doll_eisert_business model development innovation

12
6 Abstract Business model innovation becomes increasingly more important. It is without doubt the most power- ful driver for competitive advantage in today’s economy and has started to outshine product innova- tion. There are many cases in which a changing market environment requires an innovative business model that can sustain market leadership. After several years of business model innovation research and the application thereof, SAP provides a systematic, iterative approach to identify the appropriate business model. The approach is suitable for industries and for businesses of any size. It interrelates with other well-known approaches such as De- sign Thinking or Lean. Together they offer a meaningful and solid foundation for any business. To better understand the approach, a use case is used to show step by step how it successfully turned a cloud business into a cloud of insights.

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Page 1: Doll_Eisert_Business Model Development  Innovation

360deg ndash the Business Transformation Journal No 11 | August 2014

6

Abstract

Business model innovation becomes increasingly more important It is without doubt the most power-ful driver for competitive advantage in todayrsquos economy and has started to outshine product innova-tion There are many cases in which a changing market environment requires an innovative business model that can sustain market leadership After several years of business model innovation research and the application thereof SAP provides a systematic iterative approach to identify the appropriate business model The approach is suitable for industries and for businesses of any size It interrelates with other well-known approaches such as De-sign Thinking or Lean Together they offer a meaningful and solid foundation for any businessTo better understand the approach a use case is used to show step by step how it successfully turned a cloud business into a cloud of insights

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

7

The increasing difficulty to differentiate based on services and products has led to significantly greater interest for busi-ness model innovation in research and practice (Chesbrough 2007 IBM 2012) Today it is well understood that busi-ness models are decisive for a compa-nyrsquos long-term success or failure and are probably the most powerful driver for competitive advantage (Johnson et al 2008) Nevertheless there is still a strik-ing discrepancy within most companies between the degree of awareness about the importance of Business Model De-velopment and Innovation (BMDI) and its implementation (Bucherer et al 2012 Chesbrough 2010)What is needed is a systematic approach to continuously develop and improve the business models of a company and to come up with business model innova-tions whenever it makes sense Compa-nies have to maintain and develop their business models with the same profes-sionalism and seriousness as they do for their product and service portfolio Hence processes organizational struc-

BUSINESS MODEL DEVELOPMENT amp INNOVATIONA Strategic Approach to Business TransformationEven the best companies cannot sustain themselves by simply focusing on product innovation To succeed companies have to evolve their business model innovation skills In this article you will learn how business models can be developed and evaluated based on an agile and iterative approach

by Julia Doll and Uli Eisert

tures and accountability need to ensure that each business unit and if required even every single product or service is embedded into an appropriate business model Appropriate means that under given internal and external conditions the most promising model is chosen and that risks are mitigated by a comprehen-sive validation of the underlying assump-tions This will ensure that the economic viability of the unit and the entire enter-prise is ensured in the best way possible

BMDI The Silver Bullet for Economic ViabilityMost scholars and practitioners today agree that successful innovations should satisfy three perspectives technical fea-sibility human desirability and economic viability (Brown 2008 IDEO 2012) Like-wise products or services already in the marketplace are only successful if their quality lives up to userrsquos expectations users want to use them and buyers are willing to pay for them While technical feasibility and product quality had been the focus of developers engineers and

360deg ndash the Business Transformation Journal No 11 | August 2014

8product managers for quite some time Design Thinking was a break-through approach to successfully focus on hu-man desirability and to ensure that us-ers are keen to use (and maybe own) a product However Design Thinking does not sufficiently focus on the buyersrsquo per-spective It does not provide the required mindset as well as tools to systematical-ly cover economic viability and to make sure that buyers are willing to pay a giv-en price (this might be more obvious in B2B industries where buyers and users

are often different people) We believe that Business Models Development and Innovation is the missing piece to cover the economic viability dimension (see fig-ure 1) Business models specify the core logic of a firm because they describe how val-ue is created and delivered to the cus-tomers and how the value is captured for the producer or provider (Osterwalder et al 2005) If used in the right way busi-ness models also capture the competi-tive advantage of a company In a very pragmatic way they combine the market-based view and the resource-based view of the firm which makes them a great ldquounit of analysisrdquo ndash that is an ideal basis for a systematic development of business activitiesSome people might think that business cases and business plans are sufficient to ensure economic viability for a new product business field or even compa-ny Both are necessary nevertheless if done without a systematic development of the appropriate business model be-forehand they will neither ensure that the most promising approach is chosen nor that the underlying assumptions are suf-ficiently validatedOnly a systematic iterative approach to

Business Model Development amp Innovation

Design Thinking

Business Model Development amp Innovation (BMDI)

(Lean) Engineering

Illustration by Tobias Hildenbrand based on IDEO 2012

Fig 1 BMDIThe missing piece

Box 1 How was BMDI developedThe approach was developed by SAP based on extensive research in collaboration with the University of St Gal-len and practical experience from dozens of internal proj-ects It takes into account well-known concepts such as the ldquoBusiness Model Canvasrdquo (Osterwalder 2005) ldquoBusi-ness Model Patternsrdquo (Gassmann 2013) or ldquoLean Start-Uprdquo (Ries 2011 Blank 2013)The approach was standardized and validated by coach-ing multiple teams at SAP with innovative products facing market entry or established products with insufficient suc-cess After several effective projects we started to consult SAP customers as well as HANA start-ups and Social Im-pact start-ups

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

9

identify the appropriate business model such as the BMDI approach provides a meaningful and solid foundation to calcu-late business cases and develop business plans (see box 1) In addition it guides you to a model that allows full exploita-tion of ideas and capabilities regardless of whether this model is highly innovative totally new or ldquojustrdquo the adaption of a prov-en existing business model or something in between

Business Model Description Business models can only be leveraged as an appropriate ldquounit of analysisrdquo if the used description model allows to illus-trate and convey the business logic in a highly condensed and easy-to-under-stand manner This explains the success of the Business Model Canvas from Al-exander Osterwalder as the de-facto standard for business models at least on the practitionerrsquos side It uses nine elements to describe a business mod-el (Strategyzer 2011) We call the can-vas the ldquoenterprise viewrdquo of the business model (see figure 3 on the next page)

and complement it with a ldquonetwork viewrdquo that allows it to describe the relevant network and interrelations around the enterprise (see figure 2) This helps sig-nificantly to understand dependencies in complex business models and to en-sure that competition is always consid-ered when the business model is devel-oped Without a systematic development of the approriate business model be-forehand business cases and plans are not sufficient to ensure economic viabil-ity (Eisert 2013)

What is BMDI in a NutshellThe art of BMDI is to turn the baseline (see box 2 on the next page) into an ap-propriate model that is under given in-ternal and external conditions the mod-el that ensures economic viability in the best way possible In order to accomplish that the team has to go through different activities such as analysis design val-idation implementation execution and scaling However it will never be a se-quential linear process It must be tai-lored to the specific challenges of the

My Company My Customers My Partners My Competition

Network View Partner Network Customer Network Competition

Fig 2 Network view (adapted from SAP SECC BY 40)

360deg ndash the Business Transformation Journal No 11 | August 2014

10

project and it has to be flexible enough to take into account all the insights that will be gained along the way That is why BMDI is a highly iterative and agile ap-proach Its beauty is the combination of simplicity and flexibility with powerful methods BMDI offers four types of iter-ation that allow project teams in any giv-en situation to identify and carry out the activities needed to develop their model into the right direction

The Four Types of IterationWe distinguish four basic ways to sys-tematically develop a business model All of them follow the divergeconverge principle that has proven to be success-ful in Design Thinking First the team cre-ates options then it synthesizes its in-sights and chooses the most promising option(s) For each type of iteration we have developed a set of methods while leveraging good industry practices (see figure 4) Analyze amp Improve During this itera-tion parts of the business model are an-alyzed in more detail to improve the busi-ness model based on the gained insights This can be done in various areas a few examples are

minus Analyze customer needs in detail and improve the value proposition to bet-ter address them minus Analyze competitors and improve the value proposition to increase unique aspects minus Analyze partnering options and im-prove your needed key activities and resources accordingly

Business Model Development amp Innovation

Box 2 It All Starts with the BaselineTo develop the business model the first exercise should al-ways be to describe a baseline for the following activities This is straightforward when a business model already ex-ists which is not as successful as expected or under pres-sure from the competition In this case the current state of the business model is the baseline However even if you are in a very early stage eg for new product ideas or start-ups it is important to describe the baseline In this case all ideas thoughts and assumptions regardless to which ex-tent they are completed or validated should be taken into account to reflect the current thinking and create a com-mon ground for the team working on the business model

Value Capture

Value Creation Competition

Why

How What Who

My Company My Customers My Partners My Competition

Enterprise View

Fig 3 Enterprise view (adapted from Business Model Foundry AGCC BYSA 30)

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

11

Box 3 The Right Team and MindsetBesides the four types of iteration described in this article the BMDI approach is also about the right team set-up and mindset The team has to unite various perspectives so di-versity is important In addition there is a need to access experts (eg pricing legal issues) stakeholders for valida-tion (in particular customers) decision makers as well as sponsors The right mindset is very similar to the one need-ed in Design Thinking projects (eg openness and endur-ance are key)

minus Analyze customer experience and im-prove customer relations accordingly minus Analyze key activities to reduce relat-ed costs

Challenge amp Change If there are val-id triggers (opportunities or threats) to challenge the business model base-line at any point in time a design chal-lenge is formulated and dedicated ide-ation methods are used to come up with different alternative business model op-tions While some methods rather facil-itate systematic ideation for incremental improvements others are more suited for creative ideation that might bring up disruptive out-of-the-box alternatives In any case the team has to cluster ideas and finally has to decide which changes will be used for subsequent processing Test amp Verify Each business model is based on several assumptions that im-ply risks if they turn out to be wrong That is why crucial assumptions should be tested and validated at an early stage with limited effort Usually assumptions are made regarding customersrsquo issues needs and wants as well as their will-ingness to pay Also assumptions can be made regarding appropriate chan-

nels capabilities of key partners and the company itself These assumptions should be derived out of the business model and the risks involved need to be evaluated in order to figure out which as-sumptions should be tested in which se-quence The ldquoLean Start Uprdquo literature (Ries 2011) provides many insights as to how these assumptions can be validated depending on the maturity of the project Key elements are the ldquoBuild-Measure-Learnrdquo cycle and the ldquoMVP (Minimal Vi-able Product) conceptrdquo to minimize the involved effort as well as ldquoactionable metricsrdquo that should ensure some objec-tivity throughout the test Depending on

Baseline Appropriate Validated Business Model

Create Choices Make Choices

Diverge Converge

Partner Network Customer Network Competition

Partner Network Customer Network Competition

Evaluate ampDecide

Test ampVerify

Challange ampChance

Analyze ampImprove

Fig 4 BMDI in anutshell

360deg ndash the Business Transformation Journal No 11 | August 2014

12

the results of the test either an assumption is confirmed and the team can move on or changes are required sometimes sig-nificant ones so called ldquopivotsrdquo Evaluate amp Decide To figure out which of the different business model options are most promising these have to be evaluated both qualitatively and quanti-

tatively For the overall evaluation two di-mensions are decisive impact vs ease of implementation Impact summariz-es all the relevant criteria that allow as-sessment of the potential impact (includ-ing revenue potential) of the business model Ease of implementation summa-rizes all related efforts (including costs) and risks The evaluation criteria and its relative weight have to be project-spe-cific because stakeholders might look at

very different aspects However the two dimensions can be depicted in a simple decision matrix to illustrate the consoli-dated feedback of various stakeholders and experts to simplify decisions The

quantitative evaluation can be done by deriving a business case out of the re-spective model Therefore all revenue streams related to the addressed cus-tomer groups are estimated based on revenue models price points and num-ber of customersdeals In addition all costs related to value creating and deliv-ering activities resources and partner-ing are estimated and summarized Fur-thermore towards the end of the project the favored business model is evaluat-ed in detail to provide the decision mak-ers with a solid foundation for further planning or investment decisions

Specifics of Complex Business ModelsIn two-sided or multi-sided business models more than one customer group needs to be convinced because there is a crucial relationship between the cus-tomer groups The best-known examples for these types of models are platform-based business models such as Airbnb or Google Search For these models you have to create a win-win-win situation be-cause value needs to be created for all customer groups even those that do not pay anything (such as the end user of a search engine) This gets even trickier if the model is subject to so-called net-work effects Network effects are pres-ent if the value of the model depends on the amount of other customers also us-ing it and can appear within one customer group (direct) or across customer groups (indirect network effects) Network ef-fects are extremely beneficial for the owner of the business model as soon as the required critical mass is reached ie when the adoption of the product or ser-vice is self-sustaining (Mahler and Rog-ers 1999) However until critical mass is achieved the network effects are hinder-ing the adoption and success of the busi-ness model Investments as well as some endurance are needed to be success-ful in the end As a consequence BMDI supports the systematic development of strategies that can be used to accomplish critical mass

Box 4 Project Description Helix Nebula In 2012 science organizations such as the European Or-ganization for Nuclear Research (CERN) the European Molecular Biology Laboratory (EMBL) and the European Space Agency (ESA) teamed up with IT service compa-nies such as Atos CloudSigma Interoute and T-Systems to establish a federated European cloud known as Helix Nebula (HN)

Business Model Development amp Innovation

The evaluation criteria and its relative weight have to be project- specific because stakeholders might look at very different aspects

A win-win-win situation has to be created because value needs to be created for all customer groups even those that do not pay anything

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

13

How BMDI Transformed a Cloud Business into a Cloud of InsightsHelix Nebula (HN) cloud suppliers (see box 4) faced several challenges such as addressing a new market segment called ldquobig sciencerdquo pressure on prices due to ap-parently low-cost in-house solutions and building up an innovative partner ecosys-tem with usually competing companies Major competitors such as Amazon Web Services (AWS) offered cloud services at extremely low prices The fact that some of the customers already used AWS was reason enough to accelerate mar-ket entry At that point the major remain-ing question was if HN could against all odds beat AWS based on pricing or if a value proposition tailored to the needs of science could be foundIn ldquoAnalyze amp Improverdquo we started by investigating related industries exist-ing and potential competitors as well as partner ecosystems with their drivers and obstacles Further we analyzed the cus-tomer side the public sector and specif-ically the needs of ldquobig sciencerdquo For this multiple interviews with public institutions and the customers themselves were con-ducted We found that science organiza-tions tend to have many publicly fund-ed IT resources which are maintained by non-profit organizations If HN could integrate these resources with the com-mercially-offered solutions it would offer a previously non-existing flexibility to the market This value proposition would set HN apart from AWS However based on the very restricted budget of science or-ganizations prices would still have to be very low Having this in mind the chal-lenge for the supply side was to create a valuable business out of this ecosystem without just covering its costs Focusing on this design challenge we conducted several workshops with HN suppliers in ldquoChallenge amp Changerdquo to de-velop multiple potential business mod-els Since the establishment of a not-yet-existing cloud ecosystem required room for innovation many creative meth-ods were applied to inspire innovative

ideas A second challenge was to over-come coopetition issues in order to en-able smooth business operations of the proposed ecosystem For this multiple broker roles were determined that would enable interaction between suppliers and buyers based on business and technical processes

In ldquoEvaluate amp Deciderdquo these business models were evaluated by experts at SAP and HN suppliers The result was a business model roadmap with a final business model that goes beyond ge-neric cloud computing by creating value not only for science but also for busi-ness government and society based on the analysis and aggregation of Big Data brought to the cloud by science organi-zations For example earth observation data from ESA can be very valuable to oil companies in order to predict landslides near pipelines This extension allows sci-ence organizations to consume cloud services for free by providing valuable

Key Learnings

It is not enough to rely on product innovation Often products fail if they address the market with the wrong business model

Business models can be systematically developed and evaluated based on an agile and iterative process that ensures economic viability

Business models are probably the most powerful driver of competitive advantage and should be managed as it is done with product portfolios

Business cases by themselves are insufficient if they do not build on a validated business model

Business model development and innovation combined with Design Thinking and lean offers a meaningful and solid foundation for businesses

Earth observation data from ESA can be very valuable to oil companies in order to predict landslides near pipelines

360deg ndash the Business Transformation Journal No 11 | August 2014

14

Business Model Development amp Innovation

data to the cloud and to open up a major revenue stream for HN suppliers by giv-ing room for innovative services More-over it could help nations and cities pro-tect their citizens based on early warning systems The growing ecosystem of re-search organizations collaborating in the cloud allows for the aggregation of near-ly all conceivable scientific knowledge in one cloud Thus it enables not-yet-exist-ing insights based on inter-organization-al and international research

To fill the cloud with data the design of a profitable business model that pro-vides cloud services tailored to the enor-mous demand of ldquobig sciencerdquo was re-quired In this field the major competitor was AWS We had defined a clear differ-entiation by integrating non-profit partners offering publicly funded resources to Eu-ropean big science organizations Howev-er HN still needed to compete on price Hence we conducted a business case to compare HN prices to CERNrsquos in-house costs and AWS prices The results spoke for themselves HNrsquos prices beat AWSrsquos prices and partly CERNrsquos in-house costs Assuming that CERN moves to the cloud gradually while HN reaches economies of scale this is a perfectly valid starting point Therefore we had proven econom-ic viability not only by offering a unique value proposition but also by providing a financially attractive alternative to in-house solutions for science organizations The final challenge to tackle was the

roadmap to critical mass in order to es-tablish the final business model For this we worked closely with one of the major flagships namely ESA in order to cre-ate suitable steps for implementation We carefully considered a first potential niche to start with which would make use of the satellite earth observation data al-ready incorporated into the HN cloud Based on this niche the market would be expanded into other fields based on data enrichment in the cloud The proposed steps amongst others were to build up a lively community with the first ecosys-tem to facilitate partner co-innovation and complementation in order to enrich the platform along the way as well as to enable the exchange between partners and customers Based on the proposed business model roadmap and the road-map for critical mass the Helix Nebula Marketplace was rolled out in May 2014This use case showed us the specif-ic needs of partner ecosystems going through the process of business model innovation Specific focus must be giv-en to the needs of each partner provid-ing each of them with a suitable business model underlying the common business model of the ecosystem as a whole

ConclusionConsulting customers and start-ups has proven that the BMDI approach is rele-vant across industries and can be applied to challenges faced by businesses of any size In order to succeed companies will have to realize that BMDI should be grant-ed as much importance as product inno-vation The ultimate goal is to establish a standardized BMDI process in each com-pany in which the business models im-plemented are managed similarly to the product portfolio of the company

Learn more about The approach is integrated into SAP innovation approach To receive further information on training and consulting services contact Peter Mittemeyer (petermittemeyer[at]sapcom)

Business Model Development and Innovation is relevant across industries and for businesses of any size

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

15

Service

AUTHORS

Julia Doll is a Project Lead for Business Model Innovation at SAP Switzerland She has coached several projects regarding analysis design and evaluation of business models During her career at SAP starting in 2007 she has worked on several projects around the globe Julia holds a Master of Science from the University of Mannheim Germany and a Master of Business from the University of Queensland Australiajudoll[at]sapcom

Dr Uli Eisert built up a SAP research lab at the University of St Gallen and is heading a research amp innovation team that is currently focusing on Business Model Development amp Innovation (BMDI) as well as new approaches leveraging smart management of intangi-ble assets He published various journal papers and articles on innovation management and BMDI Before his current position he was heading the global PLM solution manage-ment at SAP and worked as a consultant and project manager for SAP implementations He holds degrees in mechanical and industrial engineering as well as a PhD in business administrationulieisert[at]sapcom

REFERENCES

Blank S (2013) Why the lean start-up changes everything Harvard Business Review 91(5) 63 ndash 72 Brown T (2008) Design Thinking Harvard Business Review June 2008 84 ndash 92 Bucherer B Eisert U and Grassmann O (2012) Towards Systematic Business Model Innova-

tion Lessons from Product Innovation Management Creativity and Innovation Management 21(2) pp183-198

Chesbrough H (2007) Business model innovation itrsquos not just about technology anymore Strategy amp Leadership 35(6) 12 ndash17

Chesbrough H (2010) Business Model Innovation Opportunities and Barriers Long Range Plan-ning 43(2 ndash 3) 354ndash363 doi101016jlrp200907010

Eisert U (2013) SAP Bringing Economic Viability to the Front End of Innovation In O Gassmann amp F Schweitzer (Eds) Management of the Fuzzy Front End of Innovation Berlin Springer Verlag

Gassmann O Frankenberger K amp Csik M (2013) Geschaumlftsmodelle entwickeln 55 innovative Konzepte mit dem St Galler Business Model Navigator Carl Hanser Verlag GmbH Co KG

