnership agreement How do we collaborate? 7 Distribution channel Value configuration Partnership agreement concerns Core capability • Category{chain, market, network …} • strategic importance • degree of integration • degree of competition • substitutability with Actor

31. Partnership agreement > Montreux Jazz Festival

32. Value configuration and partnership > e3value [Gordijn, 2002]

33. Financial aspects Who are our customers? How do we reach them? How do we get and keep them? What do we offer to our customers? WHAT? Value proposition WHO? HOW? Value configuration Customer group Partnership agreement Distribution channel Core capability REVENUE Customer relationship Cost HOW MUCH? How do we operate and deliver? How do we collaborate? What are our key competencies? What are our revenues? Our pricing? What are our costs?

34. refined by Revenue stream What are our revenues? Our pricing? 8 Value proposition Distribution link Revenue stream concerns Customer group • Category {subscription, sale, advertisement …}

35. Revenue stream > categories Mobile: combination REVENUE PRE-PAID card • Phone • registry • subscription • Usage • Time • Services one time sale registry recurrent Income of the subscription fees to become a member Paid by the buyer and/or the vendor subscription Income of the ad banners posted on the shopfront Paid by the vendor advertisement use transaction Income of online sales paid by the buyer commission Income, percentage of a transaction made by the settlement(affiliate program)

36. refined by Profit and cost account What are our costs? 9 Partnership Value configuration Cost account concerns Core capability • Category

37. Profit model 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

38. Profitability evaluation > e3value

39. Business model (Bird’s eye view)

40. BUSINESS MODEL | BUSINESS/IT ALIGNMENT | BUILDING ONTOLOGY BUSINESS/IT ALIGNMENT Business scope Distinctive competencies IT governance Technology scope System competencies IT governance BUSINESS IT BUSINESS strategy IT strategy strategy Strategic fit infrastructure ORGANIZATION infrastructure IS infrastructure Function integration Administrative structure Business processes Skills Architecture Processes Skills [Henderson and Venkatraman, 1993]

41. BUSINESS MODEL VALUE proposition Value configuration Customer (relationship) ENTERPRISE MODEL ARCHITECTURE & PLATFORM Function integration Organization OBJECT Business PROCESS Team (coordination) Information OBJECT Business TASK User (interface) ONTOLOGY Business/IT alignment: enterprise modeling, applications, ontology … BUSINESS IT BUSINESS strategy IT strategy strategy Strategic fit infrastructure ORGANIZATION infrastructure IS infrastructure

42. BUSINESS MODEL VALUE proposition Value configuration Customer (relationship) ARCHITECTURE & PLATFORM Information OBJECT Business TASK User (interface) Business IT/IS Alignment - IS PLANNING • application portfolio • IT infrastructure services • measures BUSINESS IT BUSINESS strategy IT strategy strategy Strategic fit infrastructure ORGANIZATION infrastructure IS infrastructure Function integration

43. Activities Strategic Key Operational Support High Potential Contracting musicians Database, Office Contracting sponsors Ticketing Website Reservation System Accounting (NAGRA s ystem) Promotion Website Mailing Database, CMS Office Concerts (NAGRA System) Production F&B (NAGRA System) Paycenter Accounting, Office Commerce (NAGRA System) Paycenter Accounting, Office Merchandising (NAGRA Syst em) Paycenter Accounting, Office Website Selling recordings Concert Database Accounting, Office Website (Music downloading) manage MJF infrastructure Production Production JAZZ currency & CASH Paycenter & Views Accounting, Office Volunteer m anagement (NAGRA system) Volunteer Database Volunteer Database, Office Illustration Application portfolio STRATEGIC POTENTIAL OPERATIONAL SUPPORT future Impact of existing IS [Ward, 2002]

44. Illustration IT infrastructure Application infrastructure Communication Data management IT management Security Architecture & standards IT research & development IT education

45. INNOVATION CUSTOMER PROCESSES FINANCE Illustration Measure >Balanced ScoreCard (BSC) INNOVATION CUSTOMERS INFRASTRUCTURE FINANCE

46. BUSINESS MODEL VALUE proposition Value configuration Customer (relationship) Strategic fit ENTERPRISE MODEL ARCHITECTURE & PLATFORM Organization OBJECT Business PROCESS Team (coordination) Information OBJECT Business TASK User (interface) Business IT/IS Alignment - Process and task modeling • Process Viewpoint • IS Viewpoint BUSINESS IT BUSINESS strategy IT strategy strategy infrastructure ORGANIZATION infrastructure IS infrastructure Function integration

47. Business/IT alignment > from business model to process model From business value to organization efficiency … AMSTERDAM FUA

48. Business/IT alignment > from business model to process model From business value to organization efficiency … STOCKHOLM KTH

49. Business/IT alignment > from business model to process model LUXEMBOURG

50. Business/IT alignment > requirement engineering BUSINESS MODEL Organization OBJECTS Business processes Agent (conversation) Individual OBJECTS Business tasks User (interface) BUSINESS PROCESS BUSINESS TAKS GOAL-BASED MODEL?