1. A design approach for business model innovation and IT alignment
Université de Lausanne
Ecole des Hautes Etudes Commerciales (HEC)
Uni. Lausanne
Table of content
DESIGN APPROACH
analysis
design
evaluation
BUSINESS MODEL
Business model analysis
IT architecture design
Alignment evaluation
INNOVATION
Business model > SIKS Amsterdam > May 30, 2006
A design approach for business model innovation and IT alignment Alexander Osterwalder Yves Pigneur
Title A design approach for business model innovation and IT alignment
Date October 2005
Author(s) Dr Alexander Osterwalder & Yves Pigneur
University of Lausanne (HEC)
Abstract
The objective of this presentation will be threefold. The first one will be to remind the interests and the roles of the business model concept in requirement engineering and the development of e-business solutions. The second topic will be to point out different types of innovation, and specifically business model innovation in relationship with information and communication technologies. The last concern will outline how an iterative design approach is particularly suited for aligning an IT solution with business strategy.
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2. A design approach for business model innovation and IT alignment
Uni. Lausanne
DESIGN APPROACH | BUSINESS MODEL | INNOVATION
Agenda
Design approach
Business task (and IT service)
Business process (and IT workflow)
Business model (and IT architecture)
Business model
Business model analysis
Product and value proposition
Customer relationship and distribution channel
Operations management and value chain
IT architecture design
Business/IT alignment evaluation
Innovation
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3. A design approach for business model innovation and IT alignment
Uni. Lausanne
Hypotheses
Requirement engineering is not independent from design
but part of the “design loop”: requirement analysis, IT solution design, prototype & evaluation
Goal-based requirement engineering is not appropriate for expressing business needs
but business model-based requirement engineering seems to be adequate
Innovation does not come from (goal-based) requirement engineering
but from business model and design
© Osterwalder & Pigneur
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4. The dominant paradigm: business/IT alignment …
A design approach for business model innovation and IT alignment
Uni. Lausanne
The dominant paradigm: 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
Architecture
Processes
Skills
Administrative structure
Business processes
Skills
© Osterwalder & Pigneur
[Henderson and Venkatraman, 1993]
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5. A design approach for business model innovation and IT alignment
Uni. Lausanne
DESIGN APPROACH | BUSINESS MODEL | INNOVATION
DESIGN APPROACH
TECHNIQUES:
observations
exploration
interviews
surveys
statistics
hypothesises
root cause analysis
problem framing
Requirement
Analysis
Validation
Design
TECHNIQUES:
tests
betas
trials
analytics
simulations
diagnostics
TECHNIQUES:
brainstorming
ideation
experiments
scenarios
models
prototypes
Kelly S., Lyytinen K., Rossi M.: MetaEdit+: A Configurable Multitool CASE environment, Proceedings of the 6th CAiSE Conference, Grete,
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6. Design approach > the designer’s core competencies
A design approach for business model innovation and IT alignment
Uni. Lausanne
Design approach > the designer’s core competencies
The ability to understand the context or circumstances of a design problem and frame them in an insightful way
The ability to work at a level of abstraction appropriate to the situation at hand
The ability to model and visualize solutions even with imperfect information
An approach to problem solving that involves the simultaneous creation and evaluation of multiple alternatives
The ability to add or maintain value as pieces are integrated into a whole
The ability to establish purposeful relationships among elements of a solution and between the solution and its context
The ability to use form to embody ideas and to communicate their value
© Osterwalder & Pigneur
[Conley, 2004]
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7. Design approach > services, process & business model
A design approach for business model innovation and IT alignment
Uni. Lausanne
Design approach > services, process & business model
ANY COMPANY IS COMPOSED OF:
a business logic
business structures & rules
business support systems
VALUE proposition
VALUE CHAIN
Customer (relationship)
BUSINESS
MODEL
THE ALIGNED COMPANY
ENTERPRISE
MODEL
IT/IS
MODEL
Organization GOAL
PROCESS
Team (coordination)
Information OBJECT
SERVICE
User (interface)
© Osterwalder & Pigneur
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8. Design approach > a cross-cutting discipline
A design approach for business model innovation and IT alignment
Uni. Lausanne
Design approach > a cross-cutting discipline
Service
Process
Business Model
Analysis
user goal and task
goal and process
business model
Design
application/service
workflow
IT architecture
Evaluation/Validation
utility/usability
efficiency
profitability/fit
Requirement
Analysis
BUSINESS
MODEL
THE ALIGNED COMPANY
Validation
Design
ENTERPRISE
MODEL
IT/IS
MODEL
© Osterwalder & Pigneur
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9. Design approach > BUSINESS TASK AND IT SERVICE
A design approach for business model innovation and IT alignment
Uni. Lausanne
Design approach > BUSINESS TASK AND IT SERVICE
IS MODEL
Viewpoint:
SOFTWARE ENGINEERING
BUSINESS
MODEL
THE ALIGNED COMPANY
ENTERPRISE
MODEL
IT/IS
MODEL
Information OBJECT
SERVICE
User (interface) 1
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10. Design approach > service > design loop
A design approach for business model innovation and IT alignment
Uni. Lausanne
Design approach > service > design loop
Transaction
Decision (& cognition)
Interaction
GOAL
TASK analysis
Requirement
Analysis
Action
Information
Validation
Design