IBM (2012) Leading Through Connections Highlights of the Global Chief Executive Officer (CEO) Study Somers New York

IDEO (2012) Human Centered Design An Introduction 2nd Edition Available from httpwwwideocomimagesuploadshcd_toolkitHCD_INTRO_PDF_WEB_optpdf [Accessed 19122012]

Johnson M Christensen C and Kagermann H ldquoReinventing your business modelrdquo Harvard business review 8612 (2008) 57ndash 68

Mahler A amp Rogers E M (1999) The diffusion of interactive communication innovations and the critical mass the adoption of telecommunications services by German banks Telecommunications policy 23(10) 719 ndash740

Osterwalder A Pigneur Y amp Tucci C L (2005) Clarifying Business Models Origins Present And Future of the Concept Communications of the AIS 16(1) 1ndash25

Ries E (2011) The Lean Startup 1st ed New York Crown Business Strategyzer (2011) Business Model Canvas Explained [video] Youtube

issue

no

11au

g 20

14

In collaboration withSponsored by

PUBLICATION DETAILS OF360deg ndash THE BUSINESS TRANSFORMATION JOURNAL

PUBLISHER

Business Transformation Academy (BTA)co University of Applied Sciences and Arts Northwestern Switzerland (FHNW)School of Business (HSW) Institute for Information Systems (IWI)Peter Merian-Strasse 864002 BaselSwitzerlandinfo[at]bta-onlinecomwwwbta-onlinecomwww360-btcom

The Business Transformation Academy (BTA) is a joint research project of the University of Applied Scienc-es and Arts Northwestern Switzerland (FHNW) and SAP AG The BTA is a Swiss non-profit association It is registered with the Commercial Register of the Canton of Basel-Stadt under the name ldquoBusiness Transfor-mation Academyrdquo and under the number CH-2706000679-0 (legal nature association) Authorized representatives Prof Dr Axel Uhl Lars Alexander Gollenia Prof Dr Rolf Dornberger Nicolas Steib Prof Dr Jan vom Brocke Paul Stratil

Disclaimer Within reason the BTA strives to provide correct and complete information in this journal How-ever the BTA does not accept any responsibility for topicality correctness and completeness of the informa-tion provided in this journal The BTA does not accept any responsibility or liability for the content on external links to which this journal refers to directly or indirectly and which is beyond the control of BTAThe material contained in this journal are the copyright works of the BTA and the authors Copying or dissem-inating content from this journal requires the prior written consent of the BTA and of the authorsLegal venue is Basel Switzerland

Note to the reader The opinions expressed in the articles in this journal do not necessarily reflect the views of the BTA

Picture Credits copy Herzog amp de Meuron (cover p 61 62) copy Oliver Heissner (2) wwwqrcode-monkeyde (2) copy iStockphotocomcmcderm1 (4 5) copy iStockphotocomDrAfter123 (6) copy iStockphotocomretro-rocket (16) SAP AG (18 19 23 25) copy kentohfotoliacom (28) art4allshutterstockcom (42) copy Photogra-pheeeufotoliacom (48) copy ReGe Hamburg Project-Realisierungsgesellschaft mbh (54) Airbus SAS (60) HafenCity Hamburg GmbH (66) copy iStockphotocombenedek (83) copy Chrisoph Gebler Zorabcshutter-stockcom (75) wwwgoQRme (83) Michael von KutzschenbachBTA (84 85) Joshua MeadonSAP (86 87)

Published three to four times a year in electronic format

EDITORIAL OFFICE

For inquiries about the journal please contact info[at]360-btcom

Subscriptions If you want to be notified when new issues are published subscribe onhttpswwwbta-onlinecomnewsletter and tick the box labeled ldquo360deg Journal Newsrdquo

Page 2: Doll_Eisert_Business Model Development  Innovation

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

7

The increasing difficulty to differentiate based on services and products has led to significantly greater interest for busi-ness model innovation in research and practice (Chesbrough 2007 IBM 2012) Today it is well understood that busi-ness models are decisive for a compa-nyrsquos long-term success or failure and are probably the most powerful driver for competitive advantage (Johnson et al 2008) Nevertheless there is still a strik-ing discrepancy within most companies between the degree of awareness about the importance of Business Model De-velopment and Innovation (BMDI) and its implementation (Bucherer et al 2012 Chesbrough 2010)What is needed is a systematic approach to continuously develop and improve the business models of a company and to come up with business model innova-tions whenever it makes sense Compa-nies have to maintain and develop their business models with the same profes-sionalism and seriousness as they do for their product and service portfolio Hence processes organizational struc-

BUSINESS MODEL DEVELOPMENT amp INNOVATIONA Strategic Approach to Business TransformationEven the best companies cannot sustain themselves by simply focusing on product innovation To succeed companies have to evolve their business model innovation skills In this article you will learn how business models can be developed and evaluated based on an agile and iterative approach

by Julia Doll and Uli Eisert

tures and accountability need to ensure that each business unit and if required even every single product or service is embedded into an appropriate business model Appropriate means that under given internal and external conditions the most promising model is chosen and that risks are mitigated by a comprehen-sive validation of the underlying assump-tions This will ensure that the economic viability of the unit and the entire enter-prise is ensured in the best way possible

BMDI The Silver Bullet for Economic ViabilityMost scholars and practitioners today agree that successful innovations should satisfy three perspectives technical fea-sibility human desirability and economic viability (Brown 2008 IDEO 2012) Like-wise products or services already in the marketplace are only successful if their quality lives up to userrsquos expectations users want to use them and buyers are willing to pay for them While technical feasibility and product quality had been the focus of developers engineers and

360deg ndash the Business Transformation Journal No 11 | August 2014

8product managers for quite some time Design Thinking was a break-through approach to successfully focus on hu-man desirability and to ensure that us-ers are keen to use (and maybe own) a product However Design Thinking does not sufficiently focus on the buyersrsquo per-spective It does not provide the required mindset as well as tools to systematical-ly cover economic viability and to make sure that buyers are willing to pay a giv-en price (this might be more obvious in B2B industries where buyers and users

are often different people) We believe that Business Models Development and Innovation is the missing piece to cover the economic viability dimension (see fig-ure 1) Business models specify the core logic of a firm because they describe how val-ue is created and delivered to the cus-tomers and how the value is captured for the producer or provider (Osterwalder et al 2005) If used in the right way busi-ness models also capture the competi-tive advantage of a company In a very pragmatic way they combine the market-based view and the resource-based view of the firm which makes them a great ldquounit of analysisrdquo ndash that is an ideal basis for a systematic development of business activitiesSome people might think that business cases and business plans are sufficient to ensure economic viability for a new product business field or even compa-ny Both are necessary nevertheless if done without a systematic development of the appropriate business model be-forehand they will neither ensure that the most promising approach is chosen nor that the underlying assumptions are suf-ficiently validatedOnly a systematic iterative approach to

Business Model Development amp Innovation

Design Thinking

Business Model Development amp Innovation (BMDI)

(Lean) Engineering

Illustration by Tobias Hildenbrand based on IDEO 2012

Fig 1 BMDIThe missing piece

Box 1 How was BMDI developedThe approach was developed by SAP based on extensive research in collaboration with the University of St Gal-len and practical experience from dozens of internal proj-ects It takes into account well-known concepts such as the ldquoBusiness Model Canvasrdquo (Osterwalder 2005) ldquoBusi-ness Model Patternsrdquo (Gassmann 2013) or ldquoLean Start-Uprdquo (Ries 2011 Blank 2013)The approach was standardized and validated by coach-ing multiple teams at SAP with innovative products facing market entry or established products with insufficient suc-cess After several effective projects we started to consult SAP customers as well as HANA start-ups and Social Im-pact start-ups

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

9

identify the appropriate business model such as the BMDI approach provides a meaningful and solid foundation to calcu-late business cases and develop business plans (see box 1) In addition it guides you to a model that allows full exploita-tion of ideas and capabilities regardless of whether this model is highly innovative totally new or ldquojustrdquo the adaption of a prov-en existing business model or something in between

Business Model Description Business models can only be leveraged as an appropriate ldquounit of analysisrdquo if the used description model allows to illus-trate and convey the business logic in a highly condensed and easy-to-under-stand manner This explains the success of the Business Model Canvas from Al-exander Osterwalder as the de-facto standard for business models at least on the practitionerrsquos side It uses nine elements to describe a business mod-el (Strategyzer 2011) We call the can-vas the ldquoenterprise viewrdquo of the business model (see figure 3 on the next page)

and complement it with a ldquonetwork viewrdquo that allows it to describe the relevant network and interrelations around the enterprise (see figure 2) This helps sig-nificantly to understand dependencies in complex business models and to en-sure that competition is always consid-ered when the business model is devel-oped Without a systematic development of the approriate business model be-forehand business cases and plans are not sufficient to ensure economic viabil-ity (Eisert 2013)

What is BMDI in a NutshellThe art of BMDI is to turn the baseline (see box 2 on the next page) into an ap-propriate model that is under given in-ternal and external conditions the mod-el that ensures economic viability in the best way possible In order to accomplish that the team has to go through different activities such as analysis design val-idation implementation execution and scaling However it will never be a se-quential linear process It must be tai-lored to the specific challenges of the

My Company My Customers My Partners My Competition

Network View Partner Network Customer Network Competition

Fig 2 Network view (adapted from SAP SECC BY 40)

360deg ndash the Business Transformation Journal No 11 | August 2014

10

project and it has to be flexible enough to take into account all the insights that will be gained along the way That is why BMDI is a highly iterative and agile ap-proach Its beauty is the combination of simplicity and flexibility with powerful methods BMDI offers four types of iter-ation that allow project teams in any giv-en situation to identify and carry out the activities needed to develop their model into the right direction

The Four Types of IterationWe distinguish four basic ways to sys-tematically develop a business model All of them follow the divergeconverge principle that has proven to be success-ful in Design Thinking First the team cre-ates options then it synthesizes its in-sights and chooses the most promising option(s) For each type of iteration we have developed a set of methods while leveraging good industry practices (see figure 4) Analyze amp Improve During this itera-tion parts of the business model are an-alyzed in more detail to improve the busi-ness model based on the gained insights This can be done in various areas a few examples are

minus Analyze customer needs in detail and improve the value proposition to bet-ter address them minus Analyze competitors and improve the value proposition to increase unique aspects minus Analyze partnering options and im-prove your needed key activities and resources accordingly

Business Model Development amp Innovation

Box 2 It All Starts with the BaselineTo develop the business model the first exercise should al-ways be to describe a baseline for the following activities This is straightforward when a business model already ex-ists which is not as successful as expected or under pres-sure from the competition In this case the current state of the business model is the baseline However even if you are in a very early stage eg for new product ideas or start-ups it is important to describe the baseline In this case all ideas thoughts and assumptions regardless to which ex-tent they are completed or validated should be taken into account to reflect the current thinking and create a com-mon ground for the team working on the business model

Value Capture

Value Creation Competition

Why

How What Who

My Company My Customers My Partners My Competition

Enterprise View

Fig 3 Enterprise view (adapted from Business Model Foundry AGCC BYSA 30)

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

11

Box 3 The Right Team and MindsetBesides the four types of iteration described in this article the BMDI approach is also about the right team set-up and mindset The team has to unite various perspectives so di-versity is important In addition there is a need to access experts (eg pricing legal issues) stakeholders for valida-tion (in particular customers) decision makers as well as sponsors The right mindset is very similar to the one need-ed in Design Thinking projects (eg openness and endur-ance are key)

minus Analyze customer experience and im-prove customer relations accordingly minus Analyze key activities to reduce relat-ed costs

Challenge amp Change If there are val-id triggers (opportunities or threats) to challenge the business model base-line at any point in time a design chal-lenge is formulated and dedicated ide-ation methods are used to come up with different alternative business model op-tions While some methods rather facil-itate systematic ideation for incremental improvements others are more suited for creative ideation that might bring up disruptive out-of-the-box alternatives In any case the team has to cluster ideas and finally has to decide which changes will be used for subsequent processing Test amp Verify Each business model is based on several assumptions that im-ply risks if they turn out to be wrong That is why crucial assumptions should be tested and validated at an early stage with limited effort Usually assumptions are made regarding customersrsquo issues needs and wants as well as their will-ingness to pay Also assumptions can be made regarding appropriate chan-

nels capabilities of key partners and the company itself These assumptions should be derived out of the business model and the risks involved need to be evaluated in order to figure out which as-sumptions should be tested in which se-quence The ldquoLean Start Uprdquo literature (Ries 2011) provides many insights as to how these assumptions can be validated depending on the maturity of the project Key elements are the ldquoBuild-Measure-Learnrdquo cycle and the ldquoMVP (Minimal Vi-able Product) conceptrdquo to minimize the involved effort as well as ldquoactionable metricsrdquo that should ensure some objec-tivity throughout the test Depending on

Baseline Appropriate Validated Business Model

Create Choices Make Choices

Diverge Converge

Partner Network Customer Network Competition

Partner Network Customer Network Competition

Evaluate ampDecide

Test ampVerify

Challange ampChance

Analyze ampImprove

Fig 4 BMDI in anutshell

360deg ndash the Business Transformation Journal No 11 | August 2014

12

the results of the test either an assumption is confirmed and the team can move on or changes are required sometimes sig-nificant ones so called ldquopivotsrdquo Evaluate amp Decide To figure out which of the different business model options are most promising these have to be evaluated both qualitatively and quanti-

tatively For the overall evaluation two di-mensions are decisive impact vs ease of implementation Impact summariz-es all the relevant criteria that allow as-sessment of the potential impact (includ-ing revenue potential) of the business model Ease of implementation summa-rizes all related efforts (including costs) and risks The evaluation criteria and its relative weight have to be project-spe-cific because stakeholders might look at

very different aspects However the two dimensions can be depicted in a simple decision matrix to illustrate the consoli-dated feedback of various stakeholders and experts to simplify decisions The

quantitative evaluation can be done by deriving a business case out of the re-spective model Therefore all revenue streams related to the addressed cus-tomer groups are estimated based on revenue models price points and num-ber of customersdeals In addition all costs related to value creating and deliv-ering activities resources and partner-ing are estimated and summarized Fur-thermore towards the end of the project the favored business model is evaluat-ed in detail to provide the decision mak-ers with a solid foundation for further planning or investment decisions

Specifics of Complex Business ModelsIn two-sided or multi-sided business models more than one customer group needs to be convinced because there is a crucial relationship between the cus-tomer groups The best-known examples for these types of models are platform-based business models such as Airbnb or Google Search For these models you have to create a win-win-win situation be-cause value needs to be created for all customer groups even those that do not pay anything (such as the end user of a search engine) This gets even trickier if the model is subject to so-called net-work effects Network effects are pres-ent if the value of the model depends on the amount of other customers also us-ing it and can appear within one customer group (direct) or across customer groups (indirect network effects) Network ef-fects are extremely beneficial for the owner of the business model as soon as the required critical mass is reached ie when the adoption of the product or ser-vice is self-sustaining (Mahler and Rog-ers 1999) However until critical mass is achieved the network effects are hinder-ing the adoption and success of the busi-ness model Investments as well as some endurance are needed to be success-ful in the end As a consequence BMDI supports the systematic development of strategies that can be used to accomplish critical mass

Box 4 Project Description Helix Nebula In 2012 science organizations such as the European Or-ganization for Nuclear Research (CERN) the European Molecular Biology Laboratory (EMBL) and the European Space Agency (ESA) teamed up with IT service compa-nies such as Atos CloudSigma Interoute and T-Systems to establish a federated European cloud known as Helix Nebula (HN)

Business Model Development amp Innovation

The evaluation criteria and its relative weight have to be project- specific because stakeholders might look at very different aspects

A win-win-win situation has to be created because value needs to be created for all customer groups even those that do not pay anything

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

13

How BMDI Transformed a Cloud Business into a Cloud of InsightsHelix Nebula (HN) cloud suppliers (see box 4) faced several challenges such as addressing a new market segment called ldquobig sciencerdquo pressure on prices due to ap-parently low-cost in-house solutions and building up an innovative partner ecosys-tem with usually competing companies Major competitors such as Amazon Web Services (AWS) offered cloud services at extremely low prices The fact that some of the customers already used AWS was reason enough to accelerate mar-ket entry At that point the major remain-ing question was if HN could against all odds beat AWS based on pricing or if a value proposition tailored to the needs of science could be foundIn ldquoAnalyze amp Improverdquo we started by investigating related industries exist-ing and potential competitors as well as partner ecosystems with their drivers and obstacles Further we analyzed the cus-tomer side the public sector and specif-ically the needs of ldquobig sciencerdquo For this multiple interviews with public institutions and the customers themselves were con-ducted We found that science organiza-tions tend to have many publicly fund-ed IT resources which are maintained by non-profit organizations If HN could integrate these resources with the com-mercially-offered solutions it would offer a previously non-existing flexibility to the market This value proposition would set HN apart from AWS However based on the very restricted budget of science or-ganizations prices would still have to be very low Having this in mind the chal-lenge for the supply side was to create a valuable business out of this ecosystem without just covering its costs Focusing on this design challenge we conducted several workshops with HN suppliers in ldquoChallenge amp Changerdquo to de-velop multiple potential business mod-els Since the establishment of a not-yet-existing cloud ecosystem required room for innovation many creative meth-ods were applied to inspire innovative

ideas A second challenge was to over-come coopetition issues in order to en-able smooth business operations of the proposed ecosystem For this multiple broker roles were determined that would enable interaction between suppliers and buyers based on business and technical processes

In ldquoEvaluate amp Deciderdquo these business models were evaluated by experts at SAP and HN suppliers The result was a business model roadmap with a final business model that goes beyond ge-neric cloud computing by creating value not only for science but also for busi-ness government and society based on the analysis and aggregation of Big Data brought to the cloud by science organi-zations For example earth observation data from ESA can be very valuable to oil companies in order to predict landslides near pipelines This extension allows sci-ence organizations to consume cloud services for free by providing valuable

Key Learnings

It is not enough to rely on product innovation Often products fail if they address the market with the wrong business model

Business models can be systematically developed and evaluated based on an agile and iterative process that ensures economic viability

Business models are probably the most powerful driver of competitive advantage and should be managed as it is done with product portfolios

Business cases by themselves are insufficient if they do not build on a validated business model

Business model development and innovation combined with Design Thinking and lean offers a meaningful and solid foundation for businesses

Earth observation data from ESA can be very valuable to oil companies in order to predict landslides near pipelines

360deg ndash the Business Transformation Journal No 11 | August 2014

14

Business Model Development amp Innovation

data to the cloud and to open up a major revenue stream for HN suppliers by giv-ing room for innovative services More-over it could help nations and cities pro-tect their citizens based on early warning systems The growing ecosystem of re-search organizations collaborating in the cloud allows for the aggregation of near-ly all conceivable scientific knowledge in one cloud Thus it enables not-yet-exist-ing insights based on inter-organization-al and international research

To fill the cloud with data the design of a profitable business model that pro-vides cloud services tailored to the enor-mous demand of ldquobig sciencerdquo was re-quired In this field the major competitor was AWS We had defined a clear differ-entiation by integrating non-profit partners offering publicly funded resources to Eu-ropean big science organizations Howev-er HN still needed to compete on price Hence we conducted a business case to compare HN prices to CERNrsquos in-house costs and AWS prices The results spoke for themselves HNrsquos prices beat AWSrsquos prices and partly CERNrsquos in-house costs Assuming that CERN moves to the cloud gradually while HN reaches economies of scale this is a perfectly valid starting point Therefore we had proven econom-ic viability not only by offering a unique value proposition but also by providing a financially attractive alternative to in-house solutions for science organizations The final challenge to tackle was the

roadmap to critical mass in order to es-tablish the final business model For this we worked closely with one of the major flagships namely ESA in order to cre-ate suitable steps for implementation We carefully considered a first potential niche to start with which would make use of the satellite earth observation data al-ready incorporated into the HN cloud Based on this niche the market would be expanded into other fields based on data enrichment in the cloud The proposed steps amongst others were to build up a lively community with the first ecosys-tem to facilitate partner co-innovation and complementation in order to enrich the platform along the way as well as to enable the exchange between partners and customers Based on the proposed business model roadmap and the road-map for critical mass the Helix Nebula Marketplace was rolled out in May 2014This use case showed us the specif-ic needs of partner ecosystems going through the process of business model innovation Specific focus must be giv-en to the needs of each partner provid-ing each of them with a suitable business model underlying the common business model of the ecosystem as a whole

