The Business Model Ontology - a proposition in a design ... - HEC

The Business Model Ontology - a proposition in a design science approach
market model. These sub-models and their interrelation shall describe the logic of a business system
for creating value that lies behind the actual processes. The value model describes the logic of what
core products, services and experiences are delivered to the customer and other value-added services
derived from the core competence. The revenue model describes the logic of how elements are
necessary for the transformation process, and how to identify and procure the required quantities. The
production model describes the logic of how elements are combined in the transformation process
from the source to the output. The customer relations model scribes the logic of how to reach, serve,
and maintain customers. It consists of the following sub-models: a distribution model – the logic
behind the delivery processes, a marketing model – the logic behind reaching and maintaining
customers and a service model – the logic behind serving the customer. The revenue model describes
the logic of what, when, why, and how the company receives compensation in return for the products.
The capital model describes the logic of how financial sourcing occurs to create a debt and equity
structure, and how that money is utilised with respect to assets and liabilities over time. The market
model describes the logic of choosing a relevant environment in which the business operates.
Compared to the previous authors Magretta (2002) has a very simple and pragmatic view on business
models. She distinguishes between two elementary parts of a business model. On the one hand the
business activities associated with making something (e.g. design, procurement, and manufacturing)
and on the other hand the business activities associated with selling something (e.g. customer
identification, selling, transaction handling, distribution and delivery).
3.1.4 Representation Tools
In addition to outlining the components of a business model, some authors offer a set of business
model representation tools. Weill and Vitale (2001) have developed a formalism to assist analyzing e-
business initiatives, which they call e-business model schematic. The schematic is a pictorial
representation, aiming to high-light a business model's important elements. This includes the firm of
interest, its suppliers and allies, the major flows of product, information and money and finally the
revenues and other benefits each participant receives. By using such a representation the authors
intend to uncover major contradictions of a business model, highlight the core competencies to
implement the model, show the position of each player in the industry value chain, deduce the
organizational form and IT infrastructure for implementation and reveal which entity owns the
customer relationship, data, and transaction.
Service
Provider
Customer
Firm of Interest
Supplier
Customer
Ally
$
0
i
Electronic Relationship
Primary Relationship
Flow of Money
Flow of Product
Flow of Information
Figure 18: business model schematic of the direct to customer model and (Weill and Vitale 2001)
The design approach of Gordijn (2002), which among other things aims at visualizing business models
is outlined in the following section.
3.1.5 Ontological Modelling
Whereas the business model frameworks presented until here stay relatively informal and descriptive
this section treats of ontology-style models. Under ontological modelling I understand a rigorous
approach to defining business models. In other terms this means carefully and precisely defining
business model terms, concepts, components and their relationships. From the authors analyzed in this
literature review Gordijn (2002) provides the most rigorous conceptual modeling approach, which he
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