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INTRODUCTION

PRODUCT INNOVATION

CUSTOMER RELATIONSHIP

INFRASTRUCTURE MANAGEMENT

CONCLUSION

EPFL > SHS > March 2006

Internet + business = e-businessInternet + business = e-business

BFSH1 - 1015 Lausanne - Switzerland - Tel. +41 21 692.3416 - [email protected] - http://www.hec.unil.ch/yp

Université de LausanneEcole des Hautes Etudes Commerciales (HEC)

Table of content

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Université de Lausanne

© 2006 Pigneur

Agenda

• Introduction > Business/IT alignment– Individual decision > Task

– Organizational behavior > Process

– Business model > Value chain

1. Product innovation and value proposition

2. Customer relationship and distribution channel

3. Infrastructure management and value configuration

• Conclusion

INTRODUCTION | PRODUCT INNOVATION | CUSTOMER RELATIONSHIP | INFRASTRUCTURE MANAGEMENT | CONCLUSION

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Business/IT alignment

BUSINESSstrategy

I. TECHNOLOGYstrategy

Functionintegration

Strategicfit

BUSINESS IT

strategy

infrastructureI. SYSTEM

infrastructureORGANIZATION

infrastructure

ArchitectureProcessesSkills

Technology scopeSystem competenciesIT governance

Administrative structureBusiness processes

Skills

Business scopeDistinctive competencies

IT governance

[Henderson and Venkatraman, 1993]


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Business/IT alignment > individual decision

USERSGOALs

BUSINESSstrategy

Functionintegration

Strategicfit

BUSINESS IT

strategy


infrastructure

TASK

StandardsArchitecture…

Action

Information

Interaction

APPLICATIONUSABILITY

prototyping


I. SYSTEMinfrastructure

Internal/external

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Order fulfilment

Buyer

Seller

info

rmat

ion

Identifyproduct

Promoteproduct

influ

ence

Negotiate

Negotiate

paym

ent

BUY

SELL

good

s

Consume

Serve

info

rmat

ion

Query

Answer

Findsource

Findcustomer

info

rmat

ion

product customer payment logistics after-sale order

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Business/IT alignment > organizational behavior

BUSINESSstrategy

Functionintegration

Strategicfit

BUSINESS IT

strategy


infrastructure


Activity

Resource

Coordination

WORKFLOWPRODUCTIVITY

simulation



PROCESS

UNITs / AGENTsMISSIONs

Intra/inter-organization

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Business model > definition

• A buzzword with no precise definition?– […] Executives, reporters and analysts who use the term don't have a clear idea of

what it means. They use it to describe everything from how a company earns revenue to how it structures its organization

or …

• An artifact 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.

[Linder, 2000]

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Business/IT alignment > Business model

BUSINESSstrategy

Functionintegration

Strategicfit

BUSINESS IT

strategy


infrastructure


Application

Database

Network

INFRATRUCTUREPROFITABILITY

ROI



VALUE CHAIN

CUSTOMERsVALUE PROPOSITION

company/network

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Business Model > questions

Core capability

Value configuration

Partnership

Customer segment

Relationship

Distribution channel

VALUE proposition

Revenue

Cost

HOW?

WHAT?

HOW MUCH?

What do we offer to our customers?

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?

Who are our customers?

How do we reach them?

How do we get and keep them?

WHO?

Trust

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Case study > Question

• A company …• created in 1997 by Alain Niccod and co• went on-line in 1998• Bon appétit took over 33% of the capital stock in 1999• Logistics center in Bremgarten in 2001• Almost closed down in 2002• Saved in 2003, following an overwhelming solidarity movement among

customers• Strategic partnership with the No 1 of retail in 2004• Evolution towards an on-line mall, with other “boutiques” in 2005

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Value proposition1

Core capability

Value configuration

Partnership

Customer segment

Relationship


VALUE PROPOSITION

Revenue

Cost

HOW?

WHAT?

HOW MUCH?How do we operate and deliver?



What are our costs?




WHO?