ConclusionConsulting customers and start-ups has proven that the BMDI approach is rele-vant across industries and can be applied to challenges faced by businesses of any size In order to succeed companies will have to realize that BMDI should be grant-ed as much importance as product inno-vation The ultimate goal is to establish a standardized BMDI process in each com-pany in which the business models im-plemented are managed similarly to the product portfolio of the company

Learn more about The approach is integrated into SAP innovation approach To receive further information on training and consulting services contact Peter Mittemeyer (petermittemeyer[at]sapcom)

Business Model Development and Innovation is relevant across industries and for businesses of any size

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

15

Service

AUTHORS

Julia Doll is a Project Lead for Business Model Innovation at SAP Switzerland She has coached several projects regarding analysis design and evaluation of business models During her career at SAP starting in 2007 she has worked on several projects around the globe Julia holds a Master of Science from the University of Mannheim Germany and a Master of Business from the University of Queensland Australiajudoll[at]sapcom

Dr Uli Eisert built up a SAP research lab at the University of St Gallen and is heading a research amp innovation team that is currently focusing on Business Model Development amp Innovation (BMDI) as well as new approaches leveraging smart management of intangi-ble assets He published various journal papers and articles on innovation management and BMDI Before his current position he was heading the global PLM solution manage-ment at SAP and worked as a consultant and project manager for SAP implementations He holds degrees in mechanical and industrial engineering as well as a PhD in business administrationulieisert[at]sapcom

REFERENCES

Blank S (2013) Why the lean start-up changes everything Harvard Business Review 91(5) 63 ndash 72 Brown T (2008) Design Thinking Harvard Business Review June 2008 84 ndash 92 Bucherer B Eisert U and Grassmann O (2012) Towards Systematic Business Model Innova-

tion Lessons from Product Innovation Management Creativity and Innovation Management 21(2) pp183-198

Chesbrough H (2007) Business model innovation itrsquos not just about technology anymore Strategy amp Leadership 35(6) 12 ndash17

Chesbrough H (2010) Business Model Innovation Opportunities and Barriers Long Range Plan-ning 43(2 ndash 3) 354ndash363 doi101016jlrp200907010

Eisert U (2013) SAP Bringing Economic Viability to the Front End of Innovation In O Gassmann amp F Schweitzer (Eds) Management of the Fuzzy Front End of Innovation Berlin Springer Verlag

Gassmann O Frankenberger K amp Csik M (2013) Geschaumlftsmodelle entwickeln 55 innovative Konzepte mit dem St Galler Business Model Navigator Carl Hanser Verlag GmbH Co KG

IBM (2012) Leading Through Connections Highlights of the Global Chief Executive Officer (CEO) Study Somers New York

IDEO (2012) Human Centered Design An Introduction 2nd Edition Available from httpwwwideocomimagesuploadshcd_toolkitHCD_INTRO_PDF_WEB_optpdf [Accessed 19122012]

Johnson M Christensen C and Kagermann H ldquoReinventing your business modelrdquo Harvard business review 8612 (2008) 57ndash 68

Mahler A amp Rogers E M (1999) The diffusion of interactive communication innovations and the critical mass the adoption of telecommunications services by German banks Telecommunications policy 23(10) 719 ndash740

Osterwalder A Pigneur Y amp Tucci C L (2005) Clarifying Business Models Origins Present And Future of the Concept Communications of the AIS 16(1) 1ndash25

Ries E (2011) The Lean Startup 1st ed New York Crown Business Strategyzer (2011) Business Model Canvas Explained [video] Youtube

issue

no

11au

g 20

14

In collaboration withSponsored by

PUBLICATION DETAILS OF360deg ndash THE BUSINESS TRANSFORMATION JOURNAL

PUBLISHER

Business Transformation Academy (BTA)co University of Applied Sciences and Arts Northwestern Switzerland (FHNW)School of Business (HSW) Institute for Information Systems (IWI)Peter Merian-Strasse 864002 BaselSwitzerlandinfo[at]bta-onlinecomwwwbta-onlinecomwww360-btcom

The Business Transformation Academy (BTA) is a joint research project of the University of Applied Scienc-es and Arts Northwestern Switzerland (FHNW) and SAP AG The BTA is a Swiss non-profit association It is registered with the Commercial Register of the Canton of Basel-Stadt under the name ldquoBusiness Transfor-mation Academyrdquo and under the number CH-2706000679-0 (legal nature association) Authorized representatives Prof Dr Axel Uhl Lars Alexander Gollenia Prof Dr Rolf Dornberger Nicolas Steib Prof Dr Jan vom Brocke Paul Stratil

Disclaimer Within reason the BTA strives to provide correct and complete information in this journal How-ever the BTA does not accept any responsibility for topicality correctness and completeness of the informa-tion provided in this journal The BTA does not accept any responsibility or liability for the content on external links to which this journal refers to directly or indirectly and which is beyond the control of BTAThe material contained in this journal are the copyright works of the BTA and the authors Copying or dissem-inating content from this journal requires the prior written consent of the BTA and of the authorsLegal venue is Basel Switzerland

Note to the reader The opinions expressed in the articles in this journal do not necessarily reflect the views of the BTA

Picture Credits copy Herzog amp de Meuron (cover p 61 62) copy Oliver Heissner (2) wwwqrcode-monkeyde (2) copy iStockphotocomcmcderm1 (4 5) copy iStockphotocomDrAfter123 (6) copy iStockphotocomretro-rocket (16) SAP AG (18 19 23 25) copy kentohfotoliacom (28) art4allshutterstockcom (42) copy Photogra-pheeeufotoliacom (48) copy ReGe Hamburg Project-Realisierungsgesellschaft mbh (54) Airbus SAS (60) HafenCity Hamburg GmbH (66) copy iStockphotocombenedek (83) copy Chrisoph Gebler Zorabcshutter-stockcom (75) wwwgoQRme (83) Michael von KutzschenbachBTA (84 85) Joshua MeadonSAP (86 87)

Published three to four times a year in electronic format

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For inquiries about the journal please contact info[at]360-btcom

Subscriptions If you want to be notified when new issues are published subscribe onhttpswwwbta-onlinecomnewsletter and tick the box labeled ldquo360deg Journal Newsrdquo

Page 3: Doll_Eisert_Business Model Development  Innovation

360deg ndash the Business Transformation Journal No 11 | August 2014

8product managers for quite some time Design Thinking was a break-through approach to successfully focus on hu-man desirability and to ensure that us-ers are keen to use (and maybe own) a product However Design Thinking does not sufficiently focus on the buyersrsquo per-spective It does not provide the required mindset as well as tools to systematical-ly cover economic viability and to make sure that buyers are willing to pay a giv-en price (this might be more obvious in B2B industries where buyers and users

are often different people) We believe that Business Models Development and Innovation is the missing piece to cover the economic viability dimension (see fig-ure 1) Business models specify the core logic of a firm because they describe how val-ue is created and delivered to the cus-tomers and how the value is captured for the producer or provider (Osterwalder et al 2005) If used in the right way busi-ness models also capture the competi-tive advantage of a company In a very pragmatic way they combine the market-based view and the resource-based view of the firm which makes them a great ldquounit of analysisrdquo ndash that is an ideal basis for a systematic development of business activitiesSome people might think that business cases and business plans are sufficient to ensure economic viability for a new product business field or even compa-ny Both are necessary nevertheless if done without a systematic development of the appropriate business model be-forehand they will neither ensure that the most promising approach is chosen nor that the underlying assumptions are suf-ficiently validatedOnly a systematic iterative approach to

Business Model Development amp Innovation

Design Thinking

Business Model Development amp Innovation (BMDI)

(Lean) Engineering

Illustration by Tobias Hildenbrand based on IDEO 2012

Fig 1 BMDIThe missing piece

Box 1 How was BMDI developedThe approach was developed by SAP based on extensive research in collaboration with the University of St Gal-len and practical experience from dozens of internal proj-ects It takes into account well-known concepts such as the ldquoBusiness Model Canvasrdquo (Osterwalder 2005) ldquoBusi-ness Model Patternsrdquo (Gassmann 2013) or ldquoLean Start-Uprdquo (Ries 2011 Blank 2013)The approach was standardized and validated by coach-ing multiple teams at SAP with innovative products facing market entry or established products with insufficient suc-cess After several effective projects we started to consult SAP customers as well as HANA start-ups and Social Im-pact start-ups

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

9

identify the appropriate business model such as the BMDI approach provides a meaningful and solid foundation to calcu-late business cases and develop business plans (see box 1) In addition it guides you to a model that allows full exploita-tion of ideas and capabilities regardless of whether this model is highly innovative totally new or ldquojustrdquo the adaption of a prov-en existing business model or something in between

Business Model Description Business models can only be leveraged as an appropriate ldquounit of analysisrdquo if the used description model allows to illus-trate and convey the business logic in a highly condensed and easy-to-under-stand manner This explains the success of the Business Model Canvas from Al-exander Osterwalder as the de-facto standard for business models at least on the practitionerrsquos side It uses nine elements to describe a business mod-el (Strategyzer 2011) We call the can-vas the ldquoenterprise viewrdquo of the business model (see figure 3 on the next page)

and complement it with a ldquonetwork viewrdquo that allows it to describe the relevant network and interrelations around the enterprise (see figure 2) This helps sig-nificantly to understand dependencies in complex business models and to en-sure that competition is always consid-ered when the business model is devel-oped Without a systematic development of the approriate business model be-forehand business cases and plans are not sufficient to ensure economic viabil-ity (Eisert 2013)

What is BMDI in a NutshellThe art of BMDI is to turn the baseline (see box 2 on the next page) into an ap-propriate model that is under given in-ternal and external conditions the mod-el that ensures economic viability in the best way possible In order to accomplish that the team has to go through different activities such as analysis design val-idation implementation execution and scaling However it will never be a se-quential linear process It must be tai-lored to the specific challenges of the

My Company My Customers My Partners My Competition

Network View Partner Network Customer Network Competition

Fig 2 Network view (adapted from SAP SECC BY 40)

360deg ndash the Business Transformation Journal No 11 | August 2014

10

project and it has to be flexible enough to take into account all the insights that will be gained along the way That is why BMDI is a highly iterative and agile ap-proach Its beauty is the combination of simplicity and flexibility with powerful methods BMDI offers four types of iter-ation that allow project teams in any giv-en situation to identify and carry out the activities needed to develop their model into the right direction

The Four Types of IterationWe distinguish four basic ways to sys-tematically develop a business model All of them follow the divergeconverge principle that has proven to be success-ful in Design Thinking First the team cre-ates options then it synthesizes its in-sights and chooses the most promising option(s) For each type of iteration we have developed a set of methods while leveraging good industry practices (see figure 4) Analyze amp Improve During this itera-tion parts of the business model are an-alyzed in more detail to improve the busi-ness model based on the gained insights This can be done in various areas a few examples are

minus Analyze customer needs in detail and improve the value proposition to bet-ter address them minus Analyze competitors and improve the value proposition to increase unique aspects minus Analyze partnering options and im-prove your needed key activities and resources accordingly

Business Model Development amp Innovation

Box 2 It All Starts with the BaselineTo develop the business model the first exercise should al-ways be to describe a baseline for the following activities This is straightforward when a business model already ex-ists which is not as successful as expected or under pres-sure from the competition In this case the current state of the business model is the baseline However even if you are in a very early stage eg for new product ideas or start-ups it is important to describe the baseline In this case all ideas thoughts and assumptions regardless to which ex-tent they are completed or validated should be taken into account to reflect the current thinking and create a com-mon ground for the team working on the business model

Value Capture

Value Creation Competition

Why

How What Who

My Company My Customers My Partners My Competition

Enterprise View

Fig 3 Enterprise view (adapted from Business Model Foundry AGCC BYSA 30)

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

11

Box 3 The Right Team and MindsetBesides the four types of iteration described in this article the BMDI approach is also about the right team set-up and mindset The team has to unite various perspectives so di-versity is important In addition there is a need to access experts (eg pricing legal issues) stakeholders for valida-tion (in particular customers) decision makers as well as sponsors The right mindset is very similar to the one need-ed in Design Thinking projects (eg openness and endur-ance are key)

minus Analyze customer experience and im-prove customer relations accordingly minus Analyze key activities to reduce relat-ed costs

Challenge amp Change If there are val-id triggers (opportunities or threats) to challenge the business model base-line at any point in time a design chal-lenge is formulated and dedicated ide-ation methods are used to come up with different alternative business model op-tions While some methods rather facil-itate systematic ideation for incremental improvements others are more suited for creative ideation that might bring up disruptive out-of-the-box alternatives In any case the team has to cluster ideas and finally has to decide which changes will be used for subsequent processing Test amp Verify Each business model is based on several assumptions that im-ply risks if they turn out to be wrong That is why crucial assumptions should be tested and validated at an early stage with limited effort Usually assumptions are made regarding customersrsquo issues needs and wants as well as their will-ingness to pay Also assumptions can be made regarding appropriate chan-

nels capabilities of key partners and the company itself These assumptions should be derived out of the business model and the risks involved need to be evaluated in order to figure out which as-sumptions should be tested in which se-quence The ldquoLean Start Uprdquo literature (Ries 2011) provides many insights as to how these assumptions can be validated depending on the maturity of the project Key elements are the ldquoBuild-Measure-Learnrdquo cycle and the ldquoMVP (Minimal Vi-able Product) conceptrdquo to minimize the involved effort as well as ldquoactionable metricsrdquo that should ensure some objec-tivity throughout the test Depending on

Baseline Appropriate Validated Business Model

Create Choices Make Choices

Diverge Converge

Partner Network Customer Network Competition

Partner Network Customer Network Competition

Evaluate ampDecide

Test ampVerify

Challange ampChance

Analyze ampImprove

Fig 4 BMDI in anutshell

360deg ndash the Business Transformation Journal No 11 | August 2014

12

the results of the test either an assumption is confirmed and the team can move on or changes are required sometimes sig-nificant ones so called ldquopivotsrdquo Evaluate amp Decide To figure out which of the different business model options are most promising these have to be evaluated both qualitatively and quanti-

tatively For the overall evaluation two di-mensions are decisive impact vs ease of implementation Impact summariz-es all the relevant criteria that allow as-sessment of the potential impact (includ-ing revenue potential) of the business model Ease of implementation summa-rizes all related efforts (including costs) and risks The evaluation criteria and its relative weight have to be project-spe-cific because stakeholders might look at

very different aspects However the two dimensions can be depicted in a simple decision matrix to illustrate the consoli-dated feedback of various stakeholders and experts to simplify decisions The

quantitative evaluation can be done by deriving a business case out of the re-spective model Therefore all revenue streams related to the addressed cus-tomer groups are estimated based on revenue models price points and num-ber of customersdeals In addition all costs related to value creating and deliv-ering activities resources and partner-ing are estimated and summarized Fur-thermore towards the end of the project the favored business model is evaluat-ed in detail to provide the decision mak-ers with a solid foundation for further planning or investment decisions

Specifics of Complex Business ModelsIn two-sided or multi-sided business models more than one customer group needs to be convinced because there is a crucial relationship between the cus-tomer groups The best-known examples for these types of models are platform-based business models such as Airbnb or Google Search For these models you have to create a win-win-win situation be-cause value needs to be created for all customer groups even those that do not pay anything (such as the end user of a search engine) This gets even trickier if the model is subject to so-called net-work effects Network effects are pres-ent if the value of the model depends on the amount of other customers also us-ing it and can appear within one customer group (direct) or across customer groups (indirect network effects) Network ef-fects are extremely beneficial for the owner of the business model as soon as the required critical mass is reached ie when the adoption of the product or ser-vice is self-sustaining (Mahler and Rog-ers 1999) However until critical mass is achieved the network effects are hinder-ing the adoption and success of the busi-ness model Investments as well as some endurance are needed to be success-ful in the end As a consequence BMDI supports the systematic development of strategies that can be used to accomplish critical mass

Box 4 Project Description Helix Nebula In 2012 science organizations such as the European Or-ganization for Nuclear Research (CERN) the European Molecular Biology Laboratory (EMBL) and the European Space Agency (ESA) teamed up with IT service compa-nies such as Atos CloudSigma Interoute and T-Systems to establish a federated European cloud known as Helix Nebula (HN)

Business Model Development amp Innovation

The evaluation criteria and its relative weight have to be project- specific because stakeholders might look at very different aspects

A win-win-win situation has to be created because value needs to be created for all customer groups even those that do not pay anything

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

13

How BMDI Transformed a Cloud Business into a Cloud of InsightsHelix Nebula (HN) cloud suppliers (see box 4) faced several challenges such as addressing a new market segment called ldquobig sciencerdquo pressure on prices due to ap-parently low-cost in-house solutions and building up an innovative partner ecosys-tem with usually competing companies Major competitors such as Amazon Web Services (AWS) offered cloud services at extremely low prices The fact that some of the customers already used AWS was reason enough to accelerate mar-ket entry At that point the major remain-ing question was if HN could against all odds beat AWS based on pricing or if a value proposition tailored to the needs of science could be foundIn ldquoAnalyze amp Improverdquo we started by investigating related industries exist-ing and potential competitors as well as partner ecosystems with their drivers and obstacles Further we analyzed the cus-tomer side the public sector and specif-ically the needs of ldquobig sciencerdquo For this multiple interviews with public institutions and the customers themselves were con-ducted We found that science organiza-tions tend to have many publicly fund-ed IT resources which are maintained by non-profit organizations If HN could integrate these resources with the com-mercially-offered solutions it would offer a previously non-existing flexibility to the market This value proposition would set HN apart from AWS However based on the very restricted budget of science or-ganizations prices would still have to be very low Having this in mind the chal-lenge for the supply side was to create a valuable business out of this ecosystem without just covering its costs Focusing on this design challenge we conducted several workshops with HN suppliers in ldquoChallenge amp Changerdquo to de-velop multiple potential business mod-els Since the establishment of a not-yet-existing cloud ecosystem required room for innovation many creative meth-ods were applied to inspire innovative

ideas A second challenge was to over-come coopetition issues in order to en-able smooth business operations of the proposed ecosystem For this multiple broker roles were determined that would enable interaction between suppliers and buyers based on business and technical processes

In ldquoEvaluate amp Deciderdquo these business models were evaluated by experts at SAP and HN suppliers The result was a business model roadmap with a final business model that goes beyond ge-neric cloud computing by creating value not only for science but also for busi-ness government and society based on the analysis and aggregation of Big Data brought to the cloud by science organi-zations For example earth observation data from ESA can be very valuable to oil companies in order to predict landslides near pipelines This extension allows sci-ence organizations to consume cloud services for free by providing valuable

Key Learnings

It is not enough to rely on product innovation Often products fail if they address the market with the wrong business model

Business models can be systematically developed and evaluated based on an agile and iterative process that ensures economic viability

Business models are probably the most powerful driver of competitive advantage and should be managed as it is done with product portfolios

Business cases by themselves are insufficient if they do not build on a validated business model

Business model development and innovation combined with Design Thinking and lean offers a meaningful and solid foundation for businesses

Earth observation data from ESA can be very valuable to oil companies in order to predict landslides near pipelines

360deg ndash the Business Transformation Journal No 11 | August 2014

14

Business Model Development amp Innovation

data to the cloud and to open up a major revenue stream for HN suppliers by giv-ing room for innovative services More-over it could help nations and cities pro-tect their citizens based on early warning systems The growing ecosystem of re-search organizations collaborating in the cloud allows for the aggregation of near-ly all conceivable scientific knowledge in one cloud Thus it enables not-yet-exist-ing insights based on inter-organization-al and international research

To fill the cloud with data the design of a profitable business model that pro-vides cloud services tailored to the enor-mous demand of ldquobig sciencerdquo was re-quired In this field the major competitor was AWS We had defined a clear differ-entiation by integrating non-profit partners offering publicly funded resources to Eu-ropean big science organizations Howev-er HN still needed to compete on price Hence we conducted a business case to compare HN prices to CERNrsquos in-house costs and AWS prices The results spoke for themselves HNrsquos prices beat AWSrsquos prices and partly CERNrsquos in-house costs Assuming that CERN moves to the cloud gradually while HN reaches economies of scale this is a perfectly valid starting point Therefore we had proven econom-ic viability not only by offering a unique value proposition but also by providing a financially attractive alternative to in-house solutions for science organizations The final challenge to tackle was the

roadmap to critical mass in order to es-tablish the final business model For this we worked closely with one of the major flagships namely ESA in order to cre-ate suitable steps for implementation We carefully considered a first potential niche to start with which would make use of the satellite earth observation data al-ready incorporated into the HN cloud Based on this niche the market would be expanded into other fields based on data enrichment in the cloud The proposed steps amongst others were to build up a lively community with the first ecosys-tem to facilitate partner co-innovation and complementation in order to enrich the platform along the way as well as to enable the exchange between partners and customers Based on the proposed business model roadmap and the road-map for critical mass the Helix Nebula Marketplace was rolled out in May 2014This use case showed us the specif-ic needs of partner ecosystems going through the process of business model innovation Specific focus must be giv-en to the needs of each partner provid-ing each of them with a suitable business model underlying the common business model of the ecosystem as a whole

