Business Models

1. Business Models

2. 1 Strategic alignment theory REF:Henderson &Venkatraman IBM SYSTEMS JOURNAL, VOL 38, NO 4, 1999 http://researchweb.watson.ibm.com/journal/sj/382/henderson.pdf

3. 1.1Strategic alignment Model • Answer to the question: “How to reconcile the dramatic increase in the role of IT in organisations and markets with the evidence of minimal productivity gains at a aggregate level of the economy?”

4. 1.1Strategic alignment Model(cont’d) • Inability to realize value from IT-investments is due to the lack of alignment between the business and the IT strategies of the organisations(companies)

5. 1.1Strategic alignment Model(cont’d) • The model is based on two fundamental assumptions: • the economic performance is related to the ability of management to create a strategic fit between the external position of an organisation in the competitive market and the internal appropriate administrative structure to support its execution • This strategic fit is a dynamic process

6. 1.2 Concept of Strategic Fit • Business Strategy : • external domain(view) • company versus competitive market • products • make or buy decision • partnership • distribution channels • ...

7. 1.2 Concept of Strategic Fit(cont’d) • Internal domain • How do we support the external domain? • Business processes • product development • customer services • human resource skills • … • IT-strategy: same concept as for the business strategy:internal and external views

8. Business strategy external product market offering pricing,quality,channels make /buy of products internal admin structures business processes human resources IT strategy external information technology scope systemic competence IT governance internal IT architecture IT processes IT skills 1.2 Concept of Strategic Fit(cont’d)

9. 1.2.1 IT strategy: External • Information technology scope • I.e specific information technologies that support current business initiatives or could shape new business strategy initiatives for the company • electronic imaging • internet business • expert systems • E-business • Wireless communications • …

10. 1.2.1 IT strategy: External (cont’d) • Systemic competence • the attributes of the IT -strategy which can be used as a competitive weapon to support actual or future business strategies • system reliability • cost performance • interconnectivity • Flexibility • …

11. 1.2.1 IT strategy: External (cont’d) • IT governance • selection and use of mechanisms for obtaining the required IT competencies • joint ventures with vendors,competitors • outsourcing • joint research • alliances • ...

12. 1.2.2 IT strategy: Internal • IT architecture • portfolio applications • configuration of HW/SW • data model • IT processes • operations • development • monitoring and control systems

13. 1.2.2 IT strategy: Internal(cont’d) • IT skills • extern/intern • training • knowledge level

14. 1.3 Functional integration • Strategy integration • business strategy IT strategy • Operational integration • organisational infrastructure IT infrastructure see fig 1

15. Fig 1:Strategic Fit Business strategy IT Strategy Strategy integration E x t e r n a l Business scope Technology scope Distinctive competencies Business governance systematic competencies IT governance I n t e r n a l Administrative infrastructure architectures processes skills processes skills Operational integration

16. Dominant alignment perspectives

17. Driver: role of top mgt: role of IT mgt: performance criteria: Business strategy strategy formulator strategy implementer cost/service center Fig 2:Strategy execution alignment perspective Business strategy Organisational infrastructure IT infrastructure

18. Business strategy ITstrategy IT infrastructure Driver: role of top mgt: role of IT mgt: performance criteria: Business strategy technology visionary technology architect technology leadership Fig 3:Technology transformation alignment perspective e.g. Colruyt

19. Business strategy IT strategy Organisational infrastructure Driver: role of top mgt: role of IT mgt: performance criteria: IT strategy business visionary catalyst business leadership Fig 4:competitive potential alignment perspective

20. Driver: role of top mgt: role of IT mgt: performance criteria: IT strategy prioritizer executive leadership customer satisfaction Fig 5:service level alignment perspective IT strategy Organizational infrastructure IT infrastructure

21. 1.4:4 dominant alignment perspectives • Strategy execution:fig 2 • most common • Technology transformation:fig 3 • f.e. Colruyt • Competitive potential:fig 4 • Service level:fig 5

22. 1.5 Comments • External and internal IT strategy • Companies have to realize that the source of IT competencies is not entirely within the company but involves a complex area of alliances and partnerships with a wide ranging set of firms in the marketplace • dynamic model:changes in time based on shifts in the business environment

23. 1.5 Comments(cont’d) • Performance criteria of IT should be reconceptualized= mix of 4 criteria • costcenter:competition with outsourcing • service center:offered SLA versus best- in- industry • profitcenter:revenue +outside delivery • investment center:possibility to reinvest+R&D

24. 1.6 conclusions • External focus becomes very important • Field research proves that the inadequate fit between external and internal domains of IT is a major reason for failure to derive benefits from IT investments

25. Measures and control Governance/alliance value competence competence Cost of restructuring versus flexibility MIS: PILOT PARAMETERS

26. Business concepts in a networked world Ref:CORPORATE INFORMATION SYSTEMS MANAGEMENT 6th edition Lynda Applegate,F.Warren Mc Farlan,James Mc Kenney Chapter 2

27. business it E x t e r n a l I n Value Delivery t e r n a l Strategic Alignment Stakeholder Value Risk Management Performance Measurement

28. Technology is changing the business • Technology is providing • Flexible channels for procuring and distributing products and services • Tools to create and package content in all its many forms,including data,voice and video Offering of new opportunities and enables the development of new capabilities that were difficult to achieve before the commercialisation of the www.

29. Value Delivery Strategic Alignment Stakeholder Value Risk Management Performance Measurement

30. Linking Strategy to Value Corporate Information Strategy and Management Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan , . Burr Ridge, IL: Chapter 2 Figure 2 - 2 McGraw - Hill/Irwin, 2002.

