Capability-based Business Model Transformation

Capability-based
Business Model
Transformation
Martin Henkel, Ilia Bider, Erik Perjons
Department of Computer and Systems Sciences,
Stockholm University, Sweden
{martinh,ilia,perjons}@dsv.su.se
Pre-proceedings - http://bit.ly/1qZ5KsO
Springer proceedings –
http://link.springer.com/chapter/10.1007/978-3-319-07869-4_8

Motivation
● Ever changing business environment of today
● Organizations should adapt to changes to survive
● Also need to use opportunities the changes give to grow
and prospect by offering new products and services
● Any organization in subject of changes in the
environment, or having the desire to improve, needs to
change their processes, personnel and their use of
resources.
HOW to design the change?
* the ability of an organization to manage its resources to accomplish a task.

Existing approaches
Business model transformation with a help of Canvas
Osterwalder, A., & Pigneur, Y. (2010). Business model generation: a handbook for
visionaries, game changers, and challengers. John Wiley & Sons.

Problems with the existing approaches
● Changes take their departure in an organizations existing
capabilities (the ability of an organization to manage its
resources to accomplish a task).
● To support change, there is a need to understand and
assess an organization’s capabilities.
● There is a need to have a structured approach for
– Discovering and assessing capability
– Rearranging them for a new usage
Are there satisfactory answers?

Contribution
● A modelling approach that describes an organization as a
recursive structure of capabilities, including the resources
being used.
● A set of initial transformation patterns that allows an
organization to restructure their capabilities in order to
implement a new business model, and find out what new
capabilities should be added, and what existing
capabilities are to be removed

Background – Process-Assets model
From our previous work:
Bider, I., Perjons, E., & Elias, M. (2012). Untangling the Dynamic Structure
of an Enterprise by Applying a Fractal Approach to Business Processes. In
The Practice of Enterprise Modeling (pp. 61-75). Springer Berlin Heidelberg
Available at http://www.ibissoft.se/publications/FractalOrg.pdf or
http://link.springer.com/chapter/10.1007%2F978-3-642-34549-4_5
Original goal:
Find all business processes in the company, even the ones that not many
people are aware of
Approach:
Start with a main (visible) process and find out all other processes that
needs to be in place in order to run the main one

Background: Process-assets and asset-
processes archetypes
Process-assets archetype for a main process

Background: Process-assets and asset-
processes archetypes
Assets-processes archetype

Background: Conclusions
In addition to getting all processes
the uncovered dynamic structure of an enterprise can support:
1. strategic planning. For example, when sales plans a new campaign that will
bring new customers, all assets required by the corresponding main process
should be adjusted to satisfy the larger number of customers. This includes
workforce, suppliers, infrastructure, etc.
2. change management. For example, a product manufacturing company could
decide to become an engineering company. Such a decision can be made when
manufacturing becomes unprofitable, while the company still have a very
strong engineering department.
3. discovering and preventing misbalances between its business
processes. For example, a supporting process can starts behaving as it were a
main one disturbing the balance of the organizational structure. This is typical
for IT–departments that may start finding external "customers" for software
developed for internal needs.
In focus of this work

Goal
● A modelling approach that helps an organization to discover and
depict all its capabilities, including the resources being used.
● Transformation patterns that allows an organization to restructure
their capabilities in order to implement a new business model,
and find out what new capabilities should be added, and what
existing capabilities are to be removed
Approach to achieving the goal:
● Rename concepts in the existing framework:
– Process – Capability
– Asset – Resource
● Adjust the framework for discussing capabilities
● Design rules for business model transformation

Overview of the approach
Step1, uncovering the organizational structure
● Starts with the so-called main capability
● Continue with discovering of so-called supporting
capabilities by examining the use of different types of
resources
● Result: A tree structure of capabilities
Step 2, transforming the business structure identified
during step 1. The aim is to identify sub-capabilities that
can be transformed, thereby creating a new business model
for the organization.
● Uses pattern for the transformation
● Result: A new tree structure of capabilities

1. Start with the main capabilities.
These are capabilities that produce
value for which some of the
enterprise external stakeholders are
ready to pay.
2. Identify resources. Proceed with
following up resources that are
needed to run the main capabilities.
This step is Guided by Capability
resource types.
3. Identify supporting capabilities.
Each Resource requires a set of so-
called supporting capabilities.
This step is guided by Capability sub-
types.
Repeat 2-3
Product manufacturing
Main capability
Customers
Workers on the
conveyor belt
Machines and IT
for production
Suppliers
Product
design
Paying stakeholders
Workforce Infrastructure
Execution templatePartners
Sales &
Marketing
Ending
customer
relationships
Customer
Relationship
Management
Acquire Maintain Retire
Workers IT/computers
Workforce Infrastructure

Capability resource types
● Paying stakeholders
● Workforce
● Execution templates
● Partners
● Infrastructure
Note:
● All resources are equally important
● To be of use, each resource need to available in the right
capacity.

Capability sub-types
● Acquire – sub-capabilities that result in the enterprise
acquiring a new resource of a given type.
● Maintain – sub-capabilities that help to keep existing
resources in the right shape to be useful in the capability
of a given type.
● Retire – sub-capabilities that phase out resources that no
longer can be used as part of the capability.
Customers
Resource
Sales &
Marketing
Ending
customer
relationships
Customer
Relationship
Management
Acquire Maintain Retire

Step 2, transforming the business structure
● Use the model with resources and capabilities as defined
in Step 1.
● Apply capability transformation patterns to change the
structure
Two initial patterns described in the paper:
● Externalising a capability. This involves taking a
capability that the enterprise has and market it toward its
customers.
● Add value to a capability. Extend existing capabilities,
or embed them into new main capabilities.

Example case
Transforming a software consulting company into
a product vendor

Example case
● Describes the changes a software development company
went through
● Initial business:
Traditional software consulting company, working in
several domains such as healthcare and financials. Main
capability offered to customers: software development.
● Impetus for change:
A main customer was lost, leaving the company with
several software developers without a project. To sustain,
the company was thus in need of re-organising its
capabilities.

Use the defined resource types to find the resources that
the main capability uses.
Resource types
Resources

Step 2, transforming the business structure
Selected transformation pattern: Add value to a capability.
This entails a “re-packaging” and extension of an existing
capability by adding a new main capability that can be
offered to the customers.
Main question: “Can we combine this capability with other ,
new, capabilities in order to provide value to our
customers?”

Step2, continued
old capability
Used for acquiring/building a software product.
Redesigned main capability

Conclusion
● A practical tool for uncovering/documenting a business in
form of capabilities. The process is guided by both
capability sub-types and resource types.
● The transformation patterns guide the formulation of a
new structure
Future work:
● More transformation patterns need to be identified
● Validation, through historical empirical evaluation or case
studies

Capability-based Business Model Transformation

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