ConclusionConsulting customers and start-ups has proven that the BMDI approach is rele-vant across industries and can be applied to challenges faced by businesses of any size In order to succeed companies will have to realize that BMDI should be grant-ed as much importance as product inno-vation The ultimate goal is to establish a standardized BMDI process in each com-pany in which the business models im-plemented are managed similarly to the product portfolio of the company

Learn more about The approach is integrated into SAP innovation approach To receive further information on training and consulting services contact Peter Mittemeyer (petermittemeyer[at]sapcom)

Business Model Development and Innovation is relevant across industries and for businesses of any size

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

15

Service

AUTHORS

Julia Doll is a Project Lead for Business Model Innovation at SAP Switzerland She has coached several projects regarding analysis design and evaluation of business models During her career at SAP starting in 2007 she has worked on several projects around the globe Julia holds a Master of Science from the University of Mannheim Germany and a Master of Business from the University of Queensland Australiajudoll[at]sapcom

Dr Uli Eisert built up a SAP research lab at the University of St Gallen and is heading a research amp innovation team that is currently focusing on Business Model Development amp Innovation (BMDI) as well as new approaches leveraging smart management of intangi-ble assets He published various journal papers and articles on innovation management and BMDI Before his current position he was heading the global PLM solution manage-ment at SAP and worked as a consultant and project manager for SAP implementations He holds degrees in mechanical and industrial engineering as well as a PhD in business administrationulieisert[at]sapcom

REFERENCES

Blank S (2013) Why the lean start-up changes everything Harvard Business Review 91(5) 63 ndash 72 Brown T (2008) Design Thinking Harvard Business Review June 2008 84 ndash 92 Bucherer B Eisert U and Grassmann O (2012) Towards Systematic Business Model Innova-

tion Lessons from Product Innovation Management Creativity and Innovation Management 21(2) pp183-198

Chesbrough H (2007) Business model innovation itrsquos not just about technology anymore Strategy amp Leadership 35(6) 12 ndash17

Chesbrough H (2010) Business Model Innovation Opportunities and Barriers Long Range Plan-ning 43(2 ndash 3) 354ndash363 doi101016jlrp200907010

Eisert U (2013) SAP Bringing Economic Viability to the Front End of Innovation In O Gassmann amp F Schweitzer (Eds) Management of the Fuzzy Front End of Innovation Berlin Springer Verlag

Gassmann O Frankenberger K amp Csik M (2013) Geschaumlftsmodelle entwickeln 55 innovative Konzepte mit dem St Galler Business Model Navigator Carl Hanser Verlag GmbH Co KG

IBM (2012) Leading Through Connections Highlights of the Global Chief Executive Officer (CEO) Study Somers New York

IDEO (2012) Human Centered Design An Introduction 2nd Edition Available from httpwwwideocomimagesuploadshcd_toolkitHCD_INTRO_PDF_WEB_optpdf [Accessed 19122012]

Johnson M Christensen C and Kagermann H ldquoReinventing your business modelrdquo Harvard business review 8612 (2008) 57ndash 68

Mahler A amp Rogers E M (1999) The diffusion of interactive communication innovations and the critical mass the adoption of telecommunications services by German banks Telecommunications policy 23(10) 719 ndash740

Osterwalder A Pigneur Y amp Tucci C L (2005) Clarifying Business Models Origins Present And Future of the Concept Communications of the AIS 16(1) 1ndash25

Ries E (2011) The Lean Startup 1st ed New York Crown Business Strategyzer (2011) Business Model Canvas Explained [video] Youtube

issue

no

11au

g 20

14

In collaboration withSponsored by

PUBLICATION DETAILS OF360deg ndash THE BUSINESS TRANSFORMATION JOURNAL

PUBLISHER

Business Transformation Academy (BTA)co University of Applied Sciences and Arts Northwestern Switzerland (FHNW)School of Business (HSW) Institute for Information Systems (IWI)Peter Merian-Strasse 864002 BaselSwitzerlandinfo[at]bta-onlinecomwwwbta-onlinecomwww360-btcom

The Business Transformation Academy (BTA) is a joint research project of the University of Applied Scienc-es and Arts Northwestern Switzerland (FHNW) and SAP AG The BTA is a Swiss non-profit association It is registered with the Commercial Register of the Canton of Basel-Stadt under the name ldquoBusiness Transfor-mation Academyrdquo and under the number CH-2706000679-0 (legal nature association) Authorized representatives Prof Dr Axel Uhl Lars Alexander Gollenia Prof Dr Rolf Dornberger Nicolas Steib Prof Dr Jan vom Brocke Paul Stratil

Disclaimer Within reason the BTA strives to provide correct and complete information in this journal How-ever the BTA does not accept any responsibility for topicality correctness and completeness of the informa-tion provided in this journal The BTA does not accept any responsibility or liability for the content on external links to which this journal refers to directly or indirectly and which is beyond the control of BTAThe material contained in this journal are the copyright works of the BTA and the authors Copying or dissem-inating content from this journal requires the prior written consent of the BTA and of the authorsLegal venue is Basel Switzerland

Note to the reader The opinions expressed in the articles in this journal do not necessarily reflect the views of the BTA

Picture Credits copy Herzog amp de Meuron (cover p 61 62) copy Oliver Heissner (2) wwwqrcode-monkeyde (2) copy iStockphotocomcmcderm1 (4 5) copy iStockphotocomDrAfter123 (6) copy iStockphotocomretro-rocket (16) SAP AG (18 19 23 25) copy kentohfotoliacom (28) art4allshutterstockcom (42) copy Photogra-pheeeufotoliacom (48) copy ReGe Hamburg Project-Realisierungsgesellschaft mbh (54) Airbus SAS (60) HafenCity Hamburg GmbH (66) copy iStockphotocombenedek (83) copy Chrisoph Gebler Zorabcshutter-stockcom (75) wwwgoQRme (83) Michael von KutzschenbachBTA (84 85) Joshua MeadonSAP (86 87)

Published three to four times a year in electronic format

EDITORIAL OFFICE

For inquiries about the journal please contact info[at]360-btcom

Subscriptions If you want to be notified when new issues are published subscribe onhttpswwwbta-onlinecomnewsletter and tick the box labeled ldquo360deg Journal Newsrdquo

Page 4: Doll_Eisert_Business Model Development  Innovation

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

9

identify the appropriate business model such as the BMDI approach provides a meaningful and solid foundation to calcu-late business cases and develop business plans (see box 1) In addition it guides you to a model that allows full exploita-tion of ideas and capabilities regardless of whether this model is highly innovative totally new or ldquojustrdquo the adaption of a prov-en existing business model or something in between

Business Model Description Business models can only be leveraged as an appropriate ldquounit of analysisrdquo if the used description model allows to illus-trate and convey the business logic in a highly condensed and easy-to-under-stand manner This explains the success of the Business Model Canvas from Al-exander Osterwalder as the de-facto standard for business models at least on the practitionerrsquos side It uses nine elements to describe a business mod-el (Strategyzer 2011) We call the can-vas the ldquoenterprise viewrdquo of the business model (see figure 3 on the next page)

and complement it with a ldquonetwork viewrdquo that allows it to describe the relevant network and interrelations around the enterprise (see figure 2) This helps sig-nificantly to understand dependencies in complex business models and to en-sure that competition is always consid-ered when the business model is devel-oped Without a systematic development of the approriate business model be-forehand business cases and plans are not sufficient to ensure economic viabil-ity (Eisert 2013)

What is BMDI in a NutshellThe art of BMDI is to turn the baseline (see box 2 on the next page) into an ap-propriate model that is under given in-ternal and external conditions the mod-el that ensures economic viability in the best way possible In order to accomplish that the team has to go through different activities such as analysis design val-idation implementation execution and scaling However it will never be a se-quential linear process It must be tai-lored to the specific challenges of the

My Company My Customers My Partners My Competition

Network View Partner Network Customer Network Competition

Fig 2 Network view (adapted from SAP SECC BY 40)

360deg ndash the Business Transformation Journal No 11 | August 2014

10

project and it has to be flexible enough to take into account all the insights that will be gained along the way That is why BMDI is a highly iterative and agile ap-proach Its beauty is the combination of simplicity and flexibility with powerful methods BMDI offers four types of iter-ation that allow project teams in any giv-en situation to identify and carry out the activities needed to develop their model into the right direction

The Four Types of IterationWe distinguish four basic ways to sys-tematically develop a business model All of them follow the divergeconverge principle that has proven to be success-ful in Design Thinking First the team cre-ates options then it synthesizes its in-sights and chooses the most promising option(s) For each type of iteration we have developed a set of methods while leveraging good industry practices (see figure 4) Analyze amp Improve During this itera-tion parts of the business model are an-alyzed in more detail to improve the busi-ness model based on the gained insights This can be done in various areas a few examples are

minus Analyze customer needs in detail and improve the value proposition to bet-ter address them minus Analyze competitors and improve the value proposition to increase unique aspects minus Analyze partnering options and im-prove your needed key activities and resources accordingly

Business Model Development amp Innovation

Box 2 It All Starts with the BaselineTo develop the business model the first exercise should al-ways be to describe a baseline for the following activities This is straightforward when a business model already ex-ists which is not as successful as expected or under pres-sure from the competition In this case the current state of the business model is the baseline However even if you are in a very early stage eg for new product ideas or start-ups it is important to describe the baseline In this case all ideas thoughts and assumptions regardless to which ex-tent they are completed or validated should be taken into account to reflect the current thinking and create a com-mon ground for the team working on the business model

Value Capture

Value Creation Competition

Why

How What Who

My Company My Customers My Partners My Competition

Enterprise View

Fig 3 Enterprise view (adapted from Business Model Foundry AGCC BYSA 30)

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

11

Box 3 The Right Team and MindsetBesides the four types of iteration described in this article the BMDI approach is also about the right team set-up and mindset The team has to unite various perspectives so di-versity is important In addition there is a need to access experts (eg pricing legal issues) stakeholders for valida-tion (in particular customers) decision makers as well as sponsors The right mindset is very similar to the one need-ed in Design Thinking projects (eg openness and endur-ance are key)

minus Analyze customer experience and im-prove customer relations accordingly minus Analyze key activities to reduce relat-ed costs

Challenge amp Change If there are val-id triggers (opportunities or threats) to challenge the business model base-line at any point in time a design chal-lenge is formulated and dedicated ide-ation methods are used to come up with different alternative business model op-tions While some methods rather facil-itate systematic ideation for incremental improvements others are more suited for creative ideation that might bring up disruptive out-of-the-box alternatives In any case the team has to cluster ideas and finally has to decide which changes will be used for subsequent processing Test amp Verify Each business model is based on several assumptions that im-ply risks if they turn out to be wrong That is why crucial assumptions should be tested and validated at an early stage with limited effort Usually assumptions are made regarding customersrsquo issues needs and wants as well as their will-ingness to pay Also assumptions can be made regarding appropriate chan-

nels capabilities of key partners and the company itself These assumptions should be derived out of the business model and the risks involved need to be evaluated in order to figure out which as-sumptions should be tested in which se-quence The ldquoLean Start Uprdquo literature (Ries 2011) provides many insights as to how these assumptions can be validated depending on the maturity of the project Key elements are the ldquoBuild-Measure-Learnrdquo cycle and the ldquoMVP (Minimal Vi-able Product) conceptrdquo to minimize the involved effort as well as ldquoactionable metricsrdquo that should ensure some objec-tivity throughout the test Depending on

Baseline Appropriate Validated Business Model

Create Choices Make Choices

Diverge Converge

Partner Network Customer Network Competition

Partner Network Customer Network Competition

Evaluate ampDecide

Test ampVerify

Challange ampChance

Analyze ampImprove

Fig 4 BMDI in anutshell

360deg ndash the Business Transformation Journal No 11 | August 2014

12

the results of the test either an assumption is confirmed and the team can move on or changes are required sometimes sig-nificant ones so called ldquopivotsrdquo Evaluate amp Decide To figure out which of the different business model options are most promising these have to be evaluated both qualitatively and quanti-

tatively For the overall evaluation two di-mensions are decisive impact vs ease of implementation Impact summariz-es all the relevant criteria that allow as-sessment of the potential impact (includ-ing revenue potential) of the business model Ease of implementation summa-rizes all related efforts (including costs) and risks The evaluation criteria and its relative weight have to be project-spe-cific because stakeholders might look at

very different aspects However the two dimensions can be depicted in a simple decision matrix to illustrate the consoli-dated feedback of various stakeholders and experts to simplify decisions The

quantitative evaluation can be done by deriving a business case out of the re-spective model Therefore all revenue streams related to the addressed cus-tomer groups are estimated based on revenue models price points and num-ber of customersdeals In addition all costs related to value creating and deliv-ering activities resources and partner-ing are estimated and summarized Fur-thermore towards the end of the project the favored business model is evaluat-ed in detail to provide the decision mak-ers with a solid foundation for further planning or investment decisions

Specifics of Complex Business ModelsIn two-sided or multi-sided business models more than one customer group needs to be convinced because there is a crucial relationship between the cus-tomer groups The best-known examples for these types of models are platform-based business models such as Airbnb or Google Search For these models you have to create a win-win-win situation be-cause value needs to be created for all customer groups even those that do not pay anything (such as the end user of a search engine) This gets even trickier if the model is subject to so-called net-work effects Network effects are pres-ent if the value of the model depends on the amount of other customers also us-ing it and can appear within one customer group (direct) or across customer groups (indirect network effects) Network ef-fects are extremely beneficial for the owner of the business model as soon as the required critical mass is reached ie when the adoption of the product or ser-vice is self-sustaining (Mahler and Rog-ers 1999) However until critical mass is achieved the network effects are hinder-ing the adoption and success of the busi-ness model Investments as well as some endurance are needed to be success-ful in the end As a consequence BMDI supports the systematic development of strategies that can be used to accomplish critical mass

Box 4 Project Description Helix Nebula In 2012 science organizations such as the European Or-ganization for Nuclear Research (CERN) the European Molecular Biology Laboratory (EMBL) and the European Space Agency (ESA) teamed up with IT service compa-nies such as Atos CloudSigma Interoute and T-Systems to establish a federated European cloud known as Helix Nebula (HN)

Business Model Development amp Innovation

The evaluation criteria and its relative weight have to be project- specific because stakeholders might look at very different aspects

A win-win-win situation has to be created because value needs to be created for all customer groups even those that do not pay anything

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

13

How BMDI Transformed a Cloud Business into a Cloud of InsightsHelix Nebula (HN) cloud suppliers (see box 4) faced several challenges such as addressing a new market segment called ldquobig sciencerdquo pressure on prices due to ap-parently low-cost in-house solutions and building up an innovative partner ecosys-tem with usually competing companies Major competitors such as Amazon Web Services (AWS) offered cloud services at extremely low prices The fact that some of the customers already used AWS was reason enough to accelerate mar-ket entry At that point the major remain-ing question was if HN could against all odds beat AWS based on pricing or if a value proposition tailored to the needs of science could be foundIn ldquoAnalyze amp Improverdquo we started by investigating related industries exist-ing and potential competitors as well as partner ecosystems with their drivers and obstacles Further we analyzed the cus-tomer side the public sector and specif-ically the needs of ldquobig sciencerdquo For this multiple interviews with public institutions and the customers themselves were con-ducted We found that science organiza-tions tend to have many publicly fund-ed IT resources which are maintained by non-profit organizations If HN could integrate these resources with the com-mercially-offered solutions it would offer a previously non-existing flexibility to the market This value proposition would set HN apart from AWS However based on the very restricted budget of science or-ganizations prices would still have to be very low Having this in mind the chal-lenge for the supply side was to create a valuable business out of this ecosystem without just covering its costs Focusing on this design challenge we conducted several workshops with HN suppliers in ldquoChallenge amp Changerdquo to de-velop multiple potential business mod-els Since the establishment of a not-yet-existing cloud ecosystem required room for innovation many creative meth-ods were applied to inspire innovative

ideas A second challenge was to over-come coopetition issues in order to en-able smooth business operations of the proposed ecosystem For this multiple broker roles were determined that would enable interaction between suppliers and buyers based on business and technical processes

In ldquoEvaluate amp Deciderdquo these business models were evaluated by experts at SAP and HN suppliers The result was a business model roadmap with a final business model that goes beyond ge-neric cloud computing by creating value not only for science but also for busi-ness government and society based on the analysis and aggregation of Big Data brought to the cloud by science organi-zations For example earth observation data from ESA can be very valuable to oil companies in order to predict landslides near pipelines This extension allows sci-ence organizations to consume cloud services for free by providing valuable

Key Learnings

It is not enough to rely on product innovation Often products fail if they address the market with the wrong business model

Business models can be systematically developed and evaluated based on an agile and iterative process that ensures economic viability

Business models are probably the most powerful driver of competitive advantage and should be managed as it is done with product portfolios

Business cases by themselves are insufficient if they do not build on a validated business model

Business model development and innovation combined with Design Thinking and lean offers a meaningful and solid foundation for businesses

Earth observation data from ESA can be very valuable to oil companies in order to predict landslides near pipelines

360deg ndash the Business Transformation Journal No 11 | August 2014

14

Business Model Development amp Innovation

data to the cloud and to open up a major revenue stream for HN suppliers by giv-ing room for innovative services More-over it could help nations and cities pro-tect their citizens based on early warning systems The growing ecosystem of re-search organizations collaborating in the cloud allows for the aggregation of near-ly all conceivable scientific knowledge in one cloud Thus it enables not-yet-exist-ing insights based on inter-organization-al and international research

To fill the cloud with data the design of a profitable business model that pro-vides cloud services tailored to the enor-mous demand of ldquobig sciencerdquo was re-quired In this field the major competitor was AWS We had defined a clear differ-entiation by integrating non-profit partners offering publicly funded resources to Eu-ropean big science organizations Howev-er HN still needed to compete on price Hence we conducted a business case to compare HN prices to CERNrsquos in-house costs and AWS prices The results spoke for themselves HNrsquos prices beat AWSrsquos prices and partly CERNrsquos in-house costs Assuming that CERN moves to the cloud gradually while HN reaches economies of scale this is a perfectly valid starting point Therefore we had proven econom-ic viability not only by offering a unique value proposition but also by providing a financially attractive alternative to in-house solutions for science organizations The final challenge to tackle was the

roadmap to critical mass in order to es-tablish the final business model For this we worked closely with one of the major flagships namely ESA in order to cre-ate suitable steps for implementation We carefully considered a first potential niche to start with which would make use of the satellite earth observation data al-ready incorporated into the HN cloud Based on this niche the market would be expanded into other fields based on data enrichment in the cloud The proposed steps amongst others were to build up a lively community with the first ecosys-tem to facilitate partner co-innovation and complementation in order to enrich the platform along the way as well as to enable the exchange between partners and customers Based on the proposed business model roadmap and the road-map for critical mass the Helix Nebula Marketplace was rolled out in May 2014This use case showed us the specif-ic needs of partner ecosystems going through the process of business model innovation Specific focus must be giv-en to the needs of each partner provid-ing each of them with a suitable business model underlying the common business model of the ecosystem as a whole

ConclusionConsulting customers and start-ups has proven that the BMDI approach is rele-vant across industries and can be applied to challenges faced by businesses of any size In order to succeed companies will have to realize that BMDI should be grant-ed as much importance as product inno-vation The ultimate goal is to establish a standardized BMDI process in each com-pany in which the business models im-plemented are managed similarly to the product portfolio of the company

Learn more about The approach is integrated into SAP innovation approach To receive further information on training and consulting services contact Peter Mittemeyer (petermittemeyer[at]sapcom)

Business Model Development and Innovation is relevant across industries and for businesses of any size

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

15

Service

AUTHORS

Julia Doll is a Project Lead for Business Model Innovation at SAP Switzerland She has coached several projects regarding analysis design and evaluation of business models During her career at SAP starting in 2007 she has worked on several projects around the globe Julia holds a Master of Science from the University of Mannheim Germany and a Master of Business from the University of Queensland Australiajudoll[at]sapcom