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Value proposition > definition

• To characterize product innovation, the value proposition defines– the actual product or service, and

– the value or benefits perceived by customers of the products and services offered by the firm

• It defines the relationship between– The performance attributes of products or services– The fulfillment of needs across multiple customer roles

(acquiring, using, and disposing of products and services), and– The total cost

[Kambill, 1997]

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Value proposition > examples

• Facilitate research– and reduced transaction costs

• Speed up distribution– particularly for digital goods (written, music, image, software)

• Improve the quality of service– by personalization, for example

• Improve facility and experience of buying– capitalizing on ludic aspects

• Improve the transparency of information– by opening up the information system

• Develop a sense of community– and improve the diffusion of knowledge,

contacts and trust

• Bind complementary products

ticketless

Yield Management

Barcelone Loterie Romande

reservation

easyCar

Illustration

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Value proposition > cost/performance

CO

ST

PERFORMANCE

Val

ue fr

ontie

r

Underperformers

Me-too Imitativeinnovation

excellence innovation

High-end

market

economy

free

Concorde

EasyJet

Exec jet

High-endQuality, comfort

…

Low cost(frequent flight, on-time schedule, service)

Major airlines

[Kambill, 1997]

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Customer segment2

Core capability

Value configuration

Partnership

CUSTOMER SEGMENT

Relationship


Value proposition

Revenue

Cost

HOW?

WHAT?




What are our costs?

WHO?






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Customer segment > definition

• Categorizations of the population into social class or psychologically defined groups

• Area where a firm can specialize and gain competitive advantage– By having lower costs or customer-satisfying differentiation

Large organization

Home User

Market

Small Business

Medium Business SOHO

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Distribution channel3

Core capability

Value configuration

Partnership

Relationship

DISTRIBUTION CHANNEL

Value proposition

Revenue

Cost

HOW?

WHAT?




What are our costs?

WHO?





Customer segment

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• A channel can be defined as a set of links or a network via which a firm “goes to market” and delivers its value proposition.

– Owned channels - direct (i.e. Web, phone, fax…)

– Owned channels - indirect (i.e. brand shops)

– Partner channels (intermediation i.e. retail, shops, ...)

• More precisely it defines how a firm is “in touch” with its customers for a variety of tasks

– Customer Buying Cycle (CBC)

– Customer Service Life Cycle (CSLC) The purpose is to make the right quantities of the right products or

services available at the right place, at the right time

The purpose is to make the right quantities of the right products or

services available at the right place, at the right time

Distribution channel > definition

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Distribution channel > life cycle

Implementation and UseTraining Monitoring MaintenanceTroubleshootingReverse Logistics (Returns)Life Cycle ManagementCommunity

Offer (Specification)NegotiationDecisionContractOrder & Order TrackingBilling & Payment(Financing)(Risk taking)Fulfillment

InformationConsulting

(&Requirements)Specification

Testing(Community)

AdvertisingPromotions

Public RelationsPartnerships

AFTER SALES

EVALUATIONPURCHASE

AWARENESS

[Muther, 2000; Ives, 2000]

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Distribution channel > activities

CHANNEL Awareness Evaluation Purchase After sales

Barnes and NobleStores

(Retail)

barnesandnoble.com

(Website)

Affiliation Network(Internet)

Barnes and NobleUniversity(Website)

TV, Print, Movies(Mass media)

Promotion of authors and

books

Reading cornersCoffee shopsSales person

Cash registry(cash/credit

card)Return books

Banners to books etc.

Search functionCustomer review

CriticsExcerpt

Shopping cartcheckout

(Credit card)

Order statusReturn booksTransaction

history

Specialized affiliate Websites

Expert commentaries

Recommendation

Free online courses

Courses based on books etc.

Mass advertising

Illustration

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Customer relationship4

Core capability

Value configuration

Partnership



Value proposition

Revenue

Cost

HOW?

WHAT?




What are our costs?

WHO?




