Transcript No Slide Title

Business Models
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
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?”
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)
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
1.2 Concept of Strategic Fit
Business Strategy :

external domain(view)
company versus competitive market

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products
make or buy decision
partnership
distribution channels
...
1.2 Concept of Strategic Fit(cont’d)

Internal domain
How do we support the external domain?

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Business processes
product development
customer services
human resource skills
…
IT-strategy:
same concept as for
the business strategy:internal and
external views
1.2 Concept of Strategic Fit(cont’d)
Business strategy

external
IT strategy

product market offering
information technology
scope
systemic competence
IT governance
pricing,quality,channels
make /buy of products

internal
admin structures
business processes
human resources
external

internal
IT architecture
IT processes
IT skills
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
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electronic imaging
internet business
expert systems
E-business
Wireless communications
…
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
…
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
...
1.2.2 IT strategy: Internal
IT architecture
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portfolio applications
configuration of HW/SW
data model
IT processes
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operations
development
monitoring and control systems
1.2.2 IT strategy: Internal(cont’d)
IT skills
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extern/intern
training
knowledge level
1.3 Functional integration
Strategy integration

business strategy
IT strategy
Operational integration

organisational infrastructure
see fig 1
IT infrastructure
Fig 1:Strategic Fit
Business strategy
IT Strategy
Strategy integration
Technology
scope
Business scope
Distinctive
competencies
Business
governance
systematic
competencies
Administrative
infrastructure
processes
IT
governance
architectures
skills
processes
Operational integration
skills
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Dominant alignment
perspectives
Fig 2:Strategy execution alignment perspective
Business strategy
Organisational
infrastructure
Driver:
role of top mgt:
role of IT mgt:
performance criteria:
IT
infrastructure
Business strategy
strategy formulator
strategy implementer
cost/service center
Fig 3:Technology transformation alignment perspective
Business strategy
ITstrategy
IT
infrastructure
Driver:
role of top mgt:
role of IT mgt:
performance criteria:
Business strategy
technology visionary
technology architect
technology leadership
e.g. Colruyt
Fig 4:competitive potential alignment perspective
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 5:service level alignment perspective
IT strategy
Organizational
infrastructure
Driver:
role of top mgt:
role of IT mgt:
performance criteria:
IT infrastructure
IT strategy
prioritizer
executive leadership
customer satisfaction
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
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
1.5 Comments(cont’d)
Performance criteria of IT should be
reconceptualized= mix of 4 criteria

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costcenter:competition with outsourcing
service center:offered SLA versus best- inindustry
profitcenter:revenue +outside delivery
investment center:possibility to
reinvest+R&D
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
MIS: PILOT PARAMETERS
Measures and control
Governance/alliance
value
competence
Cost of
restructuring
competence
versus
flexibility
Business concepts in a
networked world
Ref: CORPORATE INFORMATION SYSTEMS MANAGEMENT
6th edition
Lynda Applegate,F.Warren Mc Farlan,James Mc Kenney
Chapter 2
Business models and E-business?
business
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Value
Delivery
Strategic
Alignment
Stakeholder
Value
Performance
Measurement
it
Risk
Management
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business concepts in a networked world
Introduction
Classifying business capabilities
Evolving business capabilities
Technology is changing the business
Technology is providing

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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.
Value delivery/evolution
Value
Delivery
Strategic
Alignment
Stakeholder
Value
Performance
Measurement
Risk
Management
Linking Strategy to Value
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan , Corporate Information Strategy and Management . Burr Ridge, IL:
McGraw -Hill/Irwin, 2002.
Chapter 2 Figure 2 -2
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?
Capabilities and Community
What is it?
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
How will we…?
• 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
business
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Business Concept
What is it?
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
How will we…?
• 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 concepts in a networked world
Introduction
Classifying business capabilities
Evolving business capabilities
Classifying Network Business Models
Source: Applegate, Lynda M., Robert D. Austin, and F. WarrenMcFarlan, Corporate Information Strategy and Management. Burr Ridge, IL: McGrawHill/Irwin, 2002.
Chapter 2 Figure 2-3
Classifying business capabilities
Business build on a networked infrastructure
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
Focused distributors
Portals
producers
Business providing the network infrastructure
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