Dr Uli Eisert built up a SAP research lab at the University of St Gallen and is heading a research amp innovation team that is currently focusing on Business Model Development amp Innovation (BMDI) as well as new approaches leveraging smart management of intangi-ble assets He published various journal papers and articles on innovation management and BMDI Before his current position he was heading the global PLM solution manage-ment at SAP and worked as a consultant and project manager for SAP implementations He holds degrees in mechanical and industrial engineering as well as a PhD in business administrationulieisert[at]sapcom

REFERENCES

Blank S (2013) Why the lean start-up changes everything Harvard Business Review 91(5) 63 ndash 72 Brown T (2008) Design Thinking Harvard Business Review June 2008 84 ndash 92 Bucherer B Eisert U and Grassmann O (2012) Towards Systematic Business Model Innova-

tion Lessons from Product Innovation Management Creativity and Innovation Management 21(2) pp183-198

Chesbrough H (2007) Business model innovation itrsquos not just about technology anymore Strategy amp Leadership 35(6) 12 ndash17

Chesbrough H (2010) Business Model Innovation Opportunities and Barriers Long Range Plan-ning 43(2 ndash 3) 354ndash363 doi101016jlrp200907010

Eisert U (2013) SAP Bringing Economic Viability to the Front End of Innovation In O Gassmann amp F Schweitzer (Eds) Management of the Fuzzy Front End of Innovation Berlin Springer Verlag

Gassmann O Frankenberger K amp Csik M (2013) Geschaumlftsmodelle entwickeln 55 innovative Konzepte mit dem St Galler Business Model Navigator Carl Hanser Verlag GmbH Co KG

IBM (2012) Leading Through Connections Highlights of the Global Chief Executive Officer (CEO) Study Somers New York

IDEO (2012) Human Centered Design An Introduction 2nd Edition Available from httpwwwideocomimagesuploadshcd_toolkitHCD_INTRO_PDF_WEB_optpdf [Accessed 19122012]

Johnson M Christensen C and Kagermann H ldquoReinventing your business modelrdquo Harvard business review 8612 (2008) 57ndash 68

Mahler A amp Rogers E M (1999) The diffusion of interactive communication innovations and the critical mass the adoption of telecommunications services by German banks Telecommunications policy 23(10) 719 ndash740

Osterwalder A Pigneur Y amp Tucci C L (2005) Clarifying Business Models Origins Present And Future of the Concept Communications of the AIS 16(1) 1ndash25

Ries E (2011) The Lean Startup 1st ed New York Crown Business Strategyzer (2011) Business Model Canvas Explained [video] Youtube

issue

no

11au

g 20

14

In collaboration withSponsored by

PUBLICATION DETAILS OF360deg ndash THE BUSINESS TRANSFORMATION JOURNAL

PUBLISHER

Business Transformation Academy (BTA)co University of Applied Sciences and Arts Northwestern Switzerland (FHNW)School of Business (HSW) Institute for Information Systems (IWI)Peter Merian-Strasse 864002 BaselSwitzerlandinfo[at]bta-onlinecomwwwbta-onlinecomwww360-btcom

The Business Transformation Academy (BTA) is a joint research project of the University of Applied Scienc-es and Arts Northwestern Switzerland (FHNW) and SAP AG The BTA is a Swiss non-profit association It is registered with the Commercial Register of the Canton of Basel-Stadt under the name ldquoBusiness Transfor-mation Academyrdquo and under the number CH-2706000679-0 (legal nature association) Authorized representatives Prof Dr Axel Uhl Lars Alexander Gollenia Prof Dr Rolf Dornberger Nicolas Steib Prof Dr Jan vom Brocke Paul Stratil

Disclaimer Within reason the BTA strives to provide correct and complete information in this journal How-ever the BTA does not accept any responsibility for topicality correctness and completeness of the informa-tion provided in this journal The BTA does not accept any responsibility or liability for the content on external links to which this journal refers to directly or indirectly and which is beyond the control of BTAThe material contained in this journal are the copyright works of the BTA and the authors Copying or dissem-inating content from this journal requires the prior written consent of the BTA and of the authorsLegal venue is Basel Switzerland

Note to the reader The opinions expressed in the articles in this journal do not necessarily reflect the views of the BTA

Picture Credits copy Herzog amp de Meuron (cover p 61 62) copy Oliver Heissner (2) wwwqrcode-monkeyde (2) copy iStockphotocomcmcderm1 (4 5) copy iStockphotocomDrAfter123 (6) copy iStockphotocomretro-rocket (16) SAP AG (18 19 23 25) copy kentohfotoliacom (28) art4allshutterstockcom (42) copy Photogra-pheeeufotoliacom (48) copy ReGe Hamburg Project-Realisierungsgesellschaft mbh (54) Airbus SAS (60) HafenCity Hamburg GmbH (66) copy iStockphotocombenedek (83) copy Chrisoph Gebler Zorabcshutter-stockcom (75) wwwgoQRme (83) Michael von KutzschenbachBTA (84 85) Joshua MeadonSAP (86 87)

Published three to four times a year in electronic format

EDITORIAL OFFICE

For inquiries about the journal please contact info[at]360-btcom

Subscriptions If you want to be notified when new issues are published subscribe onhttpswwwbta-onlinecomnewsletter and tick the box labeled ldquo360deg Journal Newsrdquo

Page 5: Doll_Eisert_Business Model Development  Innovation

360deg ndash the Business Transformation Journal No 11 | August 2014

10

project and it has to be flexible enough to take into account all the insights that will be gained along the way That is why BMDI is a highly iterative and agile ap-proach Its beauty is the combination of simplicity and flexibility with powerful methods BMDI offers four types of iter-ation that allow project teams in any giv-en situation to identify and carry out the activities needed to develop their model into the right direction

The Four Types of IterationWe distinguish four basic ways to sys-tematically develop a business model All of them follow the divergeconverge principle that has proven to be success-ful in Design Thinking First the team cre-ates options then it synthesizes its in-sights and chooses the most promising option(s) For each type of iteration we have developed a set of methods while leveraging good industry practices (see figure 4) Analyze amp Improve During this itera-tion parts of the business model are an-alyzed in more detail to improve the busi-ness model based on the gained insights This can be done in various areas a few examples are

minus Analyze customer needs in detail and improve the value proposition to bet-ter address them minus Analyze competitors and improve the value proposition to increase unique aspects minus Analyze partnering options and im-prove your needed key activities and resources accordingly

Business Model Development amp Innovation

Box 2 It All Starts with the BaselineTo develop the business model the first exercise should al-ways be to describe a baseline for the following activities This is straightforward when a business model already ex-ists which is not as successful as expected or under pres-sure from the competition In this case the current state of the business model is the baseline However even if you are in a very early stage eg for new product ideas or start-ups it is important to describe the baseline In this case all ideas thoughts and assumptions regardless to which ex-tent they are completed or validated should be taken into account to reflect the current thinking and create a com-mon ground for the team working on the business model

Value Capture

Value Creation Competition

Why

How What Who

My Company My Customers My Partners My Competition

Enterprise View

Fig 3 Enterprise view (adapted from Business Model Foundry AGCC BYSA 30)

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

11

Box 3 The Right Team and MindsetBesides the four types of iteration described in this article the BMDI approach is also about the right team set-up and mindset The team has to unite various perspectives so di-versity is important In addition there is a need to access experts (eg pricing legal issues) stakeholders for valida-tion (in particular customers) decision makers as well as sponsors The right mindset is very similar to the one need-ed in Design Thinking projects (eg openness and endur-ance are key)

minus Analyze customer experience and im-prove customer relations accordingly minus Analyze key activities to reduce relat-ed costs

Challenge amp Change If there are val-id triggers (opportunities or threats) to challenge the business model base-line at any point in time a design chal-lenge is formulated and dedicated ide-ation methods are used to come up with different alternative business model op-tions While some methods rather facil-itate systematic ideation for incremental improvements others are more suited for creative ideation that might bring up disruptive out-of-the-box alternatives In any case the team has to cluster ideas and finally has to decide which changes will be used for subsequent processing Test amp Verify Each business model is based on several assumptions that im-ply risks if they turn out to be wrong That is why crucial assumptions should be tested and validated at an early stage with limited effort Usually assumptions are made regarding customersrsquo issues needs and wants as well as their will-ingness to pay Also assumptions can be made regarding appropriate chan-

nels capabilities of key partners and the company itself These assumptions should be derived out of the business model and the risks involved need to be evaluated in order to figure out which as-sumptions should be tested in which se-quence The ldquoLean Start Uprdquo literature (Ries 2011) provides many insights as to how these assumptions can be validated depending on the maturity of the project Key elements are the ldquoBuild-Measure-Learnrdquo cycle and the ldquoMVP (Minimal Vi-able Product) conceptrdquo to minimize the involved effort as well as ldquoactionable metricsrdquo that should ensure some objec-tivity throughout the test Depending on

Baseline Appropriate Validated Business Model

Create Choices Make Choices

Diverge Converge

Partner Network Customer Network Competition

Partner Network Customer Network Competition

Evaluate ampDecide

Test ampVerify

Challange ampChance

Analyze ampImprove

Fig 4 BMDI in anutshell

360deg ndash the Business Transformation Journal No 11 | August 2014

12

the results of the test either an assumption is confirmed and the team can move on or changes are required sometimes sig-nificant ones so called ldquopivotsrdquo Evaluate amp Decide To figure out which of the different business model options are most promising these have to be evaluated both qualitatively and quanti-

tatively For the overall evaluation two di-mensions are decisive impact vs ease of implementation Impact summariz-es all the relevant criteria that allow as-sessment of the potential impact (includ-ing revenue potential) of the business model Ease of implementation summa-rizes all related efforts (including costs) and risks The evaluation criteria and its relative weight have to be project-spe-cific because stakeholders might look at

very different aspects However the two dimensions can be depicted in a simple decision matrix to illustrate the consoli-dated feedback of various stakeholders and experts to simplify decisions The

quantitative evaluation can be done by deriving a business case out of the re-spective model Therefore all revenue streams related to the addressed cus-tomer groups are estimated based on revenue models price points and num-ber of customersdeals In addition all costs related to value creating and deliv-ering activities resources and partner-ing are estimated and summarized Fur-thermore towards the end of the project the favored business model is evaluat-ed in detail to provide the decision mak-ers with a solid foundation for further planning or investment decisions

Specifics of Complex Business ModelsIn two-sided or multi-sided business models more than one customer group needs to be convinced because there is a crucial relationship between the cus-tomer groups The best-known examples for these types of models are platform-based business models such as Airbnb or Google Search For these models you have to create a win-win-win situation be-cause value needs to be created for all customer groups even those that do not pay anything (such as the end user of a search engine) This gets even trickier if the model is subject to so-called net-work effects Network effects are pres-ent if the value of the model depends on the amount of other customers also us-ing it and can appear within one customer group (direct) or across customer groups (indirect network effects) Network ef-fects are extremely beneficial for the owner of the business model as soon as the required critical mass is reached ie when the adoption of the product or ser-vice is self-sustaining (Mahler and Rog-ers 1999) However until critical mass is achieved the network effects are hinder-ing the adoption and success of the busi-ness model Investments as well as some endurance are needed to be success-ful in the end As a consequence BMDI supports the systematic development of strategies that can be used to accomplish critical mass

Box 4 Project Description Helix Nebula In 2012 science organizations such as the European Or-ganization for Nuclear Research (CERN) the European Molecular Biology Laboratory (EMBL) and the European Space Agency (ESA) teamed up with IT service compa-nies such as Atos CloudSigma Interoute and T-Systems to establish a federated European cloud known as Helix Nebula (HN)

Business Model Development amp Innovation

The evaluation criteria and its relative weight have to be project- specific because stakeholders might look at very different aspects

A win-win-win situation has to be created because value needs to be created for all customer groups even those that do not pay anything

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

13

How BMDI Transformed a Cloud Business into a Cloud of InsightsHelix Nebula (HN) cloud suppliers (see box 4) faced several challenges such as addressing a new market segment called ldquobig sciencerdquo pressure on prices due to ap-parently low-cost in-house solutions and building up an innovative partner ecosys-tem with usually competing companies Major competitors such as Amazon Web Services (AWS) offered cloud services at extremely low prices The fact that some of the customers already used AWS was reason enough to accelerate mar-ket entry At that point the major remain-ing question was if HN could against all odds beat AWS based on pricing or if a value proposition tailored to the needs of science could be foundIn ldquoAnalyze amp Improverdquo we started by investigating related industries exist-ing and potential competitors as well as partner ecosystems with their drivers and obstacles Further we analyzed the cus-tomer side the public sector and specif-ically the needs of ldquobig sciencerdquo For this multiple interviews with public institutions and the customers themselves were con-ducted We found that science organiza-tions tend to have many publicly fund-ed IT resources which are maintained by non-profit organizations If HN could integrate these resources with the com-mercially-offered solutions it would offer a previously non-existing flexibility to the market This value proposition would set HN apart from AWS However based on the very restricted budget of science or-ganizations prices would still have to be very low Having this in mind the chal-lenge for the supply side was to create a valuable business out of this ecosystem without just covering its costs Focusing on this design challenge we conducted several workshops with HN suppliers in ldquoChallenge amp Changerdquo to de-velop multiple potential business mod-els Since the establishment of a not-yet-existing cloud ecosystem required room for innovation many creative meth-ods were applied to inspire innovative

ideas A second challenge was to over-come coopetition issues in order to en-able smooth business operations of the proposed ecosystem For this multiple broker roles were determined that would enable interaction between suppliers and buyers based on business and technical processes

In ldquoEvaluate amp Deciderdquo these business models were evaluated by experts at SAP and HN suppliers The result was a business model roadmap with a final business model that goes beyond ge-neric cloud computing by creating value not only for science but also for busi-ness government and society based on the analysis and aggregation of Big Data brought to the cloud by science organi-zations For example earth observation data from ESA can be very valuable to oil companies in order to predict landslides near pipelines This extension allows sci-ence organizations to consume cloud services for free by providing valuable

Key Learnings

It is not enough to rely on product innovation Often products fail if they address the market with the wrong business model

Business models can be systematically developed and evaluated based on an agile and iterative process that ensures economic viability

Business models are probably the most powerful driver of competitive advantage and should be managed as it is done with product portfolios

Business cases by themselves are insufficient if they do not build on a validated business model

Business model development and innovation combined with Design Thinking and lean offers a meaningful and solid foundation for businesses

Earth observation data from ESA can be very valuable to oil companies in order to predict landslides near pipelines

360deg ndash the Business Transformation Journal No 11 | August 2014

14

Business Model Development amp Innovation

data to the cloud and to open up a major revenue stream for HN suppliers by giv-ing room for innovative services More-over it could help nations and cities pro-tect their citizens based on early warning systems The growing ecosystem of re-search organizations collaborating in the cloud allows for the aggregation of near-ly all conceivable scientific knowledge in one cloud Thus it enables not-yet-exist-ing insights based on inter-organization-al and international research

To fill the cloud with data the design of a profitable business model that pro-vides cloud services tailored to the enor-mous demand of ldquobig sciencerdquo was re-quired In this field the major competitor was AWS We had defined a clear differ-entiation by integrating non-profit partners offering publicly funded resources to Eu-ropean big science organizations Howev-er HN still needed to compete on price Hence we conducted a business case to compare HN prices to CERNrsquos in-house costs and AWS prices The results spoke for themselves HNrsquos prices beat AWSrsquos prices and partly CERNrsquos in-house costs Assuming that CERN moves to the cloud gradually while HN reaches economies of scale this is a perfectly valid starting point Therefore we had proven econom-ic viability not only by offering a unique value proposition but also by providing a financially attractive alternative to in-house solutions for science organizations The final challenge to tackle was the

roadmap to critical mass in order to es-tablish the final business model For this we worked closely with one of the major flagships namely ESA in order to cre-ate suitable steps for implementation We carefully considered a first potential niche to start with which would make use of the satellite earth observation data al-ready incorporated into the HN cloud Based on this niche the market would be expanded into other fields based on data enrichment in the cloud The proposed steps amongst others were to build up a lively community with the first ecosys-tem to facilitate partner co-innovation and complementation in order to enrich the platform along the way as well as to enable the exchange between partners and customers Based on the proposed business model roadmap and the road-map for critical mass the Helix Nebula Marketplace was rolled out in May 2014This use case showed us the specif-ic needs of partner ecosystems going through the process of business model innovation Specific focus must be giv-en to the needs of each partner provid-ing each of them with a suitable business model underlying the common business model of the ecosystem as a whole

ConclusionConsulting customers and start-ups has proven that the BMDI approach is rele-vant across industries and can be applied to challenges faced by businesses of any size In order to succeed companies will have to realize that BMDI should be grant-ed as much importance as product inno-vation The ultimate goal is to establish a standardized BMDI process in each com-pany in which the business models im-plemented are managed similarly to the product portfolio of the company

Learn more about The approach is integrated into SAP innovation approach To receive further information on training and consulting services contact Peter Mittemeyer (petermittemeyer[at]sapcom)

Business Model Development and Innovation is relevant across industries and for businesses of any size

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

15

Service

AUTHORS

Julia Doll is a Project Lead for Business Model Innovation at SAP Switzerland She has coached several projects regarding analysis design and evaluation of business models During her career at SAP starting in 2007 she has worked on several projects around the globe Julia holds a Master of Science from the University of Mannheim Germany and a Master of Business from the University of Queensland Australiajudoll[at]sapcom

Dr Uli Eisert built up a SAP research lab at the University of St Gallen and is heading a research amp innovation team that is currently focusing on Business Model Development amp Innovation (BMDI) as well as new approaches leveraging smart management of intangi-ble assets He published various journal papers and articles on innovation management and BMDI Before his current position he was heading the global PLM solution manage-ment at SAP and worked as a consultant and project manager for SAP implementations He holds degrees in mechanical and industrial engineering as well as a PhD in business administrationulieisert[at]sapcom

REFERENCES

Blank S (2013) Why the lean start-up changes everything Harvard Business Review 91(5) 63 ndash 72 Brown T (2008) Design Thinking Harvard Business Review June 2008 84 ndash 92 Bucherer B Eisert U and Grassmann O (2012) Towards Systematic Business Model Innova-

tion Lessons from Product Innovation Management Creativity and Innovation Management 21(2) pp183-198

Chesbrough H (2007) Business model innovation itrsquos not just about technology anymore Strategy amp Leadership 35(6) 12 ndash17

Chesbrough H (2010) Business Model Innovation Opportunities and Barriers Long Range Plan-ning 43(2 ndash 3) 354ndash363 doi101016jlrp200907010

Eisert U (2013) SAP Bringing Economic Viability to the Front End of Innovation In O Gassmann amp F Schweitzer (Eds) Management of the Fuzzy Front End of Innovation Berlin Springer Verlag

Gassmann O Frankenberger K amp Csik M (2013) Geschaumlftsmodelle entwickeln 55 innovative Konzepte mit dem St Galler Business Model Navigator Carl Hanser Verlag GmbH Co KG

IBM (2012) Leading Through Connections Highlights of the Global Chief Executive Officer (CEO) Study Somers New York

IDEO (2012) Human Centered Design An Introduction 2nd Edition Available from httpwwwideocomimagesuploadshcd_toolkitHCD_INTRO_PDF_WEB_optpdf [Accessed 19122012]

Johnson M Christensen C and Kagermann H ldquoReinventing your business modelrdquo Harvard business review 8612 (2008) 57ndash 68

Mahler A amp Rogers E M (1999) The diffusion of interactive communication innovations and the critical mass the adoption of telecommunications services by German banks Telecommunications policy 23(10) 719 ndash740

Osterwalder A Pigneur Y amp Tucci C L (2005) Clarifying Business Models Origins Present And Future of the Concept Communications of the AIS 16(1) 1ndash25

Ries E (2011) The Lean Startup 1st ed New York Crown Business Strategyzer (2011) Business Model Canvas Explained [video] Youtube

issue

no

11au

g 20

14

In collaboration withSponsored by

PUBLICATION DETAILS OF360deg ndash THE BUSINESS TRANSFORMATION JOURNAL

PUBLISHER

Business Transformation Academy (BTA)co University of Applied Sciences and Arts Northwestern Switzerland (FHNW)School of Business (HSW) Institute for Information Systems (IWI)Peter Merian-Strasse 864002 BaselSwitzerlandinfo[at]bta-onlinecomwwwbta-onlinecomwww360-btcom

