ChapterPDF Available

Moving from Manufacturing to Software Business: A Business Model Transformation Pattern

Authors:

Abstract and Figures

Regularly changing the business model of an enterprise becomes a necessity for surviving and prospering in the dynamic business world of today. To cope with this task enterprises need tools for Business Model Innovation (BMI). One of such tools can be a library of patterns. While there are attempts to build libraries of patterns of business models, they concern the patterns of to-be models. This paper focuses on the transformational patterns that show how to create a new model based on the current one. It considers a real example of a business model transformation in progress and designs a pattern based on this transformation. The main idea of this pattern can be formulated as “transforming from a manufacturing business to becoming a provider of software services that can predict the needs for maintenance of equipment used in manufacturing lines”. For building the pattern enterprise models before and after transformation have been built and then compared. The modeling has been done using a so-called Fractal Enterprise Model (FEM). FEM ties various enterprise business processes together and connects them to enterprise assets (resources) that are used and/or are managed by the processes. The proposed pattern is also expressed using FEM syntax, but in difference from the concrete models, it is depicted on a much higher abstract level.
Content may be subject to copyright.
The final version of this paper has been published and is copyright by Springer in LNBIP, vol.
378, https://link.springer.com/chapter/ 10.1007/978-3-030-40783-4_25
Moving from Manufacturing to Software Business:
A Business Model Transformation Pattern
Ilia Bider1 and Azeem Lodhi2
1Department of Computer and Systems Sciences, Stockholm University, Stockholm, Sweden
2 Technische-IT, Robert Bosch GmBH, Bamberg 96050, Germany
ilia@dsv.su.se, azeem.lodhi@de.bosch.com
Abstract. Regularly changing the business model of an enterprise becomes a ne-
cessity for surviving and prospering in the dynamic business world of today. To
cope with this task enterprises need tools for Business Model Innovation (BMI).
One of such tools can be a library of patterns. While there are attempts to build
libraries of patterns of business models, they concern the patterns of to-be mod-
els. This paper focuses on the transformational patterns that show how to create
a new model based on the current one. It considers a real example of a business
model transformation in progress and designs a pattern based on this transfor-
mation. The main idea of this pattern can be formulated as "transforming from a
manufacturing business to becoming a provider of software services that can pre-
dict the needs for maintenance of equipment used in manufacturing lines". For
building the pattern enterprise models before and after transformation have been
built and then compared. The modeling has been done using a so-called Fractal
Enterprise Model (FEM). FEM ties various enterprise business processes to-
gether and connects them to enterprise assets (resources) that are used and/or are
managed by the processes. The proposed pattern is also expressed using FEM
syntax, but in difference from the concrete models, it is depicted on a much higher
abstract level.
Keywords: Business model, Business model innovation, Pattern, Enterprise
model, Fractal enterprise model
1 Introduction
In the past two decades, the speed of technological development produced a significant
impact on organizations' competitiveness. This development allows even small com-
panies with niche-based strategy create a considerable threat to well established enter-
prises. The hardening competitive climate demands enterprises to be innovative, and
not only in the current lines of products and services, but also in the way these products
and services are introduced and revenues are generated. The latter means that they need
to be innovative in their Business Models (BM).
Business Modell Innovation (BMI) is a relatively new research area aimed at helping
enterprises to innovate their existing BM [1], [2], [3]. A number of research papers are
2
devoted to designing tools that could help the decision makers to successfully innovate
their BMs. Some of these works suggest standardized procedures; for example, [4] sug-
gests a procedure to use analogies. Other works [5,6] suggest using patterns as a help
in designing new business models. Patterns can be on the highest level as in [5], or on
the level of elements of the business model, as in [6].
Generally, patterns are used to find solutions for common problems and share
knowledge about both problem and solutions [7]. In regards to BMI, there are many
different kinds of patterns, ranging from patterns for revenue generation to patterns for
the ways activities are carried out in an organization. In [8], authors analyzed business
models of 250 companies and proposed 55 patterns which can serve as a basis for new
business models.