Infrastructure distributors
Infrastructure portals
Infrastructure producers
Infrastructure service providers
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:
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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?
Types of focused distributors
Models and
examples
Own inventory
Sell online
Price set online
Physical
product or
service
Likely revenues
Retailer
Staples.com
yes
yes
no
yes
Product/service
sales
Marketplace
Eloan.com
possibly
yes
no
no
-Transaction fees
-Service fees
-commissions
Aggregator
Autoweb.com
no
no
no
possibly
-referal fees
-advertising fees
-marketing fees
Infomediary
Internet securities
no
yes
yes
no
-subscription fees
-advertising fees
Exchange
Ebay.com
possibly
possibly
yes
possibly
Depends on model
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
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
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,email,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,…)
Types of portals
Models and examples
Gateway access
Deep content
and solutions
Affinity group
focus
Likely revenues
Horizontal portals
AOL.com
Yahoo.com
yes
Possible,often
through
partnership with
vertical and
affinity portals
Possible,often
through
partnership
Advertising
Affiliation and
slotting fees
Subscription or
access fees
Vertical portal
webMD.com
Covisint.com
limited
yes
no
-Transaction fees
-commissions
Advertising
Affiliation and
slotting fees
Affinity portal
Realtor.com
Ivillage.com
possible
Focused on
affinity groups
yes
-referal fees
-advertising fees
-Affiliation and slotting
fees
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
Classifying business capabilities
Business build on a networked infrastructure



Focused distributors
Portals
producers
Business providing the network infrastructure
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
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Infrastructure distributors
Infrastructure portals
Infrastructure producers
Infrastructure service providers
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?
Types of producers
Models and
examples
Sell physical
product/services
Sell information based
product/services
Level of
customisation
Likely revenues
Manufacturers
Ford motor company
Procter&gamble
yes
possibly
Low to moderate
Product sales
Service fees
Service providers
Amex
Singapore airlines
yes
possibly
Moderate to high
-Transaction fees
-Service fees
-commissions
Educators
Harvard University
BU
VUB
possibly
possibly
Moderate to high
-registration or event fee
Subscription fee
Hosting fee
Information and
news services
Dow jones
euromoney
yes
yes
Moderate to high
Transaction fees
-Service fees
-commissions
Subscription fee
Producer portals
Covisint
Global healtcare
possibly
yes
high
Advisers
Accenture
Mckinsey
yes
yes
Moderate to high
Transaction fee
Service fee
Membership fee
Consulting fee
Integration fee
registration or event fee
Subscription fee
Membership fee
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
Classifying business capabilities
Business build on a networked infrastructure



Focused distributors
Portals
producers
Business providing the network infrastructure

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
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Infrastructure distributors
Infrastructure portals
Infrastructure producers
Infrastructure service providers
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?
Types of infrastucture distributors
Models and examples
Control
inventory
Sell online
Price set online
Physical
product or
service
Likely revenues
Infrastucture retailers
compUSA.com
yes
yes
Not usually
yes
Product sales
service fees
Infrastucture
Marketplace
ingramMicro
usually
yes
Not usually but
may be
customised
yes
-Transaction fees
-Service fees
-commissions
Channel assembly
fee
Infrastructure
Aggregator
c/net
ZD Net
no
no
no
possibly
-referal fees
-advertising fees
-marketing fees
Infrastructure
Exchange
converge
possibly
possibly
yes
yes
Depends on model
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
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
Infrastructure portals
They provide consumers and/or business with access
to a wide range of network,computing and application
hosting services
They are differentiated by the following
characteristics/



Does the firm provide “gateway access” to networks,data
centers or Web services?
Does the firm host,operate,and maintain networks,data
centers or Web services?
Does the firm provide access to hosted application services?
Types of Infrastructure portals
Models and examples
Internet/network
access and hosting
Hosted apllications
and solutions
Horizontal
infrastructure portals
America online
British telecom
yes
Trough partnership
with noninfrastructure
portals and ASPs
Vertical infrastructure
portals
IBM e-business
Solutions
Often Trough
partnership with
horizontal
infrastructure portals
yes
Likely revenues
Service fees
Hosting fees
Access fees
Commission
Transaction fees
-Transaction fees
-Service fees
-hosting fees
Maintenance and update
fees
Infrastructure portals trends
Horizontal infrastructure portals are merging or
partnering with horizontal content portals to increase
value created through intangible assets such as
information,community and brand
Convergence of voice,data,and video channels and
global acceptance of a common set of standards are
leading to global industry convergence at the content
and the infrastructure level
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
Infrastructure producers
They design,build,market and sell technology
hardware,software,solutions and services
They are differentiated by the following
characteristics:



Does the business manufacture computer or
network components or equipment?
Does the business develop packaged software?
Does the business provide infrastructure services
or consulting?
Types of Infrastructure producers
Models and examples
Manufacture
equipment
Develop
software
Services/consulting
Likely revenues
Equipment/component
manufacturer
IBM
Intel
yes
possibly
possibly
Product sales or
licences
service fees
Maintenance fees
Update fees
Installation and
integration
Softwarefirms
SAP
Siebel
rarely
yes
possibly
Product sales or
licences
service fees
Maintenance fees
Update fees
Installation and
integration
fee
Custom software and
integration service
providers
EDS
InsWeb
possibly
possibly
yes
-commission
Service fees
Transaction fees
Infrastructure services
Federal express
rarely
possibly
yes
commission
Service fees
Transaction fees
business concepts in a networked world
Introduction
Classifying business capabilities
Evolving business capabilities
Evolving business capabilities
Networked businesses are built by combining a
variety of business models
Value:



Efficiently use of resources
Integrated solutions/products for the customer
Additional value for the same level of investment
Creation of business communities
Business communities
Portal Site
Cert. Auth.
Directory Services.
Customer Care
Customers
Access
Platform
WEB
Trading
Platform
Trading
Partners
Approaches to Business Model Evolution
Extend
Enhance
Extend
Add functionality or features to current
product/service offerings or improve
performance of existing business
Enter new line of business and/or add new
business models
Enhance
Exit
Expand
Expan
d
Exit
Exit a business or market or drop a
product/service offering
Expand
Add new product/service offerings
or enter new geographic markets
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan , Corporate Information Strategy and Management . Burr Ridge, IL:
McGraw -Hill/Irwin, 2002.
Chapter 2 Figure 2 -4
Evolving American Express Interactive: Timeline of Events
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan , Corporate Information Strategy and Management . Burr Ridge, IL:
McGraw -Hill/Irwin, 2002.
Chapter 2 Figure 2 -5
Product/Service Enhancements
Evolving American Express Interactive:
Enhance
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan , Corporate Information Strategy and Management . Burr Ridge, IL:
McGraw -Hill/Irwin, 2002.
Chapter 2 Figure 2 -6
Product/Service Category Expansion
Expand
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan , Corporate Information Strategy and Management . Burr Ridge, IL:
McGraw -Hill/Irwin, 2002.
Chapter 2 Figure 2 -7
Business Model Extension
Extend
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan , Corporate Information Strategy and Management . Burr Ridge, IL:
McGraw -Hill/Irwin, 2002.
Chapter 2 Figure 2 -8
An Integrated View
Extend
Enhance
Expand
Exit
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan , Corporate Information Strategy and Management . Burr Ridge, IL:
McGraw -Hill/Irwin, 2002.
Chapter 2 Figure 2 -9
Evolving Amazon.com: Timeline of Events
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan , Corporate Information Strategy and Management . Burr Ridge, IL:
McGraw -Hill/Irwin, 2002.
Chapter 2 Figure 2 -10
Product/Service Enhancements
Enhance
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan , Corporate Information Strategy and Management . Burr Ridge, IL:
McGraw -Hill/Irwin, 2002.
Chapter 2 Figure 2 -11
Category and Geographic Expansion
Expand
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan , Corporate Information Strategy and Management . Burr Ridge, IL:
McGraw -Hill/Irwin, 2002.
Chapter 2 Figure 2 -12
Business Model Extension
Extend
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan , Corporate Information Strategy and Management . Burr Ridge, IL:
McGraw -Hill/Irwin, 2002.
Chapter 2 Figure 2 -13
An Integrated View
An Integrated View
Extend
Enhance
Expand
Exit
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan , Corporate Information Strategy and Management . Burr Ridge, IL:
McGraw -Hill/Irwin, 2002.
Chapter 2 Figure 2 -14