The Business Transformation Academy (BTA) is a joint research project of the University of Applied Scienc-es and Arts Northwestern Switzerland (FHNW) and SAP AG The BTA is a Swiss non-profit association It is registered with the Commercial Register of the Canton of Basel-Stadt under the name ldquoBusiness Transfor-mation Academyrdquo and under the number CH-2706000679-0 (legal nature association) Authorized representatives Prof Dr Axel Uhl Lars Alexander Gollenia Prof Dr Rolf Dornberger Nicolas Steib Prof Dr Jan vom Brocke Paul Stratil

Disclaimer Within reason the BTA strives to provide correct and complete information in this journal How-ever the BTA does not accept any responsibility for topicality correctness and completeness of the informa-tion provided in this journal The BTA does not accept any responsibility or liability for the content on external links to which this journal refers to directly or indirectly and which is beyond the control of BTAThe material contained in this journal are the copyright works of the BTA and the authors Copying or dissem-inating content from this journal requires the prior written consent of the BTA and of the authorsLegal venue is Basel Switzerland

Note to the reader The opinions expressed in the articles in this journal do not necessarily reflect the views of the BTA

Picture Credits copy Herzog amp de Meuron (cover p 61 62) copy Oliver Heissner (2) wwwqrcode-monkeyde (2) copy iStockphotocomcmcderm1 (4 5) copy iStockphotocomDrAfter123 (6) copy iStockphotocomretro-rocket (16) SAP AG (18 19 23 25) copy kentohfotoliacom (28) art4allshutterstockcom (42) copy Photogra-pheeeufotoliacom (48) copy ReGe Hamburg Project-Realisierungsgesellschaft mbh (54) Airbus SAS (60) HafenCity Hamburg GmbH (66) copy iStockphotocombenedek (83) copy Chrisoph Gebler Zorabcshutter-stockcom (75) wwwgoQRme (83) Michael von KutzschenbachBTA (84 85) Joshua MeadonSAP (86 87)

Published three to four times a year in electronic format

EDITORIAL OFFICE

For inquiries about the journal please contact info[at]360-btcom

Subscriptions If you want to be notified when new issues are published subscribe onhttpswwwbta-onlinecomnewsletter and tick the box labeled ldquo360deg Journal Newsrdquo

Page 6: Doll_Eisert_Business Model Development  Innovation

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

11

Box 3 The Right Team and MindsetBesides the four types of iteration described in this article the BMDI approach is also about the right team set-up and mindset The team has to unite various perspectives so di-versity is important In addition there is a need to access experts (eg pricing legal issues) stakeholders for valida-tion (in particular customers) decision makers as well as sponsors The right mindset is very similar to the one need-ed in Design Thinking projects (eg openness and endur-ance are key)

minus Analyze customer experience and im-prove customer relations accordingly minus Analyze key activities to reduce relat-ed costs

Challenge amp Change If there are val-id triggers (opportunities or threats) to challenge the business model base-line at any point in time a design chal-lenge is formulated and dedicated ide-ation methods are used to come up with different alternative business model op-tions While some methods rather facil-itate systematic ideation for incremental improvements others are more suited for creative ideation that might bring up disruptive out-of-the-box alternatives In any case the team has to cluster ideas and finally has to decide which changes will be used for subsequent processing Test amp Verify Each business model is based on several assumptions that im-ply risks if they turn out to be wrong That is why crucial assumptions should be tested and validated at an early stage with limited effort Usually assumptions are made regarding customersrsquo issues needs and wants as well as their will-ingness to pay Also assumptions can be made regarding appropriate chan-

nels capabilities of key partners and the company itself These assumptions should be derived out of the business model and the risks involved need to be evaluated in order to figure out which as-sumptions should be tested in which se-quence The ldquoLean Start Uprdquo literature (Ries 2011) provides many insights as to how these assumptions can be validated depending on the maturity of the project Key elements are the ldquoBuild-Measure-Learnrdquo cycle and the ldquoMVP (Minimal Vi-able Product) conceptrdquo to minimize the involved effort as well as ldquoactionable metricsrdquo that should ensure some objec-tivity throughout the test Depending on

Baseline Appropriate Validated Business Model

Create Choices Make Choices

Diverge Converge

Partner Network Customer Network Competition

Partner Network Customer Network Competition

Evaluate ampDecide

Test ampVerify

Challange ampChance

Analyze ampImprove

Fig 4 BMDI in anutshell

360deg ndash the Business Transformation Journal No 11 | August 2014

12

the results of the test either an assumption is confirmed and the team can move on or changes are required sometimes sig-nificant ones so called ldquopivotsrdquo Evaluate amp Decide To figure out which of the different business model options are most promising these have to be evaluated both qualitatively and quanti-

tatively For the overall evaluation two di-mensions are decisive impact vs ease of implementation Impact summariz-es all the relevant criteria that allow as-sessment of the potential impact (includ-ing revenue potential) of the business model Ease of implementation summa-rizes all related efforts (including costs) and risks The evaluation criteria and its relative weight have to be project-spe-cific because stakeholders might look at

very different aspects However the two dimensions can be depicted in a simple decision matrix to illustrate the consoli-dated feedback of various stakeholders and experts to simplify decisions The

quantitative evaluation can be done by deriving a business case out of the re-spective model Therefore all revenue streams related to the addressed cus-tomer groups are estimated based on revenue models price points and num-ber of customersdeals In addition all costs related to value creating and deliv-ering activities resources and partner-ing are estimated and summarized Fur-thermore towards the end of the project the favored business model is evaluat-ed in detail to provide the decision mak-ers with a solid foundation for further planning or investment decisions

Specifics of Complex Business ModelsIn two-sided or multi-sided business models more than one customer group needs to be convinced because there is a crucial relationship between the cus-tomer groups The best-known examples for these types of models are platform-based business models such as Airbnb or Google Search For these models you have to create a win-win-win situation be-cause value needs to be created for all customer groups even those that do not pay anything (such as the end user of a search engine) This gets even trickier if the model is subject to so-called net-work effects Network effects are pres-ent if the value of the model depends on the amount of other customers also us-ing it and can appear within one customer group (direct) or across customer groups (indirect network effects) Network ef-fects are extremely beneficial for the owner of the business model as soon as the required critical mass is reached ie when the adoption of the product or ser-vice is self-sustaining (Mahler and Rog-ers 1999) However until critical mass is achieved the network effects are hinder-ing the adoption and success of the busi-ness model Investments as well as some endurance are needed to be success-ful in the end As a consequence BMDI supports the systematic development of strategies that can be used to accomplish critical mass

Box 4 Project Description Helix Nebula In 2012 science organizations such as the European Or-ganization for Nuclear Research (CERN) the European Molecular Biology Laboratory (EMBL) and the European Space Agency (ESA) teamed up with IT service compa-nies such as Atos CloudSigma Interoute and T-Systems to establish a federated European cloud known as Helix Nebula (HN)

Business Model Development amp Innovation

The evaluation criteria and its relative weight have to be project- specific because stakeholders might look at very different aspects

A win-win-win situation has to be created because value needs to be created for all customer groups even those that do not pay anything

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

13

How BMDI Transformed a Cloud Business into a Cloud of InsightsHelix Nebula (HN) cloud suppliers (see box 4) faced several challenges such as addressing a new market segment called ldquobig sciencerdquo pressure on prices due to ap-parently low-cost in-house solutions and building up an innovative partner ecosys-tem with usually competing companies Major competitors such as Amazon Web Services (AWS) offered cloud services at extremely low prices The fact that some of the customers already used AWS was reason enough to accelerate mar-ket entry At that point the major remain-ing question was if HN could against all odds beat AWS based on pricing or if a value proposition tailored to the needs of science could be foundIn ldquoAnalyze amp Improverdquo we started by investigating related industries exist-ing and potential competitors as well as partner ecosystems with their drivers and obstacles Further we analyzed the cus-tomer side the public sector and specif-ically the needs of ldquobig sciencerdquo For this multiple interviews with public institutions and the customers themselves were con-ducted We found that science organiza-tions tend to have many publicly fund-ed IT resources which are maintained by non-profit organizations If HN could integrate these resources with the com-mercially-offered solutions it would offer a previously non-existing flexibility to the market This value proposition would set HN apart from AWS However based on the very restricted budget of science or-ganizations prices would still have to be very low Having this in mind the chal-lenge for the supply side was to create a valuable business out of this ecosystem without just covering its costs Focusing on this design challenge we conducted several workshops with HN suppliers in ldquoChallenge amp Changerdquo to de-velop multiple potential business mod-els Since the establishment of a not-yet-existing cloud ecosystem required room for innovation many creative meth-ods were applied to inspire innovative

ideas A second challenge was to over-come coopetition issues in order to en-able smooth business operations of the proposed ecosystem For this multiple broker roles were determined that would enable interaction between suppliers and buyers based on business and technical processes

In ldquoEvaluate amp Deciderdquo these business models were evaluated by experts at SAP and HN suppliers The result was a business model roadmap with a final business model that goes beyond ge-neric cloud computing by creating value not only for science but also for busi-ness government and society based on the analysis and aggregation of Big Data brought to the cloud by science organi-zations For example earth observation data from ESA can be very valuable to oil companies in order to predict landslides near pipelines This extension allows sci-ence organizations to consume cloud services for free by providing valuable

Key Learnings

It is not enough to rely on product innovation Often products fail if they address the market with the wrong business model

Business models can be systematically developed and evaluated based on an agile and iterative process that ensures economic viability

Business models are probably the most powerful driver of competitive advantage and should be managed as it is done with product portfolios

Business cases by themselves are insufficient if they do not build on a validated business model

Business model development and innovation combined with Design Thinking and lean offers a meaningful and solid foundation for businesses

Earth observation data from ESA can be very valuable to oil companies in order to predict landslides near pipelines

360deg ndash the Business Transformation Journal No 11 | August 2014

14

Business Model Development amp Innovation

data to the cloud and to open up a major revenue stream for HN suppliers by giv-ing room for innovative services More-over it could help nations and cities pro-tect their citizens based on early warning systems The growing ecosystem of re-search organizations collaborating in the cloud allows for the aggregation of near-ly all conceivable scientific knowledge in one cloud Thus it enables not-yet-exist-ing insights based on inter-organization-al and international research

To fill the cloud with data the design of a profitable business model that pro-vides cloud services tailored to the enor-mous demand of ldquobig sciencerdquo was re-quired In this field the major competitor was AWS We had defined a clear differ-entiation by integrating non-profit partners offering publicly funded resources to Eu-ropean big science organizations Howev-er HN still needed to compete on price Hence we conducted a business case to compare HN prices to CERNrsquos in-house costs and AWS prices The results spoke for themselves HNrsquos prices beat AWSrsquos prices and partly CERNrsquos in-house costs Assuming that CERN moves to the cloud gradually while HN reaches economies of scale this is a perfectly valid starting point Therefore we had proven econom-ic viability not only by offering a unique value proposition but also by providing a financially attractive alternative to in-house solutions for science organizations The final challenge to tackle was the

roadmap to critical mass in order to es-tablish the final business model For this we worked closely with one of the major flagships namely ESA in order to cre-ate suitable steps for implementation We carefully considered a first potential niche to start with which would make use of the satellite earth observation data al-ready incorporated into the HN cloud Based on this niche the market would be expanded into other fields based on data enrichment in the cloud The proposed steps amongst others were to build up a lively community with the first ecosys-tem to facilitate partner co-innovation and complementation in order to enrich the platform along the way as well as to enable the exchange between partners and customers Based on the proposed business model roadmap and the road-map for critical mass the Helix Nebula Marketplace was rolled out in May 2014This use case showed us the specif-ic needs of partner ecosystems going through the process of business model innovation Specific focus must be giv-en to the needs of each partner provid-ing each of them with a suitable business model underlying the common business model of the ecosystem as a whole

ConclusionConsulting customers and start-ups has proven that the BMDI approach is rele-vant across industries and can be applied to challenges faced by businesses of any size In order to succeed companies will have to realize that BMDI should be grant-ed as much importance as product inno-vation The ultimate goal is to establish a standardized BMDI process in each com-pany in which the business models im-plemented are managed similarly to the product portfolio of the company

Learn more about The approach is integrated into SAP innovation approach To receive further information on training and consulting services contact Peter Mittemeyer (petermittemeyer[at]sapcom)

Business Model Development and Innovation is relevant across industries and for businesses of any size

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

15

Service

AUTHORS

Julia Doll is a Project Lead for Business Model Innovation at SAP Switzerland She has coached several projects regarding analysis design and evaluation of business models During her career at SAP starting in 2007 she has worked on several projects around the globe Julia holds a Master of Science from the University of Mannheim Germany and a Master of Business from the University of Queensland Australiajudoll[at]sapcom

Dr Uli Eisert built up a SAP research lab at the University of St Gallen and is heading a research amp innovation team that is currently focusing on Business Model Development amp Innovation (BMDI) as well as new approaches leveraging smart management of intangi-ble assets He published various journal papers and articles on innovation management and BMDI Before his current position he was heading the global PLM solution manage-ment at SAP and worked as a consultant and project manager for SAP implementations He holds degrees in mechanical and industrial engineering as well as a PhD in business administrationulieisert[at]sapcom

REFERENCES

Blank S (2013) Why the lean start-up changes everything Harvard Business Review 91(5) 63 ndash 72 Brown T (2008) Design Thinking Harvard Business Review June 2008 84 ndash 92 Bucherer B Eisert U and Grassmann O (2012) Towards Systematic Business Model Innova-

tion Lessons from Product Innovation Management Creativity and Innovation Management 21(2) pp183-198

Chesbrough H (2007) Business model innovation itrsquos not just about technology anymore Strategy amp Leadership 35(6) 12 ndash17

Chesbrough H (2010) Business Model Innovation Opportunities and Barriers Long Range Plan-ning 43(2 ndash 3) 354ndash363 doi101016jlrp200907010

Eisert U (2013) SAP Bringing Economic Viability to the Front End of Innovation In O Gassmann amp F Schweitzer (Eds) Management of the Fuzzy Front End of Innovation Berlin Springer Verlag

Gassmann O Frankenberger K amp Csik M (2013) Geschaumlftsmodelle entwickeln 55 innovative Konzepte mit dem St Galler Business Model Navigator Carl Hanser Verlag GmbH Co KG

IBM (2012) Leading Through Connections Highlights of the Global Chief Executive Officer (CEO) Study Somers New York

IDEO (2012) Human Centered Design An Introduction 2nd Edition Available from httpwwwideocomimagesuploadshcd_toolkitHCD_INTRO_PDF_WEB_optpdf [Accessed 19122012]

Johnson M Christensen C and Kagermann H ldquoReinventing your business modelrdquo Harvard business review 8612 (2008) 57ndash 68

Mahler A amp Rogers E M (1999) The diffusion of interactive communication innovations and the critical mass the adoption of telecommunications services by German banks Telecommunications policy 23(10) 719 ndash740

Osterwalder A Pigneur Y amp Tucci C L (2005) Clarifying Business Models Origins Present And Future of the Concept Communications of the AIS 16(1) 1ndash25

Ries E (2011) The Lean Startup 1st ed New York Crown Business Strategyzer (2011) Business Model Canvas Explained [video] Youtube

issue

no

11au

g 20

14

In collaboration withSponsored by

PUBLICATION DETAILS OF360deg ndash THE BUSINESS TRANSFORMATION JOURNAL

PUBLISHER

Business Transformation Academy (BTA)co University of Applied Sciences and Arts Northwestern Switzerland (FHNW)School of Business (HSW) Institute for Information Systems (IWI)Peter Merian-Strasse 864002 BaselSwitzerlandinfo[at]bta-onlinecomwwwbta-onlinecomwww360-btcom

The Business Transformation Academy (BTA) is a joint research project of the University of Applied Scienc-es and Arts Northwestern Switzerland (FHNW) and SAP AG The BTA is a Swiss non-profit association It is registered with the Commercial Register of the Canton of Basel-Stadt under the name ldquoBusiness Transfor-mation Academyrdquo and under the number CH-2706000679-0 (legal nature association) Authorized representatives Prof Dr Axel Uhl Lars Alexander Gollenia Prof Dr Rolf Dornberger Nicolas Steib Prof Dr Jan vom Brocke Paul Stratil

Disclaimer Within reason the BTA strives to provide correct and complete information in this journal How-ever the BTA does not accept any responsibility for topicality correctness and completeness of the informa-tion provided in this journal The BTA does not accept any responsibility or liability for the content on external links to which this journal refers to directly or indirectly and which is beyond the control of BTAThe material contained in this journal are the copyright works of the BTA and the authors Copying or dissem-inating content from this journal requires the prior written consent of the BTA and of the authorsLegal venue is Basel Switzerland

Note to the reader The opinions expressed in the articles in this journal do not necessarily reflect the views of the BTA

Picture Credits copy Herzog amp de Meuron (cover p 61 62) copy Oliver Heissner (2) wwwqrcode-monkeyde (2) copy iStockphotocomcmcderm1 (4 5) copy iStockphotocomDrAfter123 (6) copy iStockphotocomretro-rocket (16) SAP AG (18 19 23 25) copy kentohfotoliacom (28) art4allshutterstockcom (42) copy Photogra-pheeeufotoliacom (48) copy ReGe Hamburg Project-Realisierungsgesellschaft mbh (54) Airbus SAS (60) HafenCity Hamburg GmbH (66) copy iStockphotocombenedek (83) copy Chrisoph Gebler Zorabcshutter-stockcom (75) wwwgoQRme (83) Michael von KutzschenbachBTA (84 85) Joshua MeadonSAP (86 87)

Published three to four times a year in electronic format

EDITORIAL OFFICE

For inquiries about the journal please contact info[at]360-btcom

Subscriptions If you want to be notified when new issues are published subscribe onhttpswwwbta-onlinecomnewsletter and tick the box labeled ldquo360deg Journal Newsrdquo

Page 7: Doll_Eisert_Business Model Development  Innovation

360deg ndash the Business Transformation Journal No 11 | August 2014

12

the results of the test either an assumption is confirmed and the team can move on or changes are required sometimes sig-nificant ones so called ldquopivotsrdquo Evaluate amp Decide To figure out which of the different business model options are most promising these have to be evaluated both qualitatively and quanti-

tatively For the overall evaluation two di-mensions are decisive impact vs ease of implementation Impact summariz-es all the relevant criteria that allow as-sessment of the potential impact (includ-ing revenue potential) of the business model Ease of implementation summa-rizes all related efforts (including costs) and risks The evaluation criteria and its relative weight have to be project-spe-cific because stakeholders might look at

very different aspects However the two dimensions can be depicted in a simple decision matrix to illustrate the consoli-dated feedback of various stakeholders and experts to simplify decisions The

quantitative evaluation can be done by deriving a business case out of the re-spective model Therefore all revenue streams related to the addressed cus-tomer groups are estimated based on revenue models price points and num-ber of customersdeals In addition all costs related to value creating and deliv-ering activities resources and partner-ing are estimated and summarized Fur-thermore towards the end of the project the favored business model is evaluat-ed in detail to provide the decision mak-ers with a solid foundation for further planning or investment decisions

Specifics of Complex Business ModelsIn two-sided or multi-sided business models more than one customer group needs to be convinced because there is a crucial relationship between the cus-tomer groups The best-known examples for these types of models are platform-based business models such as Airbnb or Google Search For these models you have to create a win-win-win situation be-cause value needs to be created for all customer groups even those that do not pay anything (such as the end user of a search engine) This gets even trickier if the model is subject to so-called net-work effects Network effects are pres-ent if the value of the model depends on the amount of other customers also us-ing it and can appear within one customer group (direct) or across customer groups (indirect network effects) Network ef-fects are extremely beneficial for the owner of the business model as soon as the required critical mass is reached ie when the adoption of the product or ser-vice is self-sustaining (Mahler and Rog-ers 1999) However until critical mass is achieved the network effects are hinder-ing the adoption and success of the busi-ness model Investments as well as some endurance are needed to be success-ful in the end As a consequence BMDI supports the systematic development of strategies that can be used to accomplish critical mass

Box 4 Project Description Helix Nebula In 2012 science organizations such as the European Or-ganization for Nuclear Research (CERN) the European Molecular Biology Laboratory (EMBL) and the European Space Agency (ESA) teamed up with IT service compa-nies such as Atos CloudSigma Interoute and T-Systems to establish a federated European cloud known as Helix Nebula (HN)

Business Model Development amp Innovation

The evaluation criteria and its relative weight have to be project- specific because stakeholders might look at very different aspects

A win-win-win situation has to be created because value needs to be created for all customer groups even those that do not pay anything

