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Institute for Software Technology and Interactive Systems Vienna University of Technology Favoritenstraße 9-11/188-3. 1040 Vienna. Austria Tel.: +43 (1)

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Presentation on theme: "Institute for Software Technology and Interactive Systems Vienna University of Technology Favoritenstraße 9-11/188-3. 1040 Vienna. Austria Tel.: +43 (1)"— Presentation transcript:

1 Institute for Software Technology and Interactive Systems Vienna University of Technology Favoritenstraße 9-11/188-3. 1040 Vienna. Austria Tel.: +43 (1) 58801 - 18861, Fax: +43 (1) 58801 - 18896 Business Models with special focus on e3-Value ©

2 Agenda Business Model vs. Strategy The 3 views of a Business Model Business Modeling vs. Business Process Modeling e3-Value Artifacts & Syntax of e3-Value e3-Value example Tool support Other ontologies References 2

3 Business Model Definition (1) “In the most basic sense, a business model is the method of doing business by which a company can sustain itself -- that is, generate revenue. The business model spells-out how a company makes money by specifying where it is positioned in the value chain.” (Rappa 2001) “This [the Internet business model] is a set of Internet- related activities - planned or evolving - that allows a firm to make money using the Internet and to keep the money coming”. (Afuah/Tucci 2001) 3

4 Business Model Definition (2) marketing model Architecture for product, service and information flows, including a description of the various business actors and their roles (‘organisation of the business’); Description of the potential benefits for the various business actors; Description of the sources of revenues. Business model Marketing (business) strategy (Timmers 2001) 4

5 Business Model vs. Strategy Business models specify the relationships between different participants in a commercial venture, the benefits and costs to each and the flows of revenue. Business strategies specify how a business model can be applied to the market to differentiate the firm from its competitors (Elliot, 2002) (Osterwald & Pigneur): a business model can be seen as the missing link between strategy and business processes or in other words the linkage between the planning and the implementation level of a business environment Business Model ≠ Business Plan 5

6 The 3 Views of a Business Model Classification (Timmers, Rappa) – which types of business model 29 different types of business model, in 9 categories Brokerage, Advertising, Infomediary, Merchant (Wholesaler, Retailer), Manufacturer (Direct), Affiliate, Community, Subscription, Utility (on demand model) Concrete model (for enterprises) Meta model – provide means to „model“ a business model Ontologies like …E3-Value, REA, BMO 6

7 What is Business Modeling? E-Commerce Information System CEO Programmer Modeler What? How? Just do it ;-) 7

8 Business Modeling is not Business Process Modeling Business Process Modeling time-order creation of a common approach for work to be carried out; incremental improvement of processes (e.g. efficiency); support of processes by workflow management systems; analysis of properties of a process (e.g. deadlock free); Business Modeling no time-order rationale for e-commerce systems from a business point of view concept of value stakeholders creating and exchanging objects of value with each other benefits & revenues profitability sheet 8

9 Business Process Modeling who are the actors involved in the operations which operational activities can be distinguished which activities are executed by which actors what are the inputs and outputs of activities what is the sequence of activities to be carried out for a specific case which activities can be carried out in parallel for a specific case 9

10 Business Modeling who are the value adding business actors involved what are the offerings of which actors to which other actors what are the elements of offerings what value-creating or adding activities are producing and consuming these offerings which value-creating or adding activities are performed by which actors 10

11 We concentrate on… Slides from a Tutorial at CAISE 2006 by Jaap Gordijn, Hans Akkermans and Michael Petit extended by material on © 11

12 3-Layer approach Management Administration IT Business Models (value perspective) Business Process Models (process flow perspective) Deployment Artifacts (execution perspective) plattformunabhängig plattformspezifisch E3-Value UMM BPMN BPEL 12

13 xxx 13

14 Notation of Business Models Business models are presented as informal text Ad-hoc graphical presentations Spread sheets Limitations No clear and unambiguous specification of the business issue Manifests the gap between business and IT folks E-3 Value Defines how economic value is created Defines which economic value is exchanged in a network of actors 14

