Business-models and models of service systems

After Cardoso, J, R Lopes, and G Poels – “The LSS-USDL Model” in Service Systems: Concepts, modeling, and programming (2014).

1

In Chapter 2, we studied four theories that provided a comprehensive view of service. This chapter starts by complementing the study made by looking into business model conceptualizations to create an evaluation framework that will help in identifying a set of concepts to be used for the creation of a service system model.

Related research has proposed several business model conceptualizations. We briefly present eight of these proposals that are relevant to our research as they define concepts that pertain to both external and internal views of service systems. We do not explain these conceptualizations in detail, but merely list concepts relevant to a service system model. It should be noted that these proposals are unrelated to the service theories reviewed in the previous section, hence, both types of related work will be used in the next section to derive the most common service system concepts.

2

Alt and Zimmermann [4] distinguished six generic elements as a comprehensive framework to develop business models: Mission, Structure, Processes, Revenues, Legal issues and Technology. Published in 2001, this is the earliest proposal in our study, but as we can see by analyzing Table 1 it already mentions most of the generic concepts that newer models used the most. This indicates that it had an impact in the field.

Table 3.1 Service model evaluation framework

Table 1 Service model evaluation framework.

Petrovic et al. [5] divided a business model into seven sub-models: Value model, Resource model, Production model, Customer relations model (it was further divided into Distribution model, Marketing model and Service model), Revenue model, Capital model, and Market model. The naming of this model’s elements hints at a lower level description for each of them. However, the authors do not identify any further characteristics.

Kaner and Karni [6, 7] proposed CAIOPHYKE, a service model based on 9 major classes: Customers, Goals, Inputs, Outputs, Processes, Human enablers, Physical enablers, Information enablers, and Environment. Each of these major classes can be further described by main classes, which can then be further described by their respective minor classes. This model was developed based on a study with 150 student projects that covered around 100 service domains [8]. This is one of the most comprehensive models found in the literature. However, it features a high level of complexity without a proper formalization, which prevents from creating an abstraction to handle complexity.

In e3service [9, 10], Kinderen and Gordijn focused on satisfying consumer needs and displaying the various value offerings from different services for an easier comparison. Therefore, the elements of this model are different from other approaches. This model is a valuable contribution to the state of the art as it is represented by a machine-readable ontology, the level of formality we envision for our model. However, its scope is customer-oriented, while we seek a manager-oriented approach that provides a view on how a service system operates.

Spohrer and Maglio [11] defined a service as value co-creation and list ten related foundational concepts: Ecology, Entities, Interactions, Outcomes, Value proposition based interactions, Governance mechanism based interactions, Stakeholders, Measures, Resources, Access rights and Questions [11]. Table 3.1 shows that it is one of the most complete models of our study.

Osterwalder and Pigneur [12] propose the Business Model Canvas, a high level graphical tool for business modeling. The model uses the concepts Value proposition, Customer segments, Channels, Customer relationships, Key activities, Key resources, Key partners, Cost structure, and Revenue Streams. This model and its tool are very simple and easy to understand and enjoy some popularity.

Fielt [13] extended the Business Model Canvas by addressing its strongest limitations: the lack of partnering (c.f. [14]) and co-creation (c.f. [15]) concepts. This increased the complexity of the original model. However, Table 1 shows that this new model only contributes to one more element of the common concepts, so there is a risk that this increase in complexity might not be beneficial.

Zolnowski et al. [16] tried to tackle the issue of lack of elements of the original Business Model Canvas to describe co-creation. This proposed approach focuses on a redistribution of the elements and their connections, rather than changing them as seen in Fielt’s approach. Hence, this model shares the same concepts as the original Business Model Canvas, but their organization changes ([16] p.158).

3

Comparing the related work reviewed in the previous chapter and section, it is possible to identify common concepts for describing service systems and, thus, derive a service evaluation framework of the most frequent and relevant concepts. The most common concepts identified are:

  • Goals
  • Stakeholders
  • Processes
  • Inputs
  • Outputs
  • Resources
  • Measures
  • Legal
  • Financial

Goals are one of the most used concepts in the studied models. There is no doubt that this is a critical element for a service model, not only because of its wide acceptance among the studied approaches, but also because it states the objectives of the service system and its value proposition to consumers.