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

13

How BMDI Transformed a Cloud Business into a Cloud of InsightsHelix Nebula (HN) cloud suppliers (see box 4) faced several challenges such as addressing a new market segment called ldquobig sciencerdquo pressure on prices due to ap-parently low-cost in-house solutions and building up an innovative partner ecosys-tem with usually competing companies Major competitors such as Amazon Web Services (AWS) offered cloud services at extremely low prices The fact that some of the customers already used AWS was reason enough to accelerate mar-ket entry At that point the major remain-ing question was if HN could against all odds beat AWS based on pricing or if a value proposition tailored to the needs of science could be foundIn ldquoAnalyze amp Improverdquo we started by investigating related industries exist-ing and potential competitors as well as partner ecosystems with their drivers and obstacles Further we analyzed the cus-tomer side the public sector and specif-ically the needs of ldquobig sciencerdquo For this multiple interviews with public institutions and the customers themselves were con-ducted We found that science organiza-tions tend to have many publicly fund-ed IT resources which are maintained by non-profit organizations If HN could integrate these resources with the com-mercially-offered solutions it would offer a previously non-existing flexibility to the market This value proposition would set HN apart from AWS However based on the very restricted budget of science or-ganizations prices would still have to be very low Having this in mind the chal-lenge for the supply side was to create a valuable business out of this ecosystem without just covering its costs Focusing on this design challenge we conducted several workshops with HN suppliers in ldquoChallenge amp Changerdquo to de-velop multiple potential business mod-els Since the establishment of a not-yet-existing cloud ecosystem required room for innovation many creative meth-ods were applied to inspire innovative

ideas A second challenge was to over-come coopetition issues in order to en-able smooth business operations of the proposed ecosystem For this multiple broker roles were determined that would enable interaction between suppliers and buyers based on business and technical processes

In ldquoEvaluate amp Deciderdquo these business models were evaluated by experts at SAP and HN suppliers The result was a business model roadmap with a final business model that goes beyond ge-neric cloud computing by creating value not only for science but also for busi-ness government and society based on the analysis and aggregation of Big Data brought to the cloud by science organi-zations For example earth observation data from ESA can be very valuable to oil companies in order to predict landslides near pipelines This extension allows sci-ence organizations to consume cloud services for free by providing valuable

Key Learnings

It is not enough to rely on product innovation Often products fail if they address the market with the wrong business model

Business models can be systematically developed and evaluated based on an agile and iterative process that ensures economic viability

Business models are probably the most powerful driver of competitive advantage and should be managed as it is done with product portfolios

Business cases by themselves are insufficient if they do not build on a validated business model

Business model development and innovation combined with Design Thinking and lean offers a meaningful and solid foundation for businesses

Earth observation data from ESA can be very valuable to oil companies in order to predict landslides near pipelines

360deg ndash the Business Transformation Journal No 11 | August 2014

14

Business Model Development amp Innovation

data to the cloud and to open up a major revenue stream for HN suppliers by giv-ing room for innovative services More-over it could help nations and cities pro-tect their citizens based on early warning systems The growing ecosystem of re-search organizations collaborating in the cloud allows for the aggregation of near-ly all conceivable scientific knowledge in one cloud Thus it enables not-yet-exist-ing insights based on inter-organization-al and international research

To fill the cloud with data the design of a profitable business model that pro-vides cloud services tailored to the enor-mous demand of ldquobig sciencerdquo was re-quired In this field the major competitor was AWS We had defined a clear differ-entiation by integrating non-profit partners offering publicly funded resources to Eu-ropean big science organizations Howev-er HN still needed to compete on price Hence we conducted a business case to compare HN prices to CERNrsquos in-house costs and AWS prices The results spoke for themselves HNrsquos prices beat AWSrsquos prices and partly CERNrsquos in-house costs Assuming that CERN moves to the cloud gradually while HN reaches economies of scale this is a perfectly valid starting point Therefore we had proven econom-ic viability not only by offering a unique value proposition but also by providing a financially attractive alternative to in-house solutions for science organizations The final challenge to tackle was the

roadmap to critical mass in order to es-tablish the final business model For this we worked closely with one of the major flagships namely ESA in order to cre-ate suitable steps for implementation We carefully considered a first potential niche to start with which would make use of the satellite earth observation data al-ready incorporated into the HN cloud Based on this niche the market would be expanded into other fields based on data enrichment in the cloud The proposed steps amongst others were to build up a lively community with the first ecosys-tem to facilitate partner co-innovation and complementation in order to enrich the platform along the way as well as to enable the exchange between partners and customers Based on the proposed business model roadmap and the road-map for critical mass the Helix Nebula Marketplace was rolled out in May 2014This use case showed us the specif-ic needs of partner ecosystems going through the process of business model innovation Specific focus must be giv-en to the needs of each partner provid-ing each of them with a suitable business model underlying the common business model of the ecosystem as a whole

ConclusionConsulting customers and start-ups has proven that the BMDI approach is rele-vant across industries and can be applied to challenges faced by businesses of any size In order to succeed companies will have to realize that BMDI should be grant-ed as much importance as product inno-vation The ultimate goal is to establish a standardized BMDI process in each com-pany in which the business models im-plemented are managed similarly to the product portfolio of the company

Learn more about The approach is integrated into SAP innovation approach To receive further information on training and consulting services contact Peter Mittemeyer (petermittemeyer[at]sapcom)

Business Model Development and Innovation is relevant across industries and for businesses of any size

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

15

Service

AUTHORS

Julia Doll is a Project Lead for Business Model Innovation at SAP Switzerland She has coached several projects regarding analysis design and evaluation of business models During her career at SAP starting in 2007 she has worked on several projects around the globe Julia holds a Master of Science from the University of Mannheim Germany and a Master of Business from the University of Queensland Australiajudoll[at]sapcom

Dr Uli Eisert built up a SAP research lab at the University of St Gallen and is heading a research amp innovation team that is currently focusing on Business Model Development amp Innovation (BMDI) as well as new approaches leveraging smart management of intangi-ble assets He published various journal papers and articles on innovation management and BMDI Before his current position he was heading the global PLM solution manage-ment at SAP and worked as a consultant and project manager for SAP implementations He holds degrees in mechanical and industrial engineering as well as a PhD in business administrationulieisert[at]sapcom

REFERENCES

Blank S (2013) Why the lean start-up changes everything Harvard Business Review 91(5) 63 ndash 72 Brown T (2008) Design Thinking Harvard Business Review June 2008 84 ndash 92 Bucherer B Eisert U and Grassmann O (2012) Towards Systematic Business Model Innova-

tion Lessons from Product Innovation Management Creativity and Innovation Management 21(2) pp183-198

Chesbrough H (2007) Business model innovation itrsquos not just about technology anymore Strategy amp Leadership 35(6) 12 ndash17

Chesbrough H (2010) Business Model Innovation Opportunities and Barriers Long Range Plan-ning 43(2 ndash 3) 354ndash363 doi101016jlrp200907010

Eisert U (2013) SAP Bringing Economic Viability to the Front End of Innovation In O Gassmann amp F Schweitzer (Eds) Management of the Fuzzy Front End of Innovation Berlin Springer Verlag

Gassmann O Frankenberger K amp Csik M (2013) Geschaumlftsmodelle entwickeln 55 innovative Konzepte mit dem St Galler Business Model Navigator Carl Hanser Verlag GmbH Co KG

IBM (2012) Leading Through Connections Highlights of the Global Chief Executive Officer (CEO) Study Somers New York

IDEO (2012) Human Centered Design An Introduction 2nd Edition Available from httpwwwideocomimagesuploadshcd_toolkitHCD_INTRO_PDF_WEB_optpdf [Accessed 19122012]

Johnson M Christensen C and Kagermann H ldquoReinventing your business modelrdquo Harvard business review 8612 (2008) 57ndash 68

Mahler A amp Rogers E M (1999) The diffusion of interactive communication innovations and the critical mass the adoption of telecommunications services by German banks Telecommunications policy 23(10) 719 ndash740

Osterwalder A Pigneur Y amp Tucci C L (2005) Clarifying Business Models Origins Present And Future of the Concept Communications of the AIS 16(1) 1ndash25

Ries E (2011) The Lean Startup 1st ed New York Crown Business Strategyzer (2011) Business Model Canvas Explained [video] Youtube

issue

no

11au

g 20

14

In collaboration withSponsored by

PUBLICATION DETAILS OF360deg ndash THE BUSINESS TRANSFORMATION JOURNAL

PUBLISHER

Business Transformation Academy (BTA)co University of Applied Sciences and Arts Northwestern Switzerland (FHNW)School of Business (HSW) Institute for Information Systems (IWI)Peter Merian-Strasse 864002 BaselSwitzerlandinfo[at]bta-onlinecomwwwbta-onlinecomwww360-btcom

The Business Transformation Academy (BTA) is a joint research project of the University of Applied Scienc-es and Arts Northwestern Switzerland (FHNW) and SAP AG The BTA is a Swiss non-profit association It is registered with the Commercial Register of the Canton of Basel-Stadt under the name ldquoBusiness Transfor-mation Academyrdquo and under the number CH-2706000679-0 (legal nature association) Authorized representatives Prof Dr Axel Uhl Lars Alexander Gollenia Prof Dr Rolf Dornberger Nicolas Steib Prof Dr Jan vom Brocke Paul Stratil

Disclaimer Within reason the BTA strives to provide correct and complete information in this journal How-ever the BTA does not accept any responsibility for topicality correctness and completeness of the informa-tion provided in this journal The BTA does not accept any responsibility or liability for the content on external links to which this journal refers to directly or indirectly and which is beyond the control of BTAThe material contained in this journal are the copyright works of the BTA and the authors Copying or dissem-inating content from this journal requires the prior written consent of the BTA and of the authorsLegal venue is Basel Switzerland

Note to the reader The opinions expressed in the articles in this journal do not necessarily reflect the views of the BTA

Picture Credits copy Herzog amp de Meuron (cover p 61 62) copy Oliver Heissner (2) wwwqrcode-monkeyde (2) copy iStockphotocomcmcderm1 (4 5) copy iStockphotocomDrAfter123 (6) copy iStockphotocomretro-rocket (16) SAP AG (18 19 23 25) copy kentohfotoliacom (28) art4allshutterstockcom (42) copy Photogra-pheeeufotoliacom (48) copy ReGe Hamburg Project-Realisierungsgesellschaft mbh (54) Airbus SAS (60) HafenCity Hamburg GmbH (66) copy iStockphotocombenedek (83) copy Chrisoph Gebler Zorabcshutter-stockcom (75) wwwgoQRme (83) Michael von KutzschenbachBTA (84 85) Joshua MeadonSAP (86 87)

Published three to four times a year in electronic format

EDITORIAL OFFICE

For inquiries about the journal please contact info[at]360-btcom

Subscriptions If you want to be notified when new issues are published subscribe onhttpswwwbta-onlinecomnewsletter and tick the box labeled ldquo360deg Journal Newsrdquo

Page 8: Doll_Eisert_Business Model Development  Innovation

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

13

How BMDI Transformed a Cloud Business into a Cloud of InsightsHelix Nebula (HN) cloud suppliers (see box 4) faced several challenges such as addressing a new market segment called ldquobig sciencerdquo pressure on prices due to ap-parently low-cost in-house solutions and building up an innovative partner ecosys-tem with usually competing companies Major competitors such as Amazon Web Services (AWS) offered cloud services at extremely low prices The fact that some of the customers already used AWS was reason enough to accelerate mar-ket entry At that point the major remain-ing question was if HN could against all odds beat AWS based on pricing or if a value proposition tailored to the needs of science could be foundIn ldquoAnalyze amp Improverdquo we started by investigating related industries exist-ing and potential competitors as well as partner ecosystems with their drivers and obstacles Further we analyzed the cus-tomer side the public sector and specif-ically the needs of ldquobig sciencerdquo For this multiple interviews with public institutions and the customers themselves were con-ducted We found that science organiza-tions tend to have many publicly fund-ed IT resources which are maintained by non-profit organizations If HN could integrate these resources with the com-mercially-offered solutions it would offer a previously non-existing flexibility to the market This value proposition would set HN apart from AWS However based on the very restricted budget of science or-ganizations prices would still have to be very low Having this in mind the chal-lenge for the supply side was to create a valuable business out of this ecosystem without just covering its costs Focusing on this design challenge we conducted several workshops with HN suppliers in ldquoChallenge amp Changerdquo to de-velop multiple potential business mod-els Since the establishment of a not-yet-existing cloud ecosystem required room for innovation many creative meth-ods were applied to inspire innovative

ideas A second challenge was to over-come coopetition issues in order to en-able smooth business operations of the proposed ecosystem For this multiple broker roles were determined that would enable interaction between suppliers and buyers based on business and technical processes

In ldquoEvaluate amp Deciderdquo these business models were evaluated by experts at SAP and HN suppliers The result was a business model roadmap with a final business model that goes beyond ge-neric cloud computing by creating value not only for science but also for busi-ness government and society based on the analysis and aggregation of Big Data brought to the cloud by science organi-zations For example earth observation data from ESA can be very valuable to oil companies in order to predict landslides near pipelines This extension allows sci-ence organizations to consume cloud services for free by providing valuable

Key Learnings

It is not enough to rely on product innovation Often products fail if they address the market with the wrong business model

Business models can be systematically developed and evaluated based on an agile and iterative process that ensures economic viability

Business models are probably the most powerful driver of competitive advantage and should be managed as it is done with product portfolios

Business cases by themselves are insufficient if they do not build on a validated business model

Business model development and innovation combined with Design Thinking and lean offers a meaningful and solid foundation for businesses

Earth observation data from ESA can be very valuable to oil companies in order to predict landslides near pipelines

360deg ndash the Business Transformation Journal No 11 | August 2014

14

Business Model Development amp Innovation

data to the cloud and to open up a major revenue stream for HN suppliers by giv-ing room for innovative services More-over it could help nations and cities pro-tect their citizens based on early warning systems The growing ecosystem of re-search organizations collaborating in the cloud allows for the aggregation of near-ly all conceivable scientific knowledge in one cloud Thus it enables not-yet-exist-ing insights based on inter-organization-al and international research

To fill the cloud with data the design of a profitable business model that pro-vides cloud services tailored to the enor-mous demand of ldquobig sciencerdquo was re-quired In this field the major competitor was AWS We had defined a clear differ-entiation by integrating non-profit partners offering publicly funded resources to Eu-ropean big science organizations Howev-er HN still needed to compete on price Hence we conducted a business case to compare HN prices to CERNrsquos in-house costs and AWS prices The results spoke for themselves HNrsquos prices beat AWSrsquos prices and partly CERNrsquos in-house costs Assuming that CERN moves to the cloud gradually while HN reaches economies of scale this is a perfectly valid starting point Therefore we had proven econom-ic viability not only by offering a unique value proposition but also by providing a financially attractive alternative to in-house solutions for science organizations The final challenge to tackle was the

roadmap to critical mass in order to es-tablish the final business model For this we worked closely with one of the major flagships namely ESA in order to cre-ate suitable steps for implementation We carefully considered a first potential niche to start with which would make use of the satellite earth observation data al-ready incorporated into the HN cloud Based on this niche the market would be expanded into other fields based on data enrichment in the cloud The proposed steps amongst others were to build up a lively community with the first ecosys-tem to facilitate partner co-innovation and complementation in order to enrich the platform along the way as well as to enable the exchange between partners and customers Based on the proposed business model roadmap and the road-map for critical mass the Helix Nebula Marketplace was rolled out in May 2014This use case showed us the specif-ic needs of partner ecosystems going through the process of business model innovation Specific focus must be giv-en to the needs of each partner provid-ing each of them with a suitable business model underlying the common business model of the ecosystem as a whole

ConclusionConsulting customers and start-ups has proven that the BMDI approach is rele-vant across industries and can be applied to challenges faced by businesses of any size In order to succeed companies will have to realize that BMDI should be grant-ed as much importance as product inno-vation The ultimate goal is to establish a standardized BMDI process in each com-pany in which the business models im-plemented are managed similarly to the product portfolio of the company

Learn more about The approach is integrated into SAP innovation approach To receive further information on training and consulting services contact Peter Mittemeyer (petermittemeyer[at]sapcom)

Business Model Development and Innovation is relevant across industries and for businesses of any size

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

15

Service

AUTHORS

Julia Doll is a Project Lead for Business Model Innovation at SAP Switzerland She has coached several projects regarding analysis design and evaluation of business models During her career at SAP starting in 2007 she has worked on several projects around the globe Julia holds a Master of Science from the University of Mannheim Germany and a Master of Business from the University of Queensland Australiajudoll[at]sapcom

Dr Uli Eisert built up a SAP research lab at the University of St Gallen and is heading a research amp innovation team that is currently focusing on Business Model Development amp Innovation (BMDI) as well as new approaches leveraging smart management of intangi-ble assets He published various journal papers and articles on innovation management and BMDI Before his current position he was heading the global PLM solution manage-ment at SAP and worked as a consultant and project manager for SAP implementations He holds degrees in mechanical and industrial engineering as well as a PhD in business administrationulieisert[at]sapcom

REFERENCES

Blank S (2013) Why the lean start-up changes everything Harvard Business Review 91(5) 63 ndash 72 Brown T (2008) Design Thinking Harvard Business Review June 2008 84 ndash 92 Bucherer B Eisert U and Grassmann O (2012) Towards Systematic Business Model Innova-

tion Lessons from Product Innovation Management Creativity and Innovation Management 21(2) pp183-198

Chesbrough H (2007) Business model innovation itrsquos not just about technology anymore Strategy amp Leadership 35(6) 12 ndash17

Chesbrough H (2010) Business Model Innovation Opportunities and Barriers Long Range Plan-ning 43(2 ndash 3) 354ndash363 doi101016jlrp200907010

Eisert U (2013) SAP Bringing Economic Viability to the Front End of Innovation In O Gassmann amp F Schweitzer (Eds) Management of the Fuzzy Front End of Innovation Berlin Springer Verlag

Gassmann O Frankenberger K amp Csik M (2013) Geschaumlftsmodelle entwickeln 55 innovative Konzepte mit dem St Galler Business Model Navigator Carl Hanser Verlag GmbH Co KG

IBM (2012) Leading Through Connections Highlights of the Global Chief Executive Officer (CEO) Study Somers New York

IDEO (2012) Human Centered Design An Introduction 2nd Edition Available from httpwwwideocomimagesuploadshcd_toolkitHCD_INTRO_PDF_WEB_optpdf [Accessed 19122012]

Johnson M Christensen C and Kagermann H ldquoReinventing your business modelrdquo Harvard business review 8612 (2008) 57ndash 68

Mahler A amp Rogers E M (1999) The diffusion of interactive communication innovations and the critical mass the adoption of telecommunications services by German banks Telecommunications policy 23(10) 719 ndash740

Osterwalder A Pigneur Y amp Tucci C L (2005) Clarifying Business Models Origins Present And Future of the Concept Communications of the AIS 16(1) 1ndash25

Ries E (2011) The Lean Startup 1st ed New York Crown Business Strategyzer (2011) Business Model Canvas Explained [video] Youtube

issue

no

11au

g 20

14

In collaboration withSponsored by

PUBLICATION DETAILS OF360deg ndash THE BUSINESS TRANSFORMATION JOURNAL

PUBLISHER

Business Transformation Academy (BTA)co University of Applied Sciences and Arts Northwestern Switzerland (FHNW)School of Business (HSW) Institute for Information Systems (IWI)Peter Merian-Strasse 864002 BaselSwitzerlandinfo[at]bta-onlinecomwwwbta-onlinecomwww360-btcom

The Business Transformation Academy (BTA) is a joint research project of the University of Applied Scienc-es and Arts Northwestern Switzerland (FHNW) and SAP AG The BTA is a Swiss non-profit association It is registered with the Commercial Register of the Canton of Basel-Stadt under the name ldquoBusiness Transfor-mation Academyrdquo and under the number CH-2706000679-0 (legal nature association) Authorized representatives Prof Dr Axel Uhl Lars Alexander Gollenia Prof Dr Rolf Dornberger Nicolas Steib Prof Dr Jan vom Brocke Paul Stratil

Disclaimer Within reason the BTA strives to provide correct and complete information in this journal How-ever the BTA does not accept any responsibility for topicality correctness and completeness of the informa-tion provided in this journal The BTA does not accept any responsibility or liability for the content on external links to which this journal refers to directly or indirectly and which is beyond the control of BTAThe material contained in this journal are the copyright works of the BTA and the authors Copying or dissem-inating content from this journal requires the prior written consent of the BTA and of the authorsLegal venue is Basel Switzerland

