PhD Seminar INFORGE/HEC e-Business Models HEC 2002 Lausanne, February Alexander Osterwalder HEC Lausanne (+41 21)

Université de Lausanne WEB WEB | AGENDA | FINAGENDA FIN © 2002 Osterwalder, HEC Lausanne e-business 2 Agenda 1.Why business models? 1.Economic environment (the market, the enterprise)p3p3 2.What are they good for?p7p7 2.State of the art in business models 1.Ontologies, business models, toolsp9p9 3.Structure of the research 1.Research levels, research projectsp10p10 4.Structure of my thesis 1.Ontology, prototype, proof of conceptp12p12 5.Sketch of the business model framework 1.4 pillars: Product, customer, infrastructure, financep14p14

Université de Lausanne WEB WEB | AGENDA | FINAGENDA FIN © 2002 Osterwalder, HEC Lausanne e-business 3 Why Business Models? 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 [Linder, 2001] Dynamic business environment –New Information and Communication Technologies (ICT) –Increased & global competition –Shorter product life cycles Fluid company borders & dynamic business networks –Business Webs [Tapscott & al., 2000] –Co-opetition [Brandenburger & al., 1996] –Fluid organizations [Selz, 1999]

Université de Lausanne WEB WEB | AGENDA | FINAGENDA FIN © 2002 Osterwalder, HEC Lausanne e-business 4 e-Business Logic Today Business Processes Strategy Planning level Implementation level Information & Communication Technology (ICT) pressure e-Business processes e-Business Technology layer Positioning Objectives & goals Communication of strategy Problem: Interpretation of strategy Result: Re-inventing strategy ?

Université de Lausanne WEB WEB | AGENDA | FINAGENDA FIN © 2002 Osterwalder, HEC Lausanne e-business 5 e-Business Logic Tomorrow Business Processes Business Model Strategy Planning level Architectural level Implementation level Information & Communication Technology (ICT) pressure e-Business opportunities & change e-Business processes e-Business Technology layer Conceptual architecture of a business strategy

Université de Lausanne WEB WEB | AGENDA | FINAGENDA FIN © 2002 Osterwalder, HEC Lausanne e-business 6 What is an Business Model anyway? A business model is not a description of a complex social system itself with all its actors, relations and processes. Instead it describes the logic of a “business system” for creating value, that lies behind the actual processes. A business model is the conceptual and architectural implementation of a business strategy and represents the foundation for the implementation of business processes Business Processes Business Model Strategy Business Impact

Université de Lausanne WEB WEB | AGENDA | FINAGENDA FIN © 2002 Osterwalder, HEC Lausanne e-business 7 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 (Ushold et al., 1995; Morecroft, 1994). Share knowledge –The use of formalized e-business models (i.e. an ontology) helps managers communicate and share their understanding of a business among other stakeholders (Fensel, 2001). 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 (Petrovic et al., 2001). Objects XML

Université de Lausanne WEB WEB | AGENDA | FINAGENDA FIN © 2002 Osterwalder, HEC Lausanne e-business 8 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 (Norton et al., 1992). 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 (Sternman, 2000). System thinking BSC

Université de Lausanne WEB WEB | AGENDA | FINAGENDA FIN © 2002 Osterwalder, HEC Lausanne e-business 9 State of the Art Ontologies –Enterprise ontologies: TOVE (Toronto Virtual Enterprise), The Enterprise Ontology (html), Core Enterprise Ontology (CEO)html –e-Business Process ontologies (in XML): Transactions (xCBL, cXML), Ontology.org (html)html Business Models –Classification: Timmers (pdf), Rappa (htm), Tapscott.pdfhtm –Modeling (partial…): Hamel, Gordijn, Afuah, Linder (html).html Tools –MIT eBusiness Process Handbook (html)html –System Dynamics...

Université de Lausanne WEB WEB | AGENDA | FINAGENDA FIN © 2002 Osterwalder, HEC Lausanne e-business 10 3 Research Levels Level 1 Level 3 Level 2 e-Business Model Equations e-Business Model Ontology e-Business Model Measurements Understanding model elements and relationships, communicate and share models, change models Pilote, follow, alert Simulate models, play and learn by changing models, understand consequences of change e-Business Model Simulator, e-Business Model Games e-Business Model Balanced Scorecard e-Business Model Framework (eBMF), Language (eBML), Handbook (eBMH) and Design Tool Research ProjectsManagement Use