Customer segment


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Customer relationship > customer equity

• Customer Acquisition– How do we get customers?– Growing market share

• Customer Retention– How do we keep customers?– Nurturing customer loyalty

• Add-on selling– How do we get customers to buy more? – Enhancing Average Revenue Per User (ARPU)

In some mobile firms, customer acquisition costshad reached almost a quarter of all operating expenses said Mr Zehle, CEO of

[Blattberg, 2001]

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Customer relationship > trust

• Trust and security Certification

Verification et authorization

Escrow

Notary, payments

Expertise

Guarantee of quality

Rating

Reputation of actors

Insurance

Risk management

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Make recommendation Make recommendation

Customer relationship > customization

2

3

4a

5

4b

Establish configuration Establish configuration

Planing of production

Listen to the customerListen to the customer

Distribution

CRM

Production (internal)

ERP Outsourcing (external) SCM

One-to-one

Mass-customization

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Infrastructure management

uploadimages

Print ofimages

Deliveryof items

Marketingof product

services

Printinginfrastructure

Packingstaff

ColorMailerWebsite

enablesvalue forACTIVITIES

CAPABILITIES

PARTNERS


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Business process > integration

Orderprocessing

Orderconfirmation

Planing ofrealization

De-stockingloading

Planingdelivery

Customerservice

Prevision

Planing ofstock

Planing ofcapacity

MRPchoice supplier

Availability stockScheduling

Stock allocationorder of priorities

Schedulingmanufacturing

Schedulingdistribution

Process

Order planning

Process

Replenishment

Process

Production & assemblage

Process

Distribution

• profitable?• available in the inventory?• can be manufactured?

• integration with shipping companies• tracking by the customers• return of goods

• flexibilityy•integration

• BPR (business process reengineering)•INTEGRATION WITH ERP & SCM

[Kalakota, 2001]

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Core capabilities (resources)5

CAPABILITY

Value configuration

Partnership

Customer relationship


Value proposition

Revenue

Cost

HOW?

WHAT?




What are our costs?

WHO?




Customer segment


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• Resource– ASSETS

– available & useful

– in detecting and responding to

– market opportunities or threats

• Capability– KNOW-HOW

– Repeatable patterns of action in the use of assets

– Aptitude to exploit and coordinate resources

– to create, produce, and/or offer products and services to a market

DO

OWN

Capability > definition

[Wallin, 2000]

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Value chain6

capability

VALUE CONFIGURATION

Partnership



Value proposition

Revenue

Cost

HOW?

WHAT?




What are our costs?

WHO?




Customer segment


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Value chain > definition

• Set of interdependent activities– that add value

– for the customers

– to the company products or services

infrastructure

Human resources

Technology development

Procurement

inboundlogistics

production outbound logistics

marketing &sale

After-sale

Main activities

Support activities

Value

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Value chain >

Upload image data

Image network

Data transfer to ColorMailer

Data transfer to other

customers

Print infrastructure

Buy, receive & stock material to print on

Print Packaging staff

Pack goods

Delivery network

General delivery

Deliver ColorMailer

packages

Receive complaints

ColorMailer Staff

Answer complaints

Call center

fit

flow

share

fit

flow

share

share

share Channel Noki

a

Channel Sony

flow

Website

Customer

share

Market ColorMailer

Services

Activity Resource By ACTOR Legend:

INBOUNT LOGISTICS OUTBOUND LOGISTICS OPERATIONS MARKETING SERVICES

Illustration

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Value configuration

Value chain

Value shop

Value network

[Stabell, 1998]

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Partnership agreement7

capability

Value configuration

PARTNERSHIP



Value proposition

Revenue

Cost

HOW?

WHAT?




What are our costs?

WHO?




Customer segment


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Partnership > Supply chain managment (SCM)SCM

[Kalakota, 2001]

manufacturersupplier sellerdistributor buyer

information

payment

prod

uct

«Bullwhip effect»

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Partnership > e-market

Dutch Flower auction

QuickTime™ et undécompresseur TIFF (non compressé)sont requis pour visionner cette image.

E-PROCUREMENT SCM

[Pinker, 2003]

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Partnership > Alliances

Authormarketing

Authormarketing

Distributorinventory

Distributorinventory

sales

Information systemscoordination

contents

sales

Information systemscoordination

contents

Shippingtransporttracking

Shippingtransporttracking

Affiliatesales

Affiliatesales

Customerbuy

content

Customerbuy

content

Bankpayment

Bankpayment

deliver deliver

order

sale order

sales

critics

Credit cardclearance

returns

network

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Revenue stream

capability

Value configuration

Partnership



Value proposition

REVENUE

Cost

HOW?