The patterns mentioned above show what can be included in a new business model.
In this paper, however, we focus on so-called transformational patterns; a transforma-
tional pattern shows how some elements of an old business model can be transformed
into the elements of a new business model. Therefore, in our context, we define a BMI
pattern as a combination of (a) constructs that can be applied to analyze the current
structure of the enterprise and highlight some elements of it and (b) a construct where
a new combination of the highlighted elements serves as a basis for a new business
model.
In addition, in this paper, we deal only with industry level BMI according to classi-
fication from [3]. The industry level BMI amounts to changing the position of the en-
terprise in the value chain, entering new markets, and/or other types of radical changes.
This type of BMI, for example, covers such cases as when a traditional manufacturing
company that both designs and manufactures their products decides that they would
concentrate only on one aspect of their current business. The company then can become
a manufacturer who produces goods based on somebody else's design, or a designer –
designing goods to be manufactured by somebody else. The cases of industry level BMI
can be found in such companies as LEGO [9] or TSMC [10].
Paper [3] also introduces two other types of BMI: revenue model innovation and
enterprise model innovation. The first results in changes in how a company generates
revenues, e.g. reconfiguring offerings and/or introducing new pricing models. The sec-
ond involves innovating the structure of an enterprise, such as enterprise goals, business
processes, products and/or services. Both are important, and can accompany the enter-
prise level BMI, but they remain outside the scope of this work.
In this work, we follow the ideas from [11], which present a way for defining and
designing transformational patterns from real-life cases of industry level BMI using
enterprise modeling for this end. The idea can be expressed as a sequence of the fol-
lowing steps:
1. Find an interesting example of the industry level BMI
2. Build an enterprise model before the transformation on the needed level of details
3. Build an enterprise model after the transformation, also on the needed level of details
4. Relate elements of these two models showing which elements of the original model
have been used in the transformed model and how they have been changed during
the transformation
3
5. Abstract from the details of the given case creating a transformational pattern
This paper is devoted to designing one BMI transformational pattern from a case cur-
rently being considered in one of the German companies. Though the transformation
has not yet been completed, we have found it quite interesting and realistic to take it as
a basis for designing a pattern. The main idea of this pattern can be formulated as "trans-
forming from a manufacturing business to becoming a provider of software services
that can predict the needs for maintenance of equipment used in manufacturing lines".
The idea of taking over maintenance of somebody else's equipment is not completely
new in its nature, as it was used by Rolls Royce in TotalCare [12], where customers
responsibilities were taken at the supplier end. However, it is new in the sense that in
our case, maintenance does not belong to the core operations of the company.
For the purpose of modeling of the enterprise before and after planned transfor-
mation, we follow [11] and use so-called Fractal Enterprise Model described in details
in [13]. The choice of modelling technique is personal, as the first co-author of this
work is part of the team engaged in FEM development. The question whether other
enterprise modeling techniques can be used for the purpose of designing transforma-
tional patterns remains outside the scope of this paper.
The rest of the paper is structure in the following way. In section 2, we give an over-
view of FEM so that the reader does not need to go elsewhere to obtain this knowledge.
In Section 3, we present the business case as it is and a fragment of FEM that is of
interest for the planned business transformation. In Section 4, we build a FEM for a
business-to-be and compare it with the FEM for the current business. While making the
comparison, we discuss which elements of the current structure could be used in the
new one, and what needs to be created from scratch. In Section 5, we derive a transfor-
mational pattern from the models presented in Section 3 and 4 using guidelines from
[11]. In section 6, we summarize our findings and draw plans for the future.
This paper is based on paper [14] presented at ICEIS 2019. In difference from [14],
the focus here is on building a transformational pattern, not on the analysis of the pro-
posed transformation. Therefore, the introduction and conclusion have been totally re-
written to reflect changes in the focus. In addition, Section 5, which presents a new
transformational pattern, is completely new. Besides, the models presented in the paper
are refined and supplied with more technical details related to the business case.