Note to the reader The opinions expressed in the articles in this journal do not necessarily reflect the views of the BTA

Picture Credits copy Herzog amp de Meuron (cover p 61 62) copy Oliver Heissner (2) wwwqrcode-monkeyde (2) copy iStockphotocomcmcderm1 (4 5) copy iStockphotocomDrAfter123 (6) copy iStockphotocomretro-rocket (16) SAP AG (18 19 23 25) copy kentohfotoliacom (28) art4allshutterstockcom (42) copy Photogra-pheeeufotoliacom (48) copy ReGe Hamburg Project-Realisierungsgesellschaft mbh (54) Airbus SAS (60) HafenCity Hamburg GmbH (66) copy iStockphotocombenedek (83) copy Chrisoph Gebler Zorabcshutter-stockcom (75) wwwgoQRme (83) Michael von KutzschenbachBTA (84 85) Joshua MeadonSAP (86 87)

Published three to four times a year in electronic format

EDITORIAL OFFICE

For inquiries about the journal please contact info[at]360-btcom

Subscriptions If you want to be notified when new issues are published subscribe onhttpswwwbta-onlinecomnewsletter and tick the box labeled ldquo360deg Journal Newsrdquo

Page 9: Doll_Eisert_Business Model Development  Innovation

360deg ndash the Business Transformation Journal No 11 | August 2014

14

Business Model Development amp Innovation

data to the cloud and to open up a major revenue stream for HN suppliers by giv-ing room for innovative services More-over it could help nations and cities pro-tect their citizens based on early warning systems The growing ecosystem of re-search organizations collaborating in the cloud allows for the aggregation of near-ly all conceivable scientific knowledge in one cloud Thus it enables not-yet-exist-ing insights based on inter-organization-al and international research

To fill the cloud with data the design of a profitable business model that pro-vides cloud services tailored to the enor-mous demand of ldquobig sciencerdquo was re-quired In this field the major competitor was AWS We had defined a clear differ-entiation by integrating non-profit partners offering publicly funded resources to Eu-ropean big science organizations Howev-er HN still needed to compete on price Hence we conducted a business case to compare HN prices to CERNrsquos in-house costs and AWS prices The results spoke for themselves HNrsquos prices beat AWSrsquos prices and partly CERNrsquos in-house costs Assuming that CERN moves to the cloud gradually while HN reaches economies of scale this is a perfectly valid starting point Therefore we had proven econom-ic viability not only by offering a unique value proposition but also by providing a financially attractive alternative to in-house solutions for science organizations The final challenge to tackle was the

roadmap to critical mass in order to es-tablish the final business model For this we worked closely with one of the major flagships namely ESA in order to cre-ate suitable steps for implementation We carefully considered a first potential niche to start with which would make use of the satellite earth observation data al-ready incorporated into the HN cloud Based on this niche the market would be expanded into other fields based on data enrichment in the cloud The proposed steps amongst others were to build up a lively community with the first ecosys-tem to facilitate partner co-innovation and complementation in order to enrich the platform along the way as well as to enable the exchange between partners and customers Based on the proposed business model roadmap and the road-map for critical mass the Helix Nebula Marketplace was rolled out in May 2014This use case showed us the specif-ic needs of partner ecosystems going through the process of business model innovation Specific focus must be giv-en to the needs of each partner provid-ing each of them with a suitable business model underlying the common business model of the ecosystem as a whole

ConclusionConsulting customers and start-ups has proven that the BMDI approach is rele-vant across industries and can be applied to challenges faced by businesses of any size In order to succeed companies will have to realize that BMDI should be grant-ed as much importance as product inno-vation The ultimate goal is to establish a standardized BMDI process in each com-pany in which the business models im-plemented are managed similarly to the product portfolio of the company

Learn more about The approach is integrated into SAP innovation approach To receive further information on training and consulting services contact Peter Mittemeyer (petermittemeyer[at]sapcom)

Business Model Development and Innovation is relevant across industries and for businesses of any size

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

15

Service

AUTHORS

Julia Doll is a Project Lead for Business Model Innovation at SAP Switzerland She has coached several projects regarding analysis design and evaluation of business models During her career at SAP starting in 2007 she has worked on several projects around the globe Julia holds a Master of Science from the University of Mannheim Germany and a Master of Business from the University of Queensland Australiajudoll[at]sapcom

Dr Uli Eisert built up a SAP research lab at the University of St Gallen and is heading a research amp innovation team that is currently focusing on Business Model Development amp Innovation (BMDI) as well as new approaches leveraging smart management of intangi-ble assets He published various journal papers and articles on innovation management and BMDI Before his current position he was heading the global PLM solution manage-ment at SAP and worked as a consultant and project manager for SAP implementations He holds degrees in mechanical and industrial engineering as well as a PhD in business administrationulieisert[at]sapcom

REFERENCES

Blank S (2013) Why the lean start-up changes everything Harvard Business Review 91(5) 63 ndash 72 Brown T (2008) Design Thinking Harvard Business Review June 2008 84 ndash 92 Bucherer B Eisert U and Grassmann O (2012) Towards Systematic Business Model Innova-

tion Lessons from Product Innovation Management Creativity and Innovation Management 21(2) pp183-198

Chesbrough H (2007) Business model innovation itrsquos not just about technology anymore Strategy amp Leadership 35(6) 12 ndash17

Chesbrough H (2010) Business Model Innovation Opportunities and Barriers Long Range Plan-ning 43(2 ndash 3) 354ndash363 doi101016jlrp200907010

Eisert U (2013) SAP Bringing Economic Viability to the Front End of Innovation In O Gassmann amp F Schweitzer (Eds) Management of the Fuzzy Front End of Innovation Berlin Springer Verlag

Gassmann O Frankenberger K amp Csik M (2013) Geschaumlftsmodelle entwickeln 55 innovative Konzepte mit dem St Galler Business Model Navigator Carl Hanser Verlag GmbH Co KG

IBM (2012) Leading Through Connections Highlights of the Global Chief Executive Officer (CEO) Study Somers New York

IDEO (2012) Human Centered Design An Introduction 2nd Edition Available from httpwwwideocomimagesuploadshcd_toolkitHCD_INTRO_PDF_WEB_optpdf [Accessed 19122012]

Johnson M Christensen C and Kagermann H ldquoReinventing your business modelrdquo Harvard business review 8612 (2008) 57ndash 68

Mahler A amp Rogers E M (1999) The diffusion of interactive communication innovations and the critical mass the adoption of telecommunications services by German banks Telecommunications policy 23(10) 719 ndash740

Osterwalder A Pigneur Y amp Tucci C L (2005) Clarifying Business Models Origins Present And Future of the Concept Communications of the AIS 16(1) 1ndash25

Ries E (2011) The Lean Startup 1st ed New York Crown Business Strategyzer (2011) Business Model Canvas Explained [video] Youtube

issue

no

11au

g 20

14

In collaboration withSponsored by

PUBLICATION DETAILS OF360deg ndash THE BUSINESS TRANSFORMATION JOURNAL

PUBLISHER

Business Transformation Academy (BTA)co University of Applied Sciences and Arts Northwestern Switzerland (FHNW)School of Business (HSW) Institute for Information Systems (IWI)Peter Merian-Strasse 864002 BaselSwitzerlandinfo[at]bta-onlinecomwwwbta-onlinecomwww360-btcom

The Business Transformation Academy (BTA) is a joint research project of the University of Applied Scienc-es and Arts Northwestern Switzerland (FHNW) and SAP AG The BTA is a Swiss non-profit association It is registered with the Commercial Register of the Canton of Basel-Stadt under the name ldquoBusiness Transfor-mation Academyrdquo and under the number CH-2706000679-0 (legal nature association) Authorized representatives Prof Dr Axel Uhl Lars Alexander Gollenia Prof Dr Rolf Dornberger Nicolas Steib Prof Dr Jan vom Brocke Paul Stratil

Disclaimer Within reason the BTA strives to provide correct and complete information in this journal How-ever the BTA does not accept any responsibility for topicality correctness and completeness of the informa-tion provided in this journal The BTA does not accept any responsibility or liability for the content on external links to which this journal refers to directly or indirectly and which is beyond the control of BTAThe material contained in this journal are the copyright works of the BTA and the authors Copying or dissem-inating content from this journal requires the prior written consent of the BTA and of the authorsLegal venue is Basel Switzerland

Note to the reader The opinions expressed in the articles in this journal do not necessarily reflect the views of the BTA

Picture Credits copy Herzog amp de Meuron (cover p 61 62) copy Oliver Heissner (2) wwwqrcode-monkeyde (2) copy iStockphotocomcmcderm1 (4 5) copy iStockphotocomDrAfter123 (6) copy iStockphotocomretro-rocket (16) SAP AG (18 19 23 25) copy kentohfotoliacom (28) art4allshutterstockcom (42) copy Photogra-pheeeufotoliacom (48) copy ReGe Hamburg Project-Realisierungsgesellschaft mbh (54) Airbus SAS (60) HafenCity Hamburg GmbH (66) copy iStockphotocombenedek (83) copy Chrisoph Gebler Zorabcshutter-stockcom (75) wwwgoQRme (83) Michael von KutzschenbachBTA (84 85) Joshua MeadonSAP (86 87)

Published three to four times a year in electronic format

EDITORIAL OFFICE

For inquiries about the journal please contact info[at]360-btcom

Subscriptions If you want to be notified when new issues are published subscribe onhttpswwwbta-onlinecomnewsletter and tick the box labeled ldquo360deg Journal Newsrdquo

Page 10: Doll_Eisert_Business Model Development  Innovation

360deg ndash the Business Transformation Journal No 11 | August 2014

DRIVERS

15

Service

AUTHORS

Julia Doll is a Project Lead for Business Model Innovation at SAP Switzerland She has coached several projects regarding analysis design and evaluation of business models During her career at SAP starting in 2007 she has worked on several projects around the globe Julia holds a Master of Science from the University of Mannheim Germany and a Master of Business from the University of Queensland Australiajudoll[at]sapcom

Dr Uli Eisert built up a SAP research lab at the University of St Gallen and is heading a research amp innovation team that is currently focusing on Business Model Development amp Innovation (BMDI) as well as new approaches leveraging smart management of intangi-ble assets He published various journal papers and articles on innovation management and BMDI Before his current position he was heading the global PLM solution manage-ment at SAP and worked as a consultant and project manager for SAP implementations He holds degrees in mechanical and industrial engineering as well as a PhD in business administrationulieisert[at]sapcom

REFERENCES

Blank S (2013) Why the lean start-up changes everything Harvard Business Review 91(5) 63 ndash 72 Brown T (2008) Design Thinking Harvard Business Review June 2008 84 ndash 92 Bucherer B Eisert U and Grassmann O (2012) Towards Systematic Business Model Innova-

tion Lessons from Product Innovation Management Creativity and Innovation Management 21(2) pp183-198

Chesbrough H (2007) Business model innovation itrsquos not just about technology anymore Strategy amp Leadership 35(6) 12 ndash17

Chesbrough H (2010) Business Model Innovation Opportunities and Barriers Long Range Plan-ning 43(2 ndash 3) 354ndash363 doi101016jlrp200907010

Eisert U (2013) SAP Bringing Economic Viability to the Front End of Innovation In O Gassmann amp F Schweitzer (Eds) Management of the Fuzzy Front End of Innovation Berlin Springer Verlag

Gassmann O Frankenberger K amp Csik M (2013) Geschaumlftsmodelle entwickeln 55 innovative Konzepte mit dem St Galler Business Model Navigator Carl Hanser Verlag GmbH Co KG

IBM (2012) Leading Through Connections Highlights of the Global Chief Executive Officer (CEO) Study Somers New York

IDEO (2012) Human Centered Design An Introduction 2nd Edition Available from httpwwwideocomimagesuploadshcd_toolkitHCD_INTRO_PDF_WEB_optpdf [Accessed 19122012]

Johnson M Christensen C and Kagermann H ldquoReinventing your business modelrdquo Harvard business review 8612 (2008) 57ndash 68

Mahler A amp Rogers E M (1999) The diffusion of interactive communication innovations and the critical mass the adoption of telecommunications services by German banks Telecommunications policy 23(10) 719 ndash740

Osterwalder A Pigneur Y amp Tucci C L (2005) Clarifying Business Models Origins Present And Future of the Concept Communications of the AIS 16(1) 1ndash25

Ries E (2011) The Lean Startup 1st ed New York Crown Business Strategyzer (2011) Business Model Canvas Explained [video] Youtube

issue

no

11au

g 20

14

In collaboration withSponsored by

PUBLICATION DETAILS OF360deg ndash THE BUSINESS TRANSFORMATION JOURNAL

PUBLISHER

Business Transformation Academy (BTA)co University of Applied Sciences and Arts Northwestern Switzerland (FHNW)School of Business (HSW) Institute for Information Systems (IWI)Peter Merian-Strasse 864002 BaselSwitzerlandinfo[at]bta-onlinecomwwwbta-onlinecomwww360-btcom

The Business Transformation Academy (BTA) is a joint research project of the University of Applied Scienc-es and Arts Northwestern Switzerland (FHNW) and SAP AG The BTA is a Swiss non-profit association It is registered with the Commercial Register of the Canton of Basel-Stadt under the name ldquoBusiness Transfor-mation Academyrdquo and under the number CH-2706000679-0 (legal nature association) Authorized representatives Prof Dr Axel Uhl Lars Alexander Gollenia Prof Dr Rolf Dornberger Nicolas Steib Prof Dr Jan vom Brocke Paul Stratil

Disclaimer Within reason the BTA strives to provide correct and complete information in this journal How-ever the BTA does not accept any responsibility for topicality correctness and completeness of the informa-tion provided in this journal The BTA does not accept any responsibility or liability for the content on external links to which this journal refers to directly or indirectly and which is beyond the control of BTAThe material contained in this journal are the copyright works of the BTA and the authors Copying or dissem-inating content from this journal requires the prior written consent of the BTA and of the authorsLegal venue is Basel Switzerland

Note to the reader The opinions expressed in the articles in this journal do not necessarily reflect the views of the BTA

Picture Credits copy Herzog amp de Meuron (cover p 61 62) copy Oliver Heissner (2) wwwqrcode-monkeyde (2) copy iStockphotocomcmcderm1 (4 5) copy iStockphotocomDrAfter123 (6) copy iStockphotocomretro-rocket (16) SAP AG (18 19 23 25) copy kentohfotoliacom (28) art4allshutterstockcom (42) copy Photogra-pheeeufotoliacom (48) copy ReGe Hamburg Project-Realisierungsgesellschaft mbh (54) Airbus SAS (60) HafenCity Hamburg GmbH (66) copy iStockphotocombenedek (83) copy Chrisoph Gebler Zorabcshutter-stockcom (75) wwwgoQRme (83) Michael von KutzschenbachBTA (84 85) Joshua MeadonSAP (86 87)

Published three to four times a year in electronic format

EDITORIAL OFFICE

For inquiries about the journal please contact info[at]360-btcom

Subscriptions If you want to be notified when new issues are published subscribe onhttpswwwbta-onlinecomnewsletter and tick the box labeled ldquo360deg Journal Newsrdquo

Page 11: Doll_Eisert_Business Model Development  Innovation

issue

no

11au

g 20

14

In collaboration withSponsored by

PUBLICATION DETAILS OF360deg ndash THE BUSINESS TRANSFORMATION JOURNAL

PUBLISHER

Business Transformation Academy (BTA)co University of Applied Sciences and Arts Northwestern Switzerland (FHNW)School of Business (HSW) Institute for Information Systems (IWI)Peter Merian-Strasse 864002 BaselSwitzerlandinfo[at]bta-onlinecomwwwbta-onlinecomwww360-btcom

The Business Transformation Academy (BTA) is a joint research project of the University of Applied Scienc-es and Arts Northwestern Switzerland (FHNW) and SAP AG The BTA is a Swiss non-profit association It is registered with the Commercial Register of the Canton of Basel-Stadt under the name ldquoBusiness Transfor-mation Academyrdquo and under the number CH-2706000679-0 (legal nature association) Authorized representatives Prof Dr Axel Uhl Lars Alexander Gollenia Prof Dr Rolf Dornberger Nicolas Steib Prof Dr Jan vom Brocke Paul Stratil

Disclaimer Within reason the BTA strives to provide correct and complete information in this journal How-ever the BTA does not accept any responsibility for topicality correctness and completeness of the informa-tion provided in this journal The BTA does not accept any responsibility or liability for the content on external links to which this journal refers to directly or indirectly and which is beyond the control of BTAThe material contained in this journal are the copyright works of the BTA and the authors Copying or dissem-inating content from this journal requires the prior written consent of the BTA and of the authorsLegal venue is Basel Switzerland

Note to the reader The opinions expressed in the articles in this journal do not necessarily reflect the views of the BTA

Picture Credits copy Herzog amp de Meuron (cover p 61 62) copy Oliver Heissner (2) wwwqrcode-monkeyde (2) copy iStockphotocomcmcderm1 (4 5) copy iStockphotocomDrAfter123 (6) copy iStockphotocomretro-rocket (16) SAP AG (18 19 23 25) copy kentohfotoliacom (28) art4allshutterstockcom (42) copy Photogra-pheeeufotoliacom (48) copy ReGe Hamburg Project-Realisierungsgesellschaft mbh (54) Airbus SAS (60) HafenCity Hamburg GmbH (66) copy iStockphotocombenedek (83) copy Chrisoph Gebler Zorabcshutter-stockcom (75) wwwgoQRme (83) Michael von KutzschenbachBTA (84 85) Joshua MeadonSAP (86 87)

Published three to four times a year in electronic format

EDITORIAL OFFICE

For inquiries about the journal please contact info[at]360-btcom

Subscriptions If you want to be notified when new issues are published subscribe onhttpswwwbta-onlinecomnewsletter and tick the box labeled ldquo360deg Journal Newsrdquo

Page 12: Doll_Eisert_Business Model Development  Innovation

PUBLICATION DETAILS OF360deg ndash THE BUSINESS TRANSFORMATION JOURNAL

PUBLISHER

Business Transformation Academy (BTA)co University of Applied Sciences and Arts Northwestern Switzerland (FHNW)School of Business (HSW) Institute for Information Systems (IWI)Peter Merian-Strasse 864002 BaselSwitzerlandinfo[at]bta-onlinecomwwwbta-onlinecomwww360-btcom

The Business Transformation Academy (BTA) is a joint research project of the University of Applied Scienc-es and Arts Northwestern Switzerland (FHNW) and SAP AG The BTA is a Swiss non-profit association It is registered with the Commercial Register of the Canton of Basel-Stadt under the name ldquoBusiness Transfor-mation Academyrdquo and under the number CH-2706000679-0 (legal nature association) Authorized representatives Prof Dr Axel Uhl Lars Alexander Gollenia Prof Dr Rolf Dornberger Nicolas Steib Prof Dr Jan vom Brocke Paul Stratil

Disclaimer Within reason the BTA strives to provide correct and complete information in this journal How-ever the BTA does not accept any responsibility for topicality correctness and completeness of the informa-tion provided in this journal The BTA does not accept any responsibility or liability for the content on external links to which this journal refers to directly or indirectly and which is beyond the control of BTAThe material contained in this journal are the copyright works of the BTA and the authors Copying or dissem-inating content from this journal requires the prior written consent of the BTA and of the authorsLegal venue is Basel Switzerland

Note to the reader The opinions expressed in the articles in this journal do not necessarily reflect the views of the BTA

Picture Credits copy Herzog amp de Meuron (cover p 61 62) copy Oliver Heissner (2) wwwqrcode-monkeyde (2) copy iStockphotocomcmcderm1 (4 5) copy iStockphotocomDrAfter123 (6) copy iStockphotocomretro-rocket (16) SAP AG (18 19 23 25) copy kentohfotoliacom (28) art4allshutterstockcom (42) copy Photogra-pheeeufotoliacom (48) copy ReGe Hamburg Project-Realisierungsgesellschaft mbh (54) Airbus SAS (60) HafenCity Hamburg GmbH (66) copy iStockphotocombenedek (83) copy Chrisoph Gebler Zorabcshutter-stockcom (75) wwwgoQRme (83) Michael von KutzschenbachBTA (84 85) Joshua MeadonSAP (86 87)

Published three to four times a year in electronic format

EDITORIAL OFFICE

For inquiries about the journal please contact info[at]360-btcom

Subscriptions If you want to be notified when new issues are published subscribe onhttpswwwbta-onlinecomnewsletter and tick the box labeled ldquo360deg Journal Newsrdquo