15 Network Constellations “A construct where actors come together to co- produce value with each other” (Normann & Ramirez) Similar to: value & business webs (also called b-webs): “contributors that come together to create value for customers and wealth for their stakeholders” (Don Tapscott, “Digital Capital”, 2001 !!!!) Emerged due to widespread use of the Internet Examples: Cisco Systems, Dell, but also industries such as Electricity supply Most Internet services such as news, market places, entertainment 15

16 Network Constellations

17 While designing constellations … Concerns are: Multiple enterprises: in case of conflicts no central decision taking authority Multiple stakeholders: often confusion about which product/service we offer with whom, long before talking about IT Short timeframe: ~weeks available for designing a constellation offering a particular service (time to market) Economic & technical feasibility 17

18 Reasons to model constellations Eliciting a constellation (under design) Who are the actors (enterprises and final customers) involved? What do they transfer of economic value to each other, and what do they request in return for that? Why do they transfer these values? What activities do they perform to produce/consume? Representing a value model using an ontology and conceptual modeling techniques Analyzing properties of a constellation Economic sustainability for all actors Technical feasibility 18

19 Reasons to model constellations (2) A precise and shared understanding of the constellation Checking common business rules: For business requirements and profitability e.g. “one good turn deserves another” Analysis of (economic) feasibility: scenarios Starting point for Information Systems development: networked value constellations e.g. for assessing technical feasibility 19

20 Hello world in e 3 value © 20

21 E3-value concepts Actor Value Object Value Interface Value Offering Value Transfer Market Segment Value Activity Composed actor 21 Is the meta model correct?

22 Actor Models an economically independent entity Example: enterprises and end consumers profit and loss responsible business units Graphically:  Rectangle + enterprise or role name Def: An actor is an independent economic (and often legal) entity. By carrying out value activities, an actor makes a profit or increases its utility. In a sound, viable, e-business model, each actor should be capable of making a profit. 22

23 Value object Models things of economic value that can be observed. Note: valuation itself is subjective! Example: Money, Music, Car, Electricity, … Graphically: […] Def: Is a service, a good, money, or even an experience, which is of economic value for at least one of the actors involved in a value model. 23

24 Value port Models provisioning or requesting value objects to or from actor’s environment Change of ownership, or a change in rights Used to abstract away from internal business processes Example: Requesting (in-port) money (a value object) Offering (out-port) a good Graphically: Triangle Peak signals provide / request Def: An actor uses a value port to show that it wants to provide or request value objects. The concept of port enables us to abstract away from the internal business processes and focus only on how external actors and other components of the e-business model can be plugged in. 24

25 Value interface Groups in-going and out-going value offerings Models economic reciprocity Example: Value interface: music + payment + online access + payment Graphically: Rectangle (with round edges) covering value ports © Def: Actors have one or more value interfaces, grouping individual value ports. A value interface shows the value object an actor is willing to exchange in return for another value object through its ports. The exchange of value objects is atomic at the level of the value interface. 25

26 Value offering Value offering: groups equally directed ports models bundling: mixed bundling, only of value in combination, … Example: Value offering: music + online access Graphically: No graphical representation i.e. all value ports of an value interface that either provide or consume value objects Def: A value offering is a set of value exchanges that shows which value objects are exchanged via value exchanges in return for other value objects. A value offering should obey the semantics of the connected value interfaces: Values are exchanged through a value interface on all its ports or on no ports at all. 26

27 Value transfer It shows which actors are willing to transfer value objects with each other. Graphically: A connection (line) between two value ports. The transferred value object is specified on this connection. Example: Def: A value transfer connects two value ports with each other. It models one or more potential trades of value objects. 27

28 Value transaction A value transaction groups all value transfers that all should happen, or none at all, as a result of how the value interfaces are chosen Example: Value transaction 28

29 Market segment Graphically: Stack of actors Example: ADSL light/heavy/business users Surfers assign value differently Surfers assign value equally Def: A market segment is a concept that breaks a market (consisting of actors) into segments that share common properties. It shows a set of actors that for one or more of their value interfaces, value objects equally. 29