2 Overview of Fractal Enterprise Model
The Fractal Enterprise Model (FEM) includes three types of elements: business pro-
cesses, assets, and relationships between them, see Fig. 1 in which a fragment of a
model is presented. This fragment is related to a business case considered in the next
sections. Graphically, a process is represented by an oval; an asset is represented by a
rectangle (box), while a relationship between a process and an asset is represented by
an arrow. FEM differentiates two types of relationships. One type represents a relation-
ship of a process “using” an asset; in this case, the arrow points from the asset to the
process and has a solid line. The other type represents a relationship of a process chang-
ing the asset; in this case, the arrow points from the process to the asset and has a dashed
4
line. These two types of relationships allow tying up processes and assets in a directed
graph.
In FEM, a label inside an oval names the given process, and a label inside a rectangle
names the given asset. Arrows are also labelled to show the types of relationships be-
tween the processes and assets. A label on an arrow pointing from an asset to a process
identifies the role the given asset plays in the process, for example, Workforce, Infra-
structure, etc. A label on an arrow pointing from a process to an asset identifies the way
in which the process affects (i.e. changes) the asset. In FEM, an asset is considered as
a pool of entities capable of playing a given role(s) in a given process(es). Labels lead-
ing into assets from supporting processes reflect the way the pool is affected, for exam-
ple, a label acquire identifies that the process can/should increase the size of the pool.
Note that the same asset can be used in two different processes playing the same or
different roles in them, which is reflected by labels on the corresponding arrows. It is
also possible that the same asset can be used for more than one role in the same process;
in this case, there can be more than one arrow between the asset and the process, how-
ever, with different labels. Similarly, the same process could affect different assets,
each in the same or in different ways, which is represented by the corresponding labels
on the arrows. Moreover, it is possible that the same process affects the same asset in
different ways, which is represented by having two or more arrows from the process to
the asset, each with its own label.
In FEM, different styles can be used for shapes to group together different kinds of
processes, assets, and/or relationships between them. Such styles can include using
dashed or double lines, or lines of different thickness, or colored lines and/or shapes.
For example, a diamond start of an arrow from an asset to a process means that the asset
is a stakeholder of the process (see the arrows Workforce in Fig. 1). Another example,
an assets with the dashed border represents a soft-asset, like an opinion of the agents
outside the given organization (see an example in Fig. 1).
Labels inside ovals, which represent processes, and rectangles, which represent as-
sets, are not standardized. They can be set according to the terminology accepted in the
given domain, or be specific for a given organization. Labels on arrows, which repre-
sent the relationships between processes and assets, however, can be standardized. This
is done by using a relatively abstract set of relationships, like, workforce, acquire, etc.,
which are clarified by the domain- and context-specific labels inside ovals and rectan-
gles. Standardization improves the understandability of the models.
While there are a number of types of relationships that show how an asset is used in
a process (see example in Fig. 1), there are only three types of relationships that show
how an asset is managed by a process – Acquire, Maintain and Retire.
To make the work of building a fractal model more systematic, FEM uses archetypes
(or patterns) for fragments from which a particular model can be built. An archetype is
a template defined as a fragment of a model where labels inside ovals (processes) and
rectangles (assets) are omitted, but arrows are labelled. Instantiating an archetype
means putting the fragment inside the model and labelling ovals and rectangles; it is
also possible to add elements absent in the archetype, or omit some elements that are
present in the archetype.
5
Fig. 1. A fragment of FEM (a modified version of Fig. 1 from [14])
6
FEM has two types of archetypes, process-assets archetypes and an asset-processes ar-
chetype. A process-assets archetype represents which kind of assets that can be used in
a given category of processes. The asset-processes archetype shows which kinds of
processes are aimed at changing the given category of assets.