WHAT?




What are our costs?

WHO?




Customer segment


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Revenue stream > categories

REVENUE

one time

recurrent

sale

registry

subscription

advertisement

use

Income of the subscription fees to become a memberPaid by the buyer and/or the vendor

transaction

commission Income, percentage of a transaction made by the settlement(affiliate program)

Income of online sales paid by the buyer

Income of the ad banners posted on the shopfrontPaid by the vendor

Phone• registry• subscription• Usage

• Time• Services

combinationMobile:

PRE-PAID card

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Profit and cost account

capability

Value configuration

Partnership



Value proposition

Revenue

COST

HOW?

WHAT?




What are our costs?

WHO?




Customer segment


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Profit model

Revenues

Total net revenue

Cost of goods sold

Total Costs of goods sold

Gross margin

Total Costs of goods sold

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

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The Business Model Ontology (BMO)

Channel CustomerPropositionConfigurationCapability

LinkActivity

Cost Revenue

Partnership RelationshipActor

Needsrequires

Profit

HOW?

WHAT?

HOW MUCH?

WHO?

Resource


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Business model > Bird’s eye view

VALUE PROPOSITIONs

MJF Concerts MJF off

Frequentation MJF Sponsorship

Festival recordings MJF Brand & Franchise

CAPABILITYies

Atractive MJF venue Contract stars Attract people

Mobilize volunteers Atmosphere & Experience

CUSTOMERs

Festival visitors Shops

Sponsors Record, TV, artists

Franchisees

RELATIONSHIPs

PARTNERSHIPs

Artists, sponsors, shops, F&B, volunteers, media,

infrastructure, general festival partners, "Friends of the Festival", musical

partners, Montreux municipality

ACTORs

Artists, Media, Sponsors, Montreux, Volunteers,

F&B, Merchants, Montreux Sounds, Sunset Music, Swiss Tourism, IJFO,

SMPA

REVENUE MODEL

Ticket sales {41%} Sponsoring {20%}

F&B {28%} Merchandising {5%}

Recordings {4%} Diverse {2%}

COST STRUCTURE

Infrastructure {20%} Artists {29%} F&B {10%}

Merchandising {2%} Production {16%} Fixed costs {15%} Marketing {4%}

Divers {4%}

PROFIT/LOSS

INFRASTRUCTURE MANAGEMENT


PRODUCT INNOVATION

FINANCIAL ASPECTS

CHANNELs

Montreuxjazz.com MJF event

TicketCorner bricks&clicks MJF program

Media Sponsors

MontreuxSounds.com Swiss tourism TEOS

VALUE CONFIGURATION

Contract musicians, contract sponsors, ticketing,

advertising / concerts, F&B, commerce, merchandising, selling recordings / manage

MJF infrastructure, production, manage JAZZ, manage volunteers, record

concerts

Illustration

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A company that defines it’s business model can...

• Understand– The process of modeling social systems or ontologies–

such as an e-business model – helps identifying and understanding the relevant elements in a domain and the relationships between them

• Share knowledge– The use of formalized e-business models helps

managers communicate and share their understanding of a business among other stakeholders

• React to rapid change– Mapping and using e-business models facilitates

change. Business model designers can easily modify certain elements of an existing e-business model

Formal

Document

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A company that defines it’s business model can… (continued)

• Measure– A formalized e-business model can help identifying the

relevant measures to follow in a business, similarly to the Balanced Scorecard Approach

• Simulate & learn– e-business models can help managers simulate

businesses and learn about them. This is a way of doing risk free experiments, without endangering an organization

System

thinking

BSC

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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, 2005]

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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, 2005]

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Business model innovation > examples

1. Value proposition H.

2. Target customer segment G.

3. Distribution channel D.

4. Customer relationship F.

5. Core capabilities I.

6. Value configuration A.

7. Partnership agreement B.

8. Revenue streams C.

9. Cost structure E.

[Osterwalder, 2005]

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