30 Value activity Shows activities that are expected to be profitable for at least one actor Models decoupling of a legal entity from what it is doing Needed to discuss “who is doing what” in a structured way Example: Def: An actor performs a value activity for profit or to increase its utility. The value activity is included in the ontology to discuss and design the assignment of value activities to actors. As such, we are interested in collecting activities that can be assigned as a whole to actors. Consequently, such an activity should be profitable or increase utility. 30

31 Actor composition Models that actors offer something of economic value jointly as a partnership Not: ownership Def: For providing a particular service, several actors might decide to work together and to offer objects of value jointly by using one value interface to their environment. We call such a partnership an actor composition. 31

32 Use Case Maps (Scenario Path) for e-Business Value interfaces between different actors/activities are related via value transfers Value interfaces of same actor/activity are related by dependency paths Purpose: to make value models “computable” © End stimulus Start stimulus OR AND 32

33 Dependency path Consists of one or more segments related by connection elements and start-and-stop stimuli. Indicates which exchanges through values interfaces result in further exchanges End stimulus Start stimulus OR AND 33

34 Stimulus A scenario path starts with a start stimulus Start stimulus is an initiating event caused, for example, by an actor. A scenario path ends with one or more stop stimulus. A stop stimulus indicates that the scenario path terminates. End stimulus Start stimulus 34

35 Segment A scenario path has one or more segments. Segments relate value interfaces to each other by connections Show that an exchange on one value interface causes an exchange on another value interface. 35

36 Connections Connections relate individual segments. An AND fork splits a scenario path into two or more subpaths. An AND join collapses subpaths into a single path. An OR fork models a continuation of the scenario path into one direction that is to be chosen from several alternatives. (XOR Semantics!) An OR join merges two or more paths into one path. A direct connection interconnects two individual segments A scenario path must obey the semantics of the value interface connected by value exchanges: Either objects are exchanged on all its ports or on none at all. 36 OR AND 36

37 Value transfer/exchange/object: Possession vs. Ownership 37 What is a value exchange: transfer of possession or of rights? You can possess an object, but not have rights of ownership for it Possession is not ownership Suggestion: an exchange that only involves a transfer of possession, but not rights is not a value exchange

38 E3-Value Concepts Summary 38 Is the meta model correct?

39 Waste Management Example 39

40 © “The Amsterdam Times” Idea: “We want to offer our readers new articles via the Internet online also, to: protect our channel to customers (readers); to exploit our news archive better; to offer readers more value for money; to learn how to operate in a wired world; …” 40

41 View for free 41

42 News – BAP Consortium 42

43 © Pay per view 43

44 Assessing Economic Sustainability The question is: Which scenario is the most profitable one? 44

45 Assessing Economic Sustainability Economic sustainability is assessed on a per actor basis by: Counting the number of value transfers Assigning economic value to value objects obtained and provided Calculating a net value flow by multiplying the number of value transfers times the value objects they transfer Summing up these value flows in a net value flow sheet (Discounting net value flows sheets, to account properly for the value of time) 45

46 Example “A traveler wants to travel from Amsterdam to Paris. He decides to do so by a high speed train. During traveling, it is possible to buy some food on board of the train. Two alternative are possible. First, the food can be included as part of the train trip. Second, the food can be optional.” 46

47 A value web: Both a train trip and food Actor Value interface Value port Value object Value transfer 47

48 Net value flows A net value flow for an actor equals: The economic value for all ingoing value objects minus the economic value for all outgoing value objects Assumption: for a sustainable constellation, all actors in the constellation should have a positive net value on the long term A discounted net value flow takes a long period into consideration, and accounts for the value of time 48

49 A first example A Traveler and a Railway company Value InterfaceValue PortValue TransferOccurrencesValuationEconomic ValueTotal {train trip,food,MONEY,MONEY} 5 -1050 in: train trip(all transfers)500 in: food(all transfers)500 out: MONEYMONEY510-50 out: MONEYMONEY5200-1000 INVESTMENT 0 EXPENSES 0 total for actor -1050 Value InterfaceValue PortValue TransferOccurrencesValuationEconomic ValueTotal {MONEY,food} 5 50 in: MONEYMONEY51050 out: food(all transfers)500 {MONEY,train trip} 5 1000 in: MONEYMONEY52001000 out: train trip(all transfers)500 INVESTMENT 0 EXPENSES 0 total for actor 1050 Traveler Railway company