3 Business Case
3.1 Overview of the current state and FEM model for it
The case considered in this paper concerns Robert Bosch GmbH, Bamberg-plant that
manufactures different lines of products for automotive industry like spark plugs, fuel
injection and sensors. These products can be bought by companies, retailers or end-
consumers for their usage. The company uses different machines for producing the
products like laser machines and robots. In this paper, we focus on robots used in man-
ufacturing and referred them as "Robots series X" for simplicity and generic represen-
tation.
Fig. 1 presents a fragment of a fractal enterprise model of the current business activ-
ity. In the root of this model is a primary process of manufacturing and delivering prod-
ucts. Underneath of it, there are various assets that are needed for the process working
smart-free. Under smart-free, we mean that instances of this process (production
batches) are started with normal frequency. As shown in FEM in Fig.1, the process
requires variety of assets such as workers on the flour (Workforce), manufacturing
equipment (Technical and informational infrastructure) and customers (Beneficiary).
Note that the FEM fragment in Fig.1 does not show all assets that are needed to run the
primary process, for example, a stock of orders for producing product batches is not
presented. The choice of what to present in Fig. 1 has been made based on the most
important assets and assets that are of interest for BMI to be considered in the paper.
After the assets of the first level (underneath the primary process) are put in the
model, the unfolding of FEM continues by applying the asset-processes archetype,
which requires finding processes that manage the identified assets. These processes are
connected with the asset(s) by three types of relationships: Acquire, Maintain and Re-
tire. Dependent on the type of assets, the asset managing processes have different na-
ture. For a workforce type of assets, they are hiring, training and retiring. For the infra-
structure type of assets, they are acquisition, maintenance, and phasing out. For the
execution template (EXT) type of assets, they are develop/design, maintain and phase
out.
After the management processes are identified, assets that are needed to run them
are identified using process-assets archetypes. For example, the customer asset needs
sales and marketing for both acquiring new customers and keeping them attached to
the company, so that they continue to add orders to the stock of orders. The equipment
asset, e.g. Robots series X, needs a service/maintenance process (see Fig. 1).
The process of unfolding of FEM can continue by applying the asset-processes ar-
chetype for newly identified assets. Thus, marketing and sales requires well-defined
value proposition and reputation that backs it (see Fig. 1), as well as other assets (not
identified in the figure), like sales executives. Note that the reputation is created by the
7
main process itself as shown in Fig. 1 via an arrow labeled acquire between the main
process and the reputation. The reputation asset is shown in Fig. 1 twice, once as an
asset acquired by the main process, and once as an asset playing role of attraction in the
sales process. The second occurrence has a lighter background color than the first one.
The lighter background is used to show that this asset is presented in another part of the
diagram, thus the new occurrence serves as a ghost of the first one.
Robot series X maintenance requires service technicians, machine process experts,
robots providers (partners to provide spare parts, advice, etc.) and diagnostic tools. As
machine diagnostic and prediction is in the focus of this work, we will look at this topic
in more details in the next sub-section.
3.2 Machine maintenance
In a manufacturing organization, production equipment - machines are very important
resources for production. Different Key Performance Indicators (KPIs) related to man-
ufacturing resources are used to ensure the optimal usage of the machines, such as OEE
(Overall Equipment Efficiency) defined in ISO standard [15,16]. A stoppage in pro-
duction line due to machine failure costs a lot of money for an organization.
In the context of Industry 4.0, maintenance is an important area that has an enormous
potential in terms of cost saving and resource efficiency. There are many use cases that
come under the category "maintenance 4.0", like automatic maintenance order genera-
tion, notifications to stakeholders (users, other machines and mobile devices), predic-
tive maintenance, flexible manufacturing, and support services (augmented reality).
Normally, in an organization, maintenance is counted as an overhead (however, a
mandatory one) on the production. In order to avoid unpredictable costs, machines are
serviced in regular intervals (sometimes according to manufacturer specifications).
However, despite all regular services, sometimes unplanned maintenance also has to be
carried out due to failure in machines or loss of quality in operations carried out by the
machines. If a particular machine or its part is situated in a critical position in the line,
it has a drastic impact on the whole production, as well as on the quality of products
delivered to the customers; thus a failure in such an equipment affects the overall KPIs.