Interaction
Kelly S., Lyytinen K., Rossi M.: MetaEdit+: A Configurable Multitool CASE environment, Proceedings of the 6th CAiSE Conference, Grete,
TECHNIQUES:
Scenario-based design
Pattern-based
Conceptual modeling
USABILITY
PROTOTYPE
© Osterwalder & Pigneur
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11. Design approach > service > ontology
A design approach for business model innovation and IT alignment
Uni. Lausanne
Design approach > service > ontology
Viewpoint:
HCI ENGINEERING
WHAT?
ONTOLOGY
GOAL
HOW?
WHO?
TASK
USER
Action
Information
Financial aspects
HOW MUCH?
Interaction
© Osterwalder & Pigneur
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12. Design approach > service > requirement analysis
A design approach for business model innovation and IT alignment
Uni. Lausanne
Design approach > service > requirement analysis
Goal-based requirement engineering
Task analysis
[van Lamsweerde, 2000] [Rolland, 2003] [Yu, 1994] [Paternò, 2002]
© Osterwalder & Pigneur
[Rolland, 2003] [Yu, 1994] [Paternò, 2002]
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13. Design approach > service > IT solution design
A design approach for business model innovation and IT alignment
Uni. Lausanne
Design approach > service > IT solution design
Action design
Focus on functionality
Information design
Information provided to the users by the systems
Interaction design
Details of user action and feedback
Scenario use case hand sketch …
© Osterwalder & Pigneur
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14. Design approach > service > prototype
A design approach for business model innovation and IT alignment
Uni. Lausanne
Design approach > service > prototype
Lo-fi prototype Hi-fi prototype
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15. Design approach > service > usability evaluation
A design approach for business model innovation and IT alignment
Uni. Lausanne
Design approach > service > usability evaluation
Usability testing with user model-based > service quality
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16. Design approach > service and process alignment
A design approach for business model innovation and IT alignment
Uni. Lausanne
Design approach > service and process alignment
© Osterwalder & Pigneur
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17. Design approach > BUSINESS PROCESS (AND IT WORKFLOW)
A design approach for business model innovation and IT alignment
Uni. Lausanne
Design approach > BUSINESS PROCESS (AND IT WORKFLOW)
ENTERPRISE MODEL Viewpoint:
BUSINESS PROCESS (RE-) ENGINEERING
BUSINESS
MODEL
THE ALIGNED COMPANY
ENTERPRISE
MODEL
IT/IS
MODEL
Organization GOAL
PROCESS
Team (coordination)
Information OBJECT
SERVICE
User (interface) 2 1
© Osterwalder & Pigneur
> State of the art in requirement engineering > Strategic fit weakly addressed
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18. Design approach > process > design loop
A design approach for business model innovation and IT alignment
Uni. Lausanne
Design approach > process > design loop
Organization
Coordination
Integration
BUSINESS PROCESS analysis
Requirement
Analysis
Activities
Resource
Validation
Design
Control
Kelly S., Lyytinen K., Rossi M.: MetaEdit+: A Configurable Multitool CASE environment, Proceedings of the 6th CAiSE Conference, Grete,
EFFICIENCY
simulation
TECHNIQUES:
Use case and scenario
Best practice (pattern-based)
Conceptual model
© Osterwalder & Pigneur
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19. Design approach > process > ontology
A design approach for business model innovation and IT alignment
Uni. Lausanne
Design approach > process > ontology
Viewpoint:
ENTERPRISE MODELING
BPR
WHAT?
ONTOLOGY
ORGANIZATIONAL GOAL
HOW?
WHO?
PROCESS
AGENT
Activities
TEAM
Resource
Financial aspects
HOW MUCH?
Control
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20. BUSINESS MODEL AND IT ARCHITECTURE
A design approach for business model innovation and IT alignment
Uni. Lausanne
DESIGN APPROACH | BUSINESS MODEL | INNOVATION
BUSINESS MODEL AND IT ARCHITECTURE
BUSINESS MODEL
Viewpoint:
e-BUSINESS DEVELOPMENT
VALUE proposition
VALUE CHAIN
Customer (relationship) 3
BUSINESS
MODEL
THE ALIGNED COMPANY
ENTERPRISE
MODEL
IT/IS
MODEL
Organization GOAL
PROCESS
Team (coordination)
Information OBJECT
SERVICE
User (interface) 2 1
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21. Business model > definition
A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model > definition
A model of the business of a company, 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
Business model analysis
Product and value proposition
Customer relationship and distribution channel
Operations management and value chain
IT architecture design
Business/IT alignment evaluation
© Osterwalder & Pigneur
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22. Business model > design loop
A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model > design loop
Strategy
Innovation
IS Planning
BUSINESS MODEL analysis
Requirement
Analysis
IT infrastructure
Application portfolio
Validation
Design
Measures
Kelly S., Lyytinen K., Rossi M.: MetaEdit+: A Configurable Multitool CASE environment, Proceedings of the 6th CAiSE Conference, Grete,
TECHNIQUES:
Reference model
Building blocks
Conceptual model
ALIGNMENT/FIT
Cost/benefit
© Osterwalder & Pigneur
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23. Business model > ontology > 9 questions
A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model > ontology > 9 questions
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
HOW?
WHO?
Value configuration
Customer segment
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?
© Osterwalder & Pigneur
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24. A design approach for business model innovation and IT alignment
Uni. Lausanne
Value proposition 1
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
HOW?
WHO?
Value configuration
Customer segment
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?
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