50 Steps to calculate a net value sheet 1. Count the number of times value transfers that take place, by considering the dependencies (e.g. the consumer need) and value transfers; 2. Assign economic value to value objects obtained and delivered by each actor; 3. Calculate the net value flow sheet by subtracting the value of all outgoing value objects from the value of all incoming value objects, per actor. 50

51 Counting value transfers Another example Find traces using needs Follow trace … until a boundary element Propagate need occurrences All needs should consider the same timeframe; know this timeframe (day, month, year) 51

52 Counting value transfers cont’d OR fork An OR fork splits occurrences depending on the stated fractions 52

53 Counting value transfers cont’d AND fork An AND fork duplicates occurrences of the in-port of the fork 53

54 Counting value transfers cont’d OR join An OR join sums up the occurrences of the in-ports of the fork 54

55 Counting value transfers cont’d Explosion/Implosion element An explosion / implosion element multiplies / divides the occurrences of the in-port of the element 55

56 Counting value transfers cont’d Value interface A value interface inherits the occurrences of incoming dependency element 56

57 Download e3 value toolset See © 57

58 © End of Story 58

59 Other Ontologies REA – Ressource Event Agents From the Accounting Theory Ressources exchanged between Actors, triggered by a certain Event REA is a business enterprise ontology expressing exchanges, policies and plans For interoperability, REA is used in ISO Open-edi (ISO 15944- 4) and UN/CEFACT‘s Modeling Methodology UMM Work by William E. McCarthy BMO – Business Modeling Ontology From Osterwalder & Pigneur Expresses the business logic of a specific firm Focusing on intra-organizational business dependencies 4 basic areas: value proposition, customer interface, infrastructure management, financial aspects 59

60 The take-home message … Before embarking on an IS development track for multi-enterprise information systems supporting IT- enabled value propositions: You’d better first explore the constellation of enterprises from an economic perspective And understand why the multi-enterprise IS is needed from the business point of view in the first place. E3-Value models multi-enterprises network constellations from a “value-point-of-view” E3-Value, REA, BMO are the most promising approaches in Business Modeling (so far) 60

61 Referenzen (1) Jaap Gordijn, Hans Akkermans and Hans Van Vliet. Business Modelling is not Process Modelling. In Conceptual Modeling for E-Business and the Web, ECOMO 2000, Vol. 1921(40-51) of LNCS, Springer, 2000. J. Gordijn and J.M. Akkermans, "e 3 value: Design and Evaluation of e-Business Models", IEEE Intelligent Systems, special issue on e-business, Vol. 16, No. 4, pp. 11-17, 2001 Jaap Gordijn, Eric Yu, Bas van der Raadt, “e-Service Design Using i* and e3value Modeling”, IEEE Software, May/June 2006, pp. 26-33. J. Gordijn and J.M. Akkermans, "Value based requirements engineering: Exploring innovative e- commerce idea", Requirements Engineering Journal, Vol 8, Nr 2, pp. 114-134, 2003 Timmers, P. (1998). "Business Models for Electronic Markets." Journal on Electronic Markets 8(2): 3-8. 61

62 Referenzen (2) Yves Pigneur, Jaap Gordijn and Alexander Osterwalder. Comparing two Business Model Ontologies for Designing e-Business Models and Value Constellations. Proceedings of the 18th BLED conference (e-Integration in Action), Pages cdrom,, University of Maribor, Maribor, SL, 2005. Osterwalder, A. and Y. Pigneur (2002). An e-Business Model Ontology for Modeling e-Business.15th Bled Electronic Commerce Conference, Bled, Slovenia. Rappa, M. (2001). Managing the digital enterprise - Business models on the Web, North Carolina State University. 2002. Geerts, G. and W. E. McCarthy (1999). An accounting object infrastructure for knowledge-based enterprise models. IEEE Intelligent Systems and Their Applications: 89-94. 62

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