In a manufacturing organization, machines are used as long as they fit for the pur-
pose, no matter how old they become. Several kinds of maintenance are carried out to
keep the production lines running. These are briefly described below.
1. Planned Maintenance. The planned maintenance is carried out according to a spe-
cific plan like after completion of certain number of operating hours (e.g. 20,000
hours), or after certain cycles (e.g. 2,000,000 cycles). It is carried out regularly to
avoid the unplanned (failure-based) maintenance in order to save costs. However,
this planned maintenance is carried out sometime earlier than completion of the op-
erating hours in order to avoid an extra stoppage in production when the production
line is stopped for a different reason (like new software updates). However, an earlier
planned maintenance has a negative effect on the costs of production for an organi-
zation, as shown in Fig. 2.
8
2. Condition-based Maintenance. In this kind of maintenance, certain machine param-
eters are actively monitored to get information about the health of the machine and
to carry out the appropriate actions (reducing speed, load etc.) before situation gets
out of control. This also applies to creating maintenance orders if necessary before
a planned or unplanned maintenance (in case of a failure or production stoppage)
occur.
3. Unplanned (problem-based) maintenance. In unplanned maintenance, as the name
suggests, the maintenance is carried out when a problem occurs. In this case, nor-
mally, a notification is sent to the service team and a maintenance order is created in
case of failure.
Fig. 2. The impact of maintenance on costs; adapted from [17] (as appeared in [14])
These three kinds of maintenance are common for all manufacturers. In any kind of
maintenance above, in the first place, the internal service team is asked to complete the
required service. If they cannot carried out the service, then the external resources are
used. The goal of any organization is to avoid unplanned maintenances and run the
production as continuously as possible.
3.3 Improving effectiveness of maintenance
As was discussed in the previous sub-section, machine maintenance costs, direct and
indirect, are quite high. To reduce the cost of maintenance itself, and revenue lost from
unexpected breakdowns, organizations look to applying the latest research results in
several brunches of Computer Science, e.g. Internet of Things (IoT), data mining, ma-
chine learning and Artificial Intelligence, which might improve the maintenance pro-
cess.
The goal of the project started in Bamberg-plant and considered in this paper, is to
develop a tool able to detect in advance when the machine is about to fail and carry out
Frequency of Failures
Maintenance Costs
Total Cost (incl. production)
Prevention Cost (hours, parts)
Repair Cost
Planned
Maintenance
Condition-based
Maintenance
(Predictive)
Problem-based
Maintenance
(Reactive)
Optimal point
9
appropriate measures when planning production and maintenance. Several sub-goals
are defined to achieve the main goal in a stepwise manner. The sub-goals include in-
troducing monitoring the machine status and its parameters, and in case of deviation
from the normal behavior, automatically sending notification to the service technicians.
Another sub-goal includes analysis of the historical data and identification of the pat-
terns that cause machine failure, and then using these patterns as a basis for predictive
maintenance. The main idea of the project sub-goals is represented in a graphical form
in Fig. 3, which is based on material from [18,19,20]. The direction, the project takes
is to handle more complexity and get more business value from the effort.
Fig. 3. The goals of the project as a diagram (as appeared in [14])
3.4 Extending the scope of usage
The project described in the previous sub-section was started having a technical goal in
mind, i.e. improving the maintenance effectiveness at this plant. However, when under
the way, the project spawned the discussion of extending the scope of the usage of its
results beyond the given plant and even beyond the whole company. This is understand-
able considering the costs of the project and the needs of establishing a permanent team
that would deal with maintaining and further developing the software produced by the
project. The latter is represented in Fig. 1 by the sub-tree starting from the asset node
Diagnostic & Predictive software. This asset is used as Technical & Informational in-
frastructure for the Servicing robots process in Fig. 1.