25. A design approach for business model innovation and IT alignment
Uni. Lausanne
Value proposition 1
DEFINITION
A VALUE PROPOSITION is an overall view of a firm’s bundle of offerings, products and services, that together represent a benefit or a value for its customers …
refers to [Kambill et al., 1996] …
SCHEMA
refined by
requires
targets
Core capabilities
Value
proposition
Customer segment
Description
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)
© Osterwalder & Pigneur
What do we offer?
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26. Value proposition > example
A design approach for business model innovation and IT alignment
Uni. Lausanne
Value proposition > example
Value Proposition
Event tickets (& access)
B2C offer
Distribution channel reach
(Integrated) B2B solutions
B2B offers
POS affiliation (Easy Outlet)
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27. A design approach for business model innovation and IT alignment
Uni. Lausanne
Customer segment 2
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
HOW?
WHO?
Value configuration
CUSTOMER SEGMENT
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?
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

28. A design approach for business model innovation and IT alignment
Uni. Lausanne
Customer segment 2
DEFINITION
Categorizations of the population into social class or psychologically defined groups
SCHEMA
refined by
targeted by
Value proposition
Customer
segment
Description
Reasoning (segment, community, …)
CRITERION
Category
© Osterwalder & Pigneur
Who are our customers?
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29. Customer segment > example
A design approach for business model innovation and IT alignment
Uni. Lausanne
Customer segment > example
Target Customer
Value Proposition
Event tickets (& access)
Individual event visitors
Distribution channel reach
Events & Organizers
(Integrated) B2B solutions
Venues
POS affiliation (Easy Outlet)
POS Partners
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

30. A design approach for business model innovation and IT alignment
Uni. Lausanne
Distribution channel 3
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
HOW?
WHO?
Value configuration
Customer segment
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?
© Osterwalder & Pigneur
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31. A design approach for business model innovation and IT alignment
Uni. Lausanne
Distribution channel 3
DEFINITION
a set of links or a network via which a firm “goes to market” and delivers its value proposition
SCHEMA
precedes
Distribution
link
is a
refined by
delivers
serves
Value proposition
Distribution
channel
Customer segment
Description
Reasoning
Customer buying cycle (awareness, evaluation, purchase, after sale)
Category (network, internet, call center, …) by
Actor
© Osterwalder & Pigneur
How do we reach our customers? Feel and serve them?
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32. Distribution Channels
A design approach for business model innovation and IT alignment
Uni. Lausanne
Distribution Channels
Distribution Channel
Target Customer
Value Proposition
Ticketcorner POS network
Event tickets (& access)
Affiliate POS network
Individual event visitors
Distribution channel reach
ATMs
Events & Organizers
(Integrated) B2B solutions
Call Center
Venues
POS affiliation (Easy Outlet)
Ticketcorner Website
POS Partners
B2B salesforce
© Osterwalder & Pigneur
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33. Value proposition > strategy canvas
A design approach for business model innovation and IT alignment
Uni. Lausanne
Value proposition > strategy canvas
A way to visualize the strategic profile
Based on the factors that affect competition among industry players
Showing the strategic profile of current and potential competitors, identifying which factors they invest in strategically
© Osterwalder & Pigneur
[Kim & Mauborgne, 2005]
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

34. Value proposition > Strategy canvas > B2C customer (offline)
A design approach for business model innovation and IT alignment
Uni. Lausanne
Value proposition > Strategy canvas > B2C customer (offline)
Value Proposition
Distribution Channel
Target Customer
Ticketcorner POS network
Affiliate POS network
Event tickets (& access)
ATMs
Individual event visitors
Ticketcorner Website
Call Center
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

35. Value proposition > Strategy canvas > B2C customer (online)
A design approach for business model innovation and IT alignment
Uni. Lausanne
Value proposition > Strategy canvas > B2C customer (online)
Value Proposition
Distribution Channel
Target Customer
Event tickets (& access)
Ticketcorner Website
Individual event visitors
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