Université de Lausanne WEB WEB | AGENDA | FINAGENDA FIN © 2002 Osterwalder, HEC Lausanne e-business 11 Research Objectives/Projects E-Business Model Ontology or Framework (eBMF) - concepts/models (components) - links between concepts/models E-Business Model Ontology or Framework (eBMF) - concepts/models (components) - links between concepts/models E-Business Model Handbook - navigate in concepts (www) - graphical representation - illustrative examples E-Business Model Handbook - navigate in concepts (www) - graphical representation - illustrative examples E-Business Model Language (eBML) - ontology representation (xml) - graphical representation - knowledge sharing E-Business Model Language (eBML) - ontology representation (xml) - graphical representation - knowledge sharing E-Business Model Design Tool - computer assisted design - evaluation - change management E-Business Model Design Tool - computer assisted design - evaluation - change management E-Business Model Simulation - scenarios (system dynamics) - learn about Business Models - be prepared E-Business Model Simulation - scenarios (system dynamics) - learn about Business Models - be prepared E-Business Model Games - play, learn & understand E-Business Model Games - play, learn & understand

Université de Lausanne WEB WEB | AGENDA | FINAGENDA FIN © 2002 Osterwalder, HEC Lausanne e-business 12 The Thesis Literature review and e-Business Model Ontology construction –e-business, ontology and business model review –formalizing an e-business model ontology (e-BMO) e-Business Model Visualizer (prototype) –based on the ontology (e-BMO) –e-business case –graphical representation structure Proof of concept –interviews with consultants & executive –e-business case studies

Université de Lausanne WEB WEB | AGENDA | FINAGENDA FIN © 2002 Osterwalder, HEC Lausanne e-business 13 Research Methods Conceptual Research –based on literature (articles, books) –based on observations (case studies) Design Science [Au, 2001; Ball, 2001] –development of artifacts Validation (!?) –of model –of completeness –of utility

Université de Lausanne WEB WEB | AGENDA | FINAGENDA FIN © 2002 Osterwalder, HEC Lausanne e-business 14 Definition of a Business Model A business model is nothing else than 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.

Université de Lausanne WEB WEB | AGENDA | FINAGENDA FIN © 2002 Osterwalder, HEC Lausanne e-business 15 Definition of an e-Business Model PRODUCT INNOVATION INFRASTRUCTURE MANAGEMENT CUSTOMER RELATIONSHIP FINANCIAL ASPECTS

Université de Lausanne WEB WEB | AGENDA | FINAGENDA FIN © 2002 Osterwalder, HEC Lausanne e-business 16 Definition of an e-Business Model Capabilities Value Proposition Target Customer PRODUCT INNOVATION

Université de Lausanne WEB WEB | AGENDA | FINAGENDA FIN © 2002 Osterwalder, HEC Lausanne e-business 17 Definition of an e-Business Model Capabilities Value Proposition Target Customer PRODUCT INNOVATION Resources Value Configuration Partner Network INFRASTRUCTURE MANAGEMENT

Université de Lausanne WEB WEB | AGENDA | FINAGENDA FIN © 2002 Osterwalder, HEC Lausanne e-business 18 Definition of an e-Business Model Capabilities Value Proposition Target Customer Resources Value Configuration Partner Network PRODUCT INNOVATION INFRASTRUCTURE MANAGEMENT Information Strategy Feel & Serve Trust & Loyalty CUSTOMER RELATIONSHIP

Université de Lausanne WEB WEB | AGENDA | FINAGENDA FIN © 2002 Osterwalder, HEC Lausanne e-business 19 Definition of an e-Business Model Capabilities Value Proposition Target Customer Resources Value Configuration Partner Network Information Strategy Feel & Serve Trust & Loyalty PRODUCT INNOVATION INFRASTRUCTURE MANAGEMENT CUSTOMER RELATIONSHIP Cost Structure Revenue ModelProfit/Loss FINANCIAL ASPECTS

Université de Lausanne WEB WEB | AGENDA | FINAGENDA FIN © 2002 Osterwalder, HEC Lausanne e-business 20 Ontology: Relationships Between Concepts CUSTOMER RELATIONSHIP CUSTOMER RELATIONSHIP PRODUCT INNOVATION PRODUCT INNOVATION FINANCIAL ASPECTS FINANCIAL ASPECTS INFRASTRUCTURE MANAGEMENT INFRASTRUCTURE MANAGEMENT resource for resource for sold through revenue for resource for cost feedback for builds on TARGET CUSTOMER VALUE PROPOSITION CAPABILITIES RESOURCES & ASSETS ACTIVITY CONFIGURATION PARTNER NETWORK INFORMATION FEEL & SERVE TRUST & LOYALTY REVENUE MODEL PROFIT / LOSS COST MODEL has needs value for resource for builds on to enable supposes resource for builds on to improve to collect to establish to improve to increase diminishes builds on

Université de Lausanne WEB WEB | AGENDA | FINAGENDA FIN © 2002 Osterwalder, HEC Lausanne e-business 21 Questions & More Information