As any other asset, Diagnostic & Predictive software requires its managing pro-
cesses, two of which, Acquire and Maintain, are represented in Fig. 1. Continuing un-
folding of the FEM structure for the Diagnostic & Predictive software node, we will
add assets needed for these management processes, such as Workforce represented in
Fig.1. Furthermore, the workforce asset, i.e. Data Scientists, needs its own processes of
hiring and training, etc.
As follows from the deliberation above, unfolding node Diagnostic & Predictive
software reveals quite a complex structure that needs to be in place in order to use the
10
results of the project described in Section 3.3 in practice. This explains the desire to
extend the goal of the project from just improving the effectiveness of the maintenance
in one plant to envisioning new BMs (Business Models) that could generate additional
revenues for the company. The current discussion of extending the scope of usage
ranges from providing maintenance services to other plants of the firm (remotely) to
creating a separate business of licensing the diagnostic software to external companies.
The latter example would be exploited in the next section.
4 Building a FEM for a new Business Model
The most radical suggestion for a new business model based on the project was to open
a new business of licensing diagnostic software to other manufacturers that uses the
same type of robots, including the firm's competitors. To analyze the feasibility of in-
troducing this BM, we drafted a basic FEM related to the new BM as presented in Fig.
4.
The primary process for the new BM becomes Licensing of Predictive Software. It
needs certain assets to ensure that this process functions smart-free. The central asset
for this process is Diagnostic & Predictive Software promoted from the old BM; in Fig.
4, the whole tree related to this asset is moved from FEM in Fig. 1. This asset serves as
Technical & information infrastructure for the primary process (the root of the dia-
gram). Besides this asset, other assets are needed, in particular Workforce (Installation
& Configuration Engineers) and Beneficiary (customers).
While comparing the beneficiary/customer assets in Fig. 1 and Fig. 4, it becomes clear
that these two assets are completely different. In Fig. 4, asset Beneficiary has nothing
Fig. 4. A FEM fragment for the new BM (a modified version of Fig.4 from [14])
11
to do with manufacturing, in difference from Fig. 1. This difference becomes clearer if
we compare value propositions for both processes. The difference means that a com-
pletely new set of managing processes need to be added to manage the new kind of
customers. Two of such processes, Sales and marketing and Customer support are pre-
sented in Fig. 4. These processes and assets for them need to be developed separately
from the ones that are used in Sales and marketing in the current BM.
To analyze which other existing assets could be used in the new BM, we put two
FEM fragments from Fig. 1 and Fig. 4 side by side, see Fig. 5, and continue delibera-
tion. To start with, we can decide that process experts and service technicians can serve
as installation and configuration engineers on one hand and as customer support staff
on the other hand, which is shown by green arrow lines drawn between these assets in
Fig 5. The experience of the process experts and service technicians in using the soft-
ware would enable them to function in another capacity as well. However, this may
help only in the beginning, if the new BM starts producing more customers, more Work-
force will need to be hired.
The next step would be to use existing reputation on high-level quality as an attrac-
tion in the new BM. As many of the new customers will belong to the company's com-
petitors, this reputation can be used in advertising by pointing out that the software
to be licensed is used internally in the organization. This gives us a possibility to move
asset Reputation of producing high quality with reasonable price to the new fragment
of FEM in Fig. 5 and mark it with a lighter background color to show that it has already
been introduced in the diagram. As the follow up step, we can consider using the robots
vendor as a partner for sales and marketing activities, as the vendor has access to all
companies who use the machine. In Fig. 5, the machine vendor is moved to the new
FEM fragment and also marked with a lighter background color.
The analysis above shows that some existing assets could be used in a new BM,
however, introducing it still requires considerable efforts, e.g. in creating different kind
of sales and marketing, and support, as well as increasing the size of some existing
assets. The latter will mean increasing the capacity of the processes that manage these
assets, e.g. hiring and training new members of staff.