36. Value proposition > Strategy canvas > B2B customer
A design approach for business model innovation and IT alignment
Uni. Lausanne
Value proposition > Strategy canvas > B2B customer
Value Proposition
Distribution Channel
Target Customer
Events & Organizers
Ticketcorner Website
(Integrated) B2B solutions
Venues
B2B sales force
POS Partners
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

37. Customer relationship
A design approach for business model innovation and IT alignment
Uni. Lausanne
Customer relationship 4
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
HOW?
WHO?
Value configuration
Customer segment
Partnership
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?
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

38. Customer relationship
A design approach for business model innovation and IT alignment
Uni. Lausanne
Customer relationship 4
DEFINITION
customer equity: acquisition, retention, add-on selling
trust and personalization mechanisms, …
SCHEMA
refined by
Value proposition
Distribution link
Relationship
mechanism
concerns
Customer segment
Description
Reasoning (acquisition, retention, add-on selling, …)
Category (trust, personalization, brand…)
© Osterwalder & Pigneur
How do we get and keep our customers?
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39. Core capabilities (resources)
A design approach for business model innovation and IT alignment
Uni. Lausanne
Core capabilities (resources) 5
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
HOW?
WHO?
Value configuration
Customer segment
Partnership
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?
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

40. Core capabilities (and resources)
A design approach for business model innovation and IT alignment
Uni. Lausanne
Core capabilities (and resources) 5
DEFINITION
Resource (assets): available & useful in 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
SCHEMA
Core capability
is a
refined by
required by
Resource
Value proposition
Description
Reasoning
Category (generative, transformative, …) by
Actor
© Osterwalder & Pigneur
What are our key competencies?
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41. A design approach for business model innovation and IT alignment
Uni. Lausanne
Value configuration 6
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
HOW?
WHO?
VALUE CONFIGURATION
Customer segment
Partnership
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?
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

42. A design approach for business model innovation and IT alignment
Uni. Lausanne
Value configuration 6
DEFINITION
Set of interdependent activities that add value for the customers to the company products or services
SCHEMA
Value
activity
Category {principal, support …}
is a
refined by
needs (in)
implements
Resource
Value
configuration
Value proposition
creates (out)
Description
Reasoning
Category {Value chain, Value shop, Value network …} by
Actor
© Osterwalder & Pigneur
How do we operate and deliver?
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43. Value configuration > value chain
A design approach for business model innovation and IT alignment
Uni. Lausanne
Value configuration > value chain
© Osterwalder & Pigneur
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44. Value configuration > category
A design approach for business model innovation and IT alignment
Uni. Lausanne
Value configuration > category
Value chain
Value network
Value shop
© Osterwalder & Pigneur
[Stabell, 1998]
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

45. Value configuration (and resources)
A design approach for business model innovation and IT alignment
Uni. Lausanne
Value configuration (and resources)
Network promotion and contract management
Service provisioning
Infrastructure operation
activities
Mainstream marketing
POS acquisition & development
Event, Venue acquisition
Selling tickets
Printing tickets
Delivering tickets
POS network maintenance
Platform (TicketSoft) operation, development & maintenance
Website maintenance
Operating call center
Installing solutions
resources
Newsletter
Recommendation system
Printing infrastructure
Delivery logistics
Own POS network
Partner POS network
Web platform
TicketSoft
Call center
consists of activities (& resources) associated with inviting potential customers to join the network, selection of customers that are allowed to join and the initialization, management, and termination of contracts governing service provisioning and charging.
consists of activities (& resources) associated with establishing, maintaining, and terminating links between customers and billing for value received. The links can be synchronous as in telephone service, or asynchronous as in electronic mail service or banking.
consists of activities (& resources) associated with maintaining and running a physical and information infrastructure. The activities keep the network in an alert status, ready to service customer requests.
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46. Partnership agreement
A design approach for business model innovation and IT alignment
Uni. Lausanne
Partnership agreement 7
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
HOW?
WHO?
Value chain
Customer segment
PARTNERSHIP
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?
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

47. Partnership agreement
A design approach for business model innovation and IT alignment
Uni. Lausanne
Partnership agreement 7
refined by
Distribution channel
Value configuration
Partnership
agreement
concerns
Core capability
Description
Reasoning
Category {chain, market, network …}
with
Actor
© Osterwalder & Pigneur
How do we collaborate?
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

48. Partnership agreement > category
A design approach for business model innovation and IT alignment
Uni. Lausanne
Partnership agreement > category
MARKET
NETWORK
low
Author
marketing
Distributor
inventory
sales
Information systems
coordination
contents
Shipping
transport
tracking
Affiliate
Customer
buy
content
Bank
payment
deliver
order
sale
critics
Credit card
clearance
returns
Coordination cost
high
low
CHAIN
manufacturer
supplier
retailer
distributor
buyer
product
Production cost
high
© Osterwalder & Pigneur
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49. Value configuration with partners > e3value model
A design approach for business model innovation and IT alignment
Uni. Lausanne
Value configuration with partners > e3value model
© Osterwalder & Pigneur
[Gordijn, 2002]
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