Stakeholders are one of the most important concepts of a service, since it is conditioned by the people and organizations involved. This concept is used by almost all the studied approaches due to its importance. In most service models, there is an attribute for service customers. In the Business Model Canvas from Osterwalder [12] and the two studied improved approaches there is also an attribute for service partners [12, 13, 16]. Spohrer and Maglio [11] propose additional attributes which specialize stakeholders into authorities and competitors.

Processes are, along with Goals, a concept that all studied approaches share. This concept is of utmost importance when describing services from an internal organization, because corporations must have a strong knowledge of the processes needed for their services, to identify bottlenecks, and other issues.

Inputs are described in a small set of service models. Spohrer and Maglio [11] refer to them using the concept of Ecology. Fielt [13], when extending the Business Model Canvas, adds Partner activities and Customer activities, which act as an input for the service. Karni and Kaner’s CAIOPHYKE model [7] features the major class Inputs.

Outputs are also described in a small set of service models. Spohrer and Maglio [11] refer to them using the concept of Outcomes. e3service [10] features outputs in the classes Consequence, Benefit, and Value derivation. Karni and Kaner [7] feature the major class Outputs.

Resources are described in most service description models, being absent just in e3service. Alt and Zimmermann’s approach [4] is the only model that does a partial description of this concept, focusing only on technology.

Measures refer to how the company can know its services’ performance receive feedback of their operations. Only a small number of models were found in the literature that addressed this concept, as shown in Table 1.

Legal is the concept for the legal aspects of a service or business. It has a surprisingly low presence in the literature. Exceptions are Alt and Zimmermann [4] who propose Legal issues as one of their six generic elements of a business model; Karni and Kaner [7] use the main class Legal factors in the major class Environment; and Spohrer and Maglio identify Governance mechanism based interactions and Access rights [11].

Financial is the concept for the financial aspects of a service. This concept is used in most of the studied approaches. Hence, it is also an important concept for developing a comprehensive service model and evaluation framework.

References

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  5. Otto Petrovic, Christian Kittl, and Ryan Teksten. Developing business models for e-business. Available at SSRN 1658505, 2001.
  6. Maya Kaner and Reuven Karni. Design of service systems using a knowledge-based approach.Knowledge and Process Management, 14(4):260–274, 2007.
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  8. Teaching innovative conceptual design. Technological Forecasting and Social Change, 64(2):225–240, 2000.
  9. Sybren Kinderen and Jaap Gordijn. e3service: An ontological approach for deriving multi-supplier IT-service bundles from consumer needs. In Proceedings of the 41st annual Hawaii international conference on system sciences, 2008.
  10. Reasoning about substitute choices and preference ordering in e-services. In Advanced Information Systems Engineering, pages 390–404. Springer, 2008.
  11. Jim Spohrer and Paul Maglio. Service science: Toward a smarter planet. Introduction to service engineering, pages 3–30, 2009.
  12. Alexander Osterwalder and Yves Pigneur. Business model generation: a handbook for visionaries, game changers, and challengers. Wiley, 2010.
  13. Erwin Fielt. An Extended Business Model Canvas for Co-Creation and Partnering, 2010.
  14. Erwin Fielt. To what extent is the Business Model Canvas constraining? A Co-Creation Canvas example. http://fieltnotes.blogspot.pt/2010/11/to-what-extent-is-business-model-canvas. html, 2010
  15. Erwin Fielt. Alternative business model canvasses: A Partnering Canvas example. http:// blogspot.pt/2010/12/alternative-business-model-canvasses.html, 2010
  16. Andreas Zolnowski, Martin Semmann, and Tilo Böhmann. Introducing a Co-Creation Perspective to Service Business Models. In Enterprise Modelling and Information Systems Architectures (EMISA), page 243, 2011.
  1. 1 Service System Evaluation Framework
  2. 1.1 Business Model Conceptualizations of Service Systems
  3. 1.2 Evaluation Framework