31. Value What is it? How will we…? • An organization returns value to stakeholders by: • Increasing equity cash flows available to owners and investors that hold stock in a company • Decreasing the cost or increasing the benefits returned to non-equity stakeholders. • Meeting an expectation or need of a customer, supplier, partner or employee. • Generating trust and confidence that the organization will deliver what it promises. • Ensure strong growth in earnings? • Generate positive equity cash flow? • Increase market value? • Personalize our products and services to meet the expectations and needs of all members of the business community. • Increase reputation and image among all stakeholders? • Generate confidence and trust?

32. Capabilities and Community What is it? How will we…? • An organization’s capabilities and community enable it to: • Improve operating performance • Leverage information, knowledge and expertise • Achieve rapid penetration and loyalty of the business community(including customers, suppliers and partners) • Increase ability to respond quickly to opportunities and threats • Achieve best-in-class operating performance? • Develop a modular, scalable, and flexible infrastructure? • Build and manage strong partnerships with employees and the community? • Increase the lifetime value of all members of the community? • Build, nurture, and exploit knowledge assets? • Make informed decisions and take actions that increase value? • Organize for action and agility

33. business it E x t e r n a l I n What is it? How will we…? t e r n a l • An organization’s business concept defines: • Market opportunity • Products and services offered • Competitive dynamics • Strategy for capturing a dominant position • Strategic options for evolving the business • Attract a large & loyal community? • Deliver value to all community members? • Price our product to achieve rapid adoption? • Become #1 or #2? • Erect barriers to entry? • Evolve the business to “cash in on strategic options”? • Generate multiple revenue streams? • Manage risk and growth? Business Concept

34. Classifying Network Business Models Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan , Corporate Information Strategy and Management . Burr Ridge, IL: McGraw - Chapter 2 Figure 2 - 3 Hill/Irwin, 2002.

35. Classifying business capabilities • Business build on a networked infrastructure • Focused distributors • Portals • producers • Business providing the network infrastructure • Infrastructure distributors • Infrastructure portals • Infrastructure producers • Infrastructure service providers

36. Focused distributors • Provide products and services related to a specific industry or market niche • There are 5 types of focused distributors in function of the following characteristics: • Does the business assume control of inventory? • Does the business sell online? • Is the price set outside the market or is online price negotiation and bidding permitted? • Is there a physical product and service that must be delivered?

37. Types of focused distributors

38. Focused distributor capability trends • Those with no”online business transaction”are losing power • Aggregators are evolving into marketplaces and/or vertical portals • Multiple capability models are required to ensure flexibility and sustainability • Focused distributors are aligning closely with vertical and horizontal portals and are evolving their model to become vertical portals

39. Classifying business capabilities • Business build on a networked infrastructure • Focused distributors • Portals • producers • Business providing the network infrastructure • Infrastructure distributors • Infrastructure portals • Infrastructure producers • Infrastructure service providers

40. Portals • Definition:”a doorway or gate ,especially one that is large and imposing” • There are 3 types of portals in function of the following characteristics: • Does the business provide gateway access to a full range of online information and services including search,e-mail,messaging,chat …? • Does the business provide access to deep content,products and services within a vertical industry? • Does the business provide information and services for all types of users ,or are the information and services specific to a well-defined affiliation group(fe.students,women,…)

41. Types of portals

42. Portal trends • Horizontal and vertical portals are emerging as dominant sources of power within consumer and business markets • Horizontal portals are joining forces with horizontal infrastructure portals to provide not just access to content and services but also access to network and hosting services • Large media and entertainment portals that represent the convergence of data ,telephone,television and radio networks are emerging in the consumer space.These portals unite content development,packaging and distribution components of the value chain • B2B portals provide both horizontal access to business networks and vertical industry wide solutions

43. Classifying business capabilities • Business build on a networked infrastructure • Focused distributors • Portals • producers • Business providing the network infrastructure • Infrastructure distributors • Infrastructure portals • Infrastructure producers • Infrastructure service providers

44. producers • Producers design and make and also may directly market,sell and distribute products,services and solutions • There are 3 types of producers in function of the following characteristics: • Does the business sell physical products and/or provide face-to-face services? • Does the business sell information-based products and/or services? • Does the business provide customised products and/or services?

45. Types of producers

46. Producer capability trends • Producers must be best in class to survive • Some large full-service producers (amex,citigroup,..)are acquiring a full range of services and products and then integrating them to provide vertical solutions required by the customers.These solutions are offered through company-owned portals and also through a wide variety of distribution agreements • Industry supplier coalitions are forming to enable virtually integrated B2B commerce within and across industry groups

47. Classifying business capabilities • Business build on a networked infrastructure • Focused distributors • Portals • producers • Business providing the network infrastructure • Infrastructure distributors • Infrastructure portals • Infrastructure producers • Infrastructure service providers

48. Infrastructure distributors • Enable technology buyers and sellers to transact business • There are 4 types of infrastructure distributors in function of the following characteristics: • Does the business assume control of inventory? • Does the business sell online? • Is the price set outside the market oris the price negotiation and bidding permitted?

49. Types of infrastucture distributors

50. infrastucture distributors capability trends • The speed of obsolescence of the technology,coupled with the complexity of the solution and slim margins,has forced massive consolidation in networkand computing technology channels • Those distributors that take ownership of inventory are searching for inventoryless,just-in-time business models • Distributors that have the capability for custom configuration of products and services are gaining power