50. A design approach for business model innovation and IT alignment
Uni. Lausanne
Revenue stream 8
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
HOW?
WHO?
Value chain
Customer segment
Partnership
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?
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

51. Revenue stream > categories
A design approach for business model innovation and IT alignment
Uni. Lausanne
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)
© Osterwalder & Pigneur
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52. A design approach for business model innovation and IT alignment
Uni. Lausanne
Revenue Model
Value Proposition
Revenue Model
Target Customer
Event tickets (& access)
Revenue cut on tickets sold
Individual event visitors
Distribution channel reach
Advertising online & print
Events & Organizers
POS affiliation (Easy Outlet)
Fee B2B platform usage
POS Partners
(Integrated) B2B solutions
Fee general contractor service
Venues
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

53. Profit and cost account
A design approach for business model innovation and IT alignment
Uni. Lausanne
Profit and cost account 9
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
HOW?
WHO?
Value chain
Customer segment
Partnership
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?
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

54. Profit and cost account
A design approach for business model innovation and IT alignment
Uni. Lausanne
Profit and cost account
Revenues
Total net revenue
Cost of goods sold
Total Costs of goods sold
Gross margin
Operating expenses
research and development
sales and marketing
general and administration
Total operating expenses
Operating income (loss)
Income (loss) before tax
Net income (loss)
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
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

55. A design approach for business model innovation and IT alignment
Uni. Lausanne
Cost Structure
Cost positions
Percentage of total
Point of sales network development and maintenance
TicketSoft platform development and maintenance
Ticketcorner marketing
Point of sales & event acquisition and maintenance
Website
Call center
R&D
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

56. Business model ontology > model
A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model ontology > model
HOW?
WHO?
Partnership
Actor
Relationship
WHAT?
Capability
Configuration
Proposition
Channel
Customer
Needs
requires
Resource
Activity
Link
Cost
Profit
Revenue
HOW MUCH?
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

57. Ticketcorner Business Model
A design approach for business model innovation and IT alignment
Uni. Lausanne
Ticketcorner Business Model
Partner Network
Customer Relationship
Postfinance
Personalized website
POS partners
Personal info e-update
Kudelski (SkiData)
Event booklet Ticketnews
Core Capability
Value Configuration
Value Proposition
Distribution Channel
Target Customer
Increase reach
(Value network)
Ticketcorner POS network
Event tickets (& access)
Individual event visitors
Increase visibility
Acquire events & venues
Affiliate POS network
Distribution channel reach
Events & Organizers
Develop event coverage
Acquire/develop POS
ATMs
(Integrated) B2B solutions
Venues
Provide payment security
Improve visibility
Ticketcorner Website
POS affiliation (Easy Outlet)
POS Partners
Offer seamless ticketing
Maintain & dev. platform
B2B salesforce
Call Center
Cost Structure
Revenue Model
POS network
Revenue cut tickets
platform (TicketSoft)
B2B platform usage
Marketing
General contractor service
POS & event acquisition
Advertising online & print
© Osterwalder & Pigneur
website
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

58. Ticketcorner Business Model > bird eyes view
A design approach for business model innovation and IT alignment
Uni. Lausanne
Ticketcorner Business Model > bird eyes view
Partner Network
Customer Relationship
Kudelski (SkiData)
Postfinance
POS partners
Personalized website
Personalized info update
(Webmember-Newsmail)
Event booklet Ticketnews
(CH only)
Core Capability
Value Configuration
Value Proposition
Distribution Channel
Target Customer
Increase reach
Increase visibility
Develop coverage
(e.g. of events & venues)
Provide payment security
Offer seamless ticketing
Value network
Acquire events & venues
Acquire/develop POS
Improve visibility
Maintain & develop platform
Event tickets
(sports/culture)
Distribution channel reach
(for events)
(Integrated) B2B solutions
(e.g. TicketSoft, Access)
POS affiliation
(e.g. chains, small stores)
Ticketcorner POS network
Call Center
Affiliate POS network
Ticketcorner Website
ATMs
B2B salesforce
Individual event visitors
(CH, D, AT, I)
Events & Organizers
(Sports, Concerts, etc.)
Venues
(Hallenstadion, Arenas, etc.)
POS partners
(e.g. chains & stores)
Cost Structure
Revenue Model
POS network maintenance
Develop & maintain platform (TicketSoft)
Marketing
POS & event acquisition
Develop & maintain website
Revenue cut of each ticket sold
B2B platform usage
General contractor services
Advertising online & print
(website banner, text in webmember-newsmail, offline Ticketnews Event Booklet)
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

59. Business model > design loop > IT architecture design
A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model > design loop > IT architecture design
Strategy
Innovation
IS Planning
BUSINESS MODEL analysis
Requirement
Analysis
IT ARCHITECTURE
Application portfolio
Validation
DESIGN
Measures
TECHNIQUES:
reference model
Building blocks
Conceptual model
ALIGNMENT
Cost/benefit
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