5 BMI pattern of becoming software service provider
5.1 Deriving a Transformational Pattern from the example
As follows from Section 1, the stated goal of this paper is to design a transformational
pattern of the type as "transforming from a manufacturing business to becoming a pro-
vider of software services that can predict the needs for maintenance of equipment used
in manufacturing lines". We do this based on the models designed in the previous sec-
tions and presented in Fig 5. The main idea of creating a pattern is taking an example
and abstracting from the specific details of the case [11]. A transformational pattern
built based on this idea from the current case is presented in Fig. 6. We use more or less
the same visual representation in the pattern as in the underlying FEM, but with some
extensions.
12
Fig. 5. Comparing two FEM fragments (a modified version of Fig. 5 from [14])
13
Fig. 6. A pattern derived from the models in Fig. 5
14
The left-hand side of the pattern in Fig. 6 represents a template that should be applied
to the FEM of the current activities of an enterprise. The root is identified just as a main
process, meaning that it can be any activity that delivers value to the beneficiaries/cus-
tomers. This main process employs directly or indirectly complex and expensive equip-
ment of any kind. Directly means that this equipment serves as an infrastructure for the
main process, as in the case described in this paper. Indirectly means that it serves as
an infrastructure to one of the supporting processes down the line. For example, it can
be a piece of equipment employed in research in a high-tech company. The possibility
of the indirect connection is denoted by having the light gray background on the label
between the main process and the equipment asset.
The next level of the business as-is template concerns the equipment that needs to
be acquired maintained and discharged. Here, the equipment vendor appears as a part-
ner for delivering new equipment, as well as helping to maintain it via providing spare
parts and technicians that can help with reparation. An important process of maintaining
equipment is its servicing. In this template we consider that the equipment servicing is
done in-house by own people, though help from the third-party, e.g. equipment vendor,
in certain situations can be accepted. This is a requirement to be fulfilled in order the
pattern becoming applicable to a situation. This requirement is written in a green hex-
agons, as recommended in [11].
The next important for the template part is the presence of the Diagnostic & Predic-
tive software, which is used to determine the need for service, developed by the com-
pany itself. The latter is highlighted by having in-hose supporting processes for devel-
oping and maintaining this software. This process require special workforce that is de-
noted by "data scientists", however, it can be called something else in a business situa-
tion that satisfies the left-hand side template.
The right-hand side of Fig. 6 presents a template for business to-be which is an ab-
straction of the right-hand side of Fig. 5. Left- and right-hand side pictures are con-
nected via the same elements appearing in both. This is identify by the shapes having
lighter background colors on the right-hand side of figure 6. In addition, green lines
show that some assets playing a role in the business as-is can be-used in slightly differ-
ent roles in the business to-be. Everything else needs to be built from scratch.
5.2 Discussion
The transformational pattern presented in Section 5.1 shows how a manufacturer can
become a software service provider with the software seemingly not directly connected
to the current primary business. Creating a new business does not necessarily results in
immediate abandoning the old one. Both can exists in synergy. However, if the new
business takes off, the company may consider to expand this business instead of con-
tinuing to invest in the old one, and later on deciding on abandoning the old business
as less profitable. The needs to abandon the old business may also come from changing
business environment, for example, if suddenly, the market for the currently manufac-
tured product collapses. The expansion of the new business may, for example, go in the
direction of providing diagnostic and predictive software for other type of equipment,
15
at least in the same class as the current one. This, in turn, may require collaboration
with the equipment vendor(s).
Applying the pattern in Fig. 6 to a specific organization does not require having a
FEM built in advance. Actually, the template in the left-hand side of Fig. 6 can serve
as guidance for building a relevant for the pattern fragment of FEM. One starts with
any of the primary processes and tries to figure out if it uses a complex & expensive
equipment. One can also start with trying to find out whether such an equipment exists
somewhere in the company. After such equipment has been found, the servicing of it
becomes in the focus of the study, if the servicing is not done in-house, then there is no
match. If the servicing is done in-house, the check is done whether any kind of software
is used to control the equipment and predict its breaking down. If such software is used,
the check is done whether it was created in-house. If the answer to the last question is
yes, the matching is established and one can start with defining a possible transfor-
mation that can be analyzed further.