60. A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model > design loop > IT architecture > application portfolio 2 1
STRATEGIC
HIGH POTENTIAL
Applications
that are critical
to sustaining future
Applications
that may be important
In achieving the future
EMERGING
GROWTH
High IMPORTANCE OF IT APPLICATIONS low 3 4
Applications
that are essential
for success
Applications
that are valuable
for success
MATURITY
DECLINE
KEY OPERATIONAL
SUPPORT
McFarlan
© Osterwalder & Pigneur
High STRATEGIC IMPACT OF IT low
[Ward, 2002]
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

61. A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model > design loop > IT architecture > application portfolio
BUSINESS
MODEL
STRATEGIC
POTENTIAL
future
OPERATIONAL
SUPPORT
Impact of existing IS
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

62. A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model > design loop > IT architecture > application portfolio
STRATEGIC
POTENTIAL
future
OPERATIONAL
SUPPORT
Impact of existing IS
Activities
Strategic
Key Operational
Support
High Potential
Contracting musicians
Database, Office
Contracting sponsors
Ticketing
Website
(NAGRA s
ystem)
Reservation System
Accounting
Promotion
Mailing Database,
Office
CMS
Concerts
(NAGRA System)
Production
F&B
Paycenter
Accounting, Office
Commerce
Merchandising
(NAGRA Syst
em)
Selling recordings
Concert Database
(Music downloading)
manage MJF infrastructure
JAZZ currency & CASH
Paycenter & Views
Volunteer m
anagement
(NAGRA system)
Volunteer Database
Volunteer Database,
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

63. Business model > design loop > IT architecture > ticketcorner
A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model > design loop > IT architecture > ticketcorner
WEB NUB (Easy Tics, TC.com, …)
Ticket
inventory
Ski
inventory
Transport
inventory
AMADEUS reservation system
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

64. A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model > design loop > IT architecture > infrastructure
Application infrastructure
Communication
Data management
IT management
Security
Architecture & standards
IT research & development
IT education
© Osterwalder & Pigneur
[Weil and Vitale, 2002]
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

65. A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model > design loop > IT architecture > infrastructure
Application infrastructure
Communication
Data management
IT management
Security
Architecture & standards
IT research & development
IT education
BUSINESS
MODEL
© Osterwalder & Pigneur
[Weil and Vitale, 2002]
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

66. A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model > design loop > IT architecture > infrastructure
Application infrastructure
Communication
Data management
IT management
Security
Architecture & standards
IT research & development
IT education
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

67. A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model > design loop > IT architecture > balanced scorecard
How to improve our services and our quality?
INNOVATION
Goals Measures
& initiatives
How do the customers perceive us?
Innovation
perspective
CUSTOMER
Goals Measures
& initiatives
Process
perspective
Customer
perspective
Financial
perspective
PROCESSES
Goals Measures
& initiatives
FINANCE
Goals Measures
& initiatives
In which process do we have to prove excellence?
How do shareholder perceive us?
© Osterwalder & Pigneur
[Norton and Kaplan, 1992]
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

68. A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model > design loop > IT architecture > balanced scorecard
Business model > design loop > IT architecture > application portfolio
BUSINESS
MODEL
CUSTOMER
INNOVATION
FINANCE
PROCESSES
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

69. A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model > design loop > IT architecture > balanced scorecard
CUSTOMER
INNOVATION
FINANCE
PROCESSES
INNOVATION
CUSTOMERS
INFRASTRUCTURE
FINANCE
© Osterwalder & Pigneur
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70. Business model > design loop > alignment
A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model > design loop > alignment
Strategy
Innovation
IS Planning
BUSINESS MODEL analysis
Requirement
Analysis
Application portfolio
Measures
VALIDATION
Design
IT infrastructure
TECHNIQUES:
business model description
Building blocks
Conceptual model
ALIGNMENT
Cost/benefit
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

71. Business model > design loop > business/IT alignment
A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model > design loop > business/IT alignment
BUSINESS MODEL
IT ARCHITECTURE
APPLICATION PORTFOLIO
PERFORMANCE INDICATORS
BUSINESS IT
BUSINESS
strategy IT
strategy
strategy
Strategic
fit
infrastructure
ORGANIZATION
infrastructure IS
infrastructure
Function
integration
IT SERVICE
BUSINESS PROCESS
© Osterwalder & Pigneur
[Henderson and Venkatraman, 1993]
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

72. Business model > design loop > business/IT alignment
A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model > design loop > business/IT alignment
VALUE proposition
VALUE CHAIN
Customer (relationship)
BUSINESS
MODEL
THE ALIGNED COMPANY
ENTERPRISE
MODEL
IT/IS
MODEL
Organization GOAL
PROCESS
Team (coordination)
Information OBJECT
SERVICE
User (interface)
© Osterwalder & Pigneur
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73. A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model > design loop > alignment with processes and services
BUSINESS
MODEL
PROCESSES
SERVICES
ENTERPRISE
MODEL
IT/IS
MODEL
Goal-based
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

74. Business model innovation
A design approach for business model innovation and IT alignment
Uni. Lausanne
DESIGN APPROACH | BUSINESS MODEL | INNOVATION
Business model innovation
Innovating in one or several of the business model components and as combining them in new and innovative ways
Managers and executives had a whole new range of ways to design their businesses, which resulted in innovative and competing business models in the same industries.
Before it used to be sufficient to say in what industry you where for somebody to understand what your company was doing because all players had the same business model.
Today it is not sufficient anymore to choose a lucrative industry, but you must design a competitive business model.
In addition increased competition and rapid copying of successful business models forces all the players to continuously innovate their business model to gain and sustain a competitive edge.
© Osterwalder & Pigneur
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75. Business model innovation > typology
A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model innovation > typology
Supply-driven innovation
New way of doing/supplying or new technology
Demand-driven
New or changing customer needs
Similar business model
Same value proposition
Extended business model
Adding new things
New business model
New rules of the game …
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

76. Business model innovation > examples
A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model innovation > examples
1. Value proposition
2. Target customer segment
3. Distribution channel
4. Customer relationship
5. Core capabilities
6. Value configuration
7. Partnership agreement
8. Revenue streams
9. Cost structure
There are examples of business model innovations in each building block. The most obvious is innovating in the value proposition. When mobile phones appeared in the market they offered a different value proposition than fixed line phones. In the early days of the Internet popular indexes like Yahoo! helped people find information on the Web. Regarding target customer segments, low-cost airlines like EasyJet have brought flying to the masses. Dell became really successful by exploring the web as a distribution channel. Gillette has made a fortune by establishing a continuous relationship with customers based on its disposable razors. Apple resurged based on its core capacity of bringing design to computers and electronic gadgets. Cisco became famous for its capacity of configuring activities in new and innovative supply chains. Intel thrived for its capacity to get partners to build on its processing platform. Google tapped in an innovative revenue streams by linking highly specific search results and content with text ads. Wal-Mart became dominant by its ability to slash cost throughout its business model.
Alex Osterwalder
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

77. Business model innovation > disruptive technology
A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model innovation > disruptive technology
A disruptive technology is a technology or an innovation
"that results in worse product performance, at least in the near-term...
[It] brings to the market a very different value proposition than had been available previously...
Products that are based on disruptive technologies are typically cheaper, simpler, smaller, and, frequently, more convenient to use.
[But, they generally] under-perform established products in mainstream markets."
disruption
market
New replaces old technology
Market for new
technology
time
© Osterwalder & Pigneur
[Christensen, 1997] [Danneels, 2004]
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

78. Business model innovation > environmental pressures
A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model innovation > environmental pressures
disruption
enablement
efficiency
TECHNOLOGICAL CHANGE
disruption
market share
new products
needs
new markets
COMPETITIVE FORCES
BUSINESS
MODEL
CUSTOMER DEMAND
THE ALIGNED COMPANY
ENTERPRISE
MODEL
IT/IS
MODEL
intellectual property
WTO
antitrust
The business model of your company is subject to continuous change and influence from external pressures. As a knowledge worker and business designer it is your role to constantly reflect on how to adapt your company’s business model to this changing business environment. In this post I discuss some of the major pressures that directly or indirectly influence your business model and illustrate them through simple examples. I mainly look at 5 pressures coming from technological change, competitive forces, changes in customer demand and changes in the social or legal environment. While this might seem obvious very few companies constantly scan their competitive environment for these 5 forces acting upon their business model Technological change. Understanding the transformational potential of technology for your company’s business model is not an option anymore. It is a must. This does not mean you should be driven by technology, but it means that you should be on the outlook on how it can reinforce or transform your business model. Examples: Retailing has been transformed by the web: Established retailers such as Walmart and Tesco are now among the most successful Internet companies, because they added a new distribution channel to their traditional business model. The music industry is a most-cited of being turned up side down by the digitalization of sounds and images, because its players are incapable of finding new sustainable Internet-era business models Competitive forces. A second-major pressure on a company's business model comes from its competitors. Competitors may be well known and established adversaries or new and unknown incumbents disrupting entire markets. Increasingly competitors also emerge from completely different fields to compete in an established market with a very new business model. Examples: In mobile phone manufacturing established players like Nokia, Motorola and Samsung are fiercely battling for market share with roughly similar business models. In the field of voice telecommunications new kids on the block like Skype are rapidly disrupting the market by offering free or cheap voice over the Internet (Skype’s business model) based on an entirely different business model. But most interestingly sometimes competitors emerge from two very different industries to compete head to head with different business models. This happened when Telcos and Cable TV operators both started offering so-called quadruple plays to the same segment of cusotmers: TV, Internet access, fixed-line telephony and mobile telephony all out of one hand (quadruple play) Customer demand. Pressure to adapt a company's business model may obviously also come from the customer demand side. Changes in consumption patterns, revenue increases and "fashion changes" are just some of the possibilities I would like to mention. Examples: The shift from fixed-line to mobile telephony might be seen as technological change, but it is a nice example of how this relates to changes in customer demand. The fashion industry is a domain which is constantly submitted to changes in customer demand. Companies like Zara have been extremely successful by designing a business model around detecting customer fashion tastes and immediately adapting their offer to that (Zara’s business model) Social environment. Sometimes the social environment and social mood can influence the business model of a firm. This kind of pressure is particularly studied in stakeholder theory. For instance, if a company's business model is centered around low cost production in developing countries it might draw the attention of militant non-governmental organizations (NGOs) that could mobilize public opinion against the firm. Ultimately the social environment always has an indirect influence on customer demand, be this by shaping people’s values, their everyday behavior or their attitude regarding technology adoption. Examples: Nike was subject to activist accusations regarding the ethics of its operations in Vietnam. Subsequently, NGOs put a lot of energy in mobilizing consumer boycotts against Nike. A completely different example of the social environment is the position of the elderly in a society. Traditionally, families have looked after the oldest members of a family. This is still the case in many parts of the developing world, but has changed a while ago in western societies. Demographics in general should be monitored when thinking of the future of one’s business model. Don’t forget that in Japan and large parts of Europe retirees are already one of the most interesting market segments Legal environment. Often changes in the legal environment also make it necessary to adapt your business model. These changes may sometimes come from unexpected places such as consumer or environmental taxes or patent laws. Examples: Taxes on gas or SUVs may shift consumer demand to new and innovative vehicles, such as hybrids or even solar energy cars (I am still waiting for this shift here in Thailand…). This may even lead to an increase in the use of the public transportation system. The introduction of new privacy laws can make some business models that extensively rely on customer information without the customer's explicit accordance illegal. Anti-spamming laws may (hopefully) wipe-out business models based on sending out large trunks of unsolicited mails. Regulating advertisement over mobile phones may limit the range of possible business models in m-commerce. While these 5 forces may seem obvious there are still relatively little tools to constantly scan and map a company’s environment. Simply maintaining a list with the five categories outlined above is a simple, but useful start…
Alex Osterwalder
SOCIAL ENVIRONMENT
LEGAL ENVIRONMENT
stakeholers
environmental values
© Osterwalder & Pigneur
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79. Business model innovation > environment assessment
A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model innovation > environment assessment
VISUALIZATION
ANALYSIS
Multi-perspective
MODEL
REPRESENTATION
Future
issues
LANDSCAPE
Infrastructure
Industry
Customer
Market
Financial
aspects
Observation & capture
STUDY
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

80. Business model innovation > environment assessment > model
A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model innovation > environment assessment > model
Viewpoint:
ENVIRONMENT INTELLIGENCE
Business
process
Business
process
Business
task
Business
task
WHAT?
ONTOLOGY
PRODUCT INNOVATION
HOW?
WHO?
ACTOR NETWORK
ISSUE
MARKET (ADOPTION)
HOW MUCH?
© Osterwalder & Pigneur
[Camponovo, 2004]
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

81. Business model innovation > environment assessment > model
A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model innovation > environment assessment > model
ISSUES
New Channels
Paperless Ticketing
Margins
Ticketing Outsourcing
Software Innovation
Market Consolidation
Exclusivity
Black Markets
Technology Innovation
Service Bundling
Privacy
ACTORS
Ticketing Operators
Distribution Channel Actors
Ticketing Software Platforms
Events
Venues
Event Organizers
Artists
Clubs
Access Systems & Devices
Billing & Payment
Card Owners
Value Added Actors
Regulator
New Actors
MARKET
Individuals
Fans
Corporate Groups
Distribution Channel Actors
Events
Venues
Event Organizers
Artists
Clubs
Card Owners
Value Added Actors
New Actors
VALUE PROPOSITIONS
POS for tickets
Frequentation
Distribution Channel Network
Advertising Space
Ticketing Software Platform
Access Cards
Access Systems
Event Packages
Integrated Solutions (T&A)
Event Management
Corporate Group Events
Database Marketing
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

82. Business model innovation > evolution & change management
A design approach for business model innovation and IT alignment
Uni. Lausanne
Business model innovation > evolution & change management
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

83. Next > wikibook “Business model design and innovation” > content
A design approach for business model innovation and IT alignment
Uni. Lausanne
Next > wikibook “Business model design and innovation” > content
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

84. Next > wikibook “Business model design and innovation”
A design approach for business model innovation and IT alignment
Uni. Lausanne
Next > wikibook “Business model design and innovation”
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp

85. A design approach for business model innovation and IT alignment
Uni. Lausanne
DESIGN APPROACH | BUSINESS MODEL | INNOVATION
Questions …
© Osterwalder & Pigneur
amsterdam.ppt v1.1 (May 30, 2006) /ap & yp