As we can see from Fig.6, our transformational pattern does not produce a full-fledge
business model, e.g. in the form of a Business Model Canvas (BMC) [5]. The goal of a
transformational pattern is not to provide all details, but show what new business can
be considered, and how the existing elements of the current business can be used in the
new one. Everything else needs to be added after the pattern has been applied to the
current situation and is considered feasible to explore.
There are a number of decisions to be made when designing a full BM based on the
suggested transformation. The first one is to decide in what way the software will be
licensed. Will it be in the form of software to download and install on the customer own
severs, or a cloud-service fed by customers' equipment constantly sending information
from the sensors installed on the equipment? The first solution results in the customer
being taught how to use the software. The second solution means that the customer
needs to disclose the processes in which the equipment is used. Which decision is taken
affects how the supporting processes are defined. For example, in the first case, a cus-
tomers' education process needs to be created, while the second case requires trust from
the customers. The latter may require the company to drop its old business activity, as
it might compete with some of the potential customers.
Another decision that needs to be made is payment and pricing. This decision is
connected to the first one. The cloud service option gives a better flexibility to device
paying schemes. It can be a subscription with regular payment in advance, or payment
for the actual usage later or a combination.
Summarizing the above discussion, creating a full BM based on the transformational
pattern in Fig. 6 requires adding many concrete details. This can be done by using other
types of patterns discussed in the Introduction and partly presented in [6]. Patterns that
can help in deciding an approach to delivery, sales and marketing, and payment are of
particular interest. In the future, these patterns can be integrated into the transforma-
tional pattern suggested in this paper to give the potential users a wider range of options
to implement the transformation.
16
6 Concluding remarks and plans for the future
In this paper, we suggested a BM transformational pattern based on the example of
currently discussed transformation in one of the plants of Robert Bosch GmbH. The
pattern has been derived based on the recommendations from [11]. Due to the second
author engagement in the business case, the detailed information about the case was
available, which made it easier to create a pattern.
The authors' long-term plans include creating a library of transformational BM pat-
terns to guide the companies when they need to modify their business model. As the
example in this paper shows, each pattern requires some efforts to be build, even when
information is available. So this work will take some years. Another long-term plan is
to integrate this and other transformational patterns with other types of BM patterns as
discussed in the previous section.
One of the important parts of deciding on a specific transformation is analysis of the
context. For example, in the case of transformation discussed in this paper, the current
competitors of the company need to be considered as potential customers in a new busi-
ness model. These kind of facts is not represented in the current version of FEM, there-
fore, introducing the context representation in the model is placed on our short-term
agenda. The context information might be important not only for building transforma-
tional BM patterns, but for other usages of FEM as well.
Another important issue for both FEM and transformational BM patterns is to have
a computerized IT support for both building FEM and matching a pattern. Currently all
figures included in this paper were build using InsightMaker [21]. However, at the mo-
ment of this writing, we are starting a project of creating a specialized tool based on the
ADOxx modeling environment [22].
References
[1]
Andreini, A., Bettinelli, C.: Business Model Innovation. From Systematic Literature
Review to Future Research Directions. Springer (2017)
[2] Mangematin, V., Ravarini, A., Sharkey Scott, P.: Special Issue: Business
Innovation. Journal of Business Strategy 38(2) (2017)
[3]
Giesen, E., Berman, S. J., Bell, R., Blitz, A.: Three ways to successfully innovate your
business model. Strategy & Leadership, Vol. 35 Issue: 6, pp. 35(6), 27-33 (2007)
[4] Rumble, R., Nial
l Anthony Minto, A.: How to use analogies for creative business
modelling. Journal of Business Strategy, 38(2), 76-82 (2017)
[5]
Osterwalder, A., Pigneur, Y.: Business Model Generation: A Handbook for Visionaries,
Game Changers, and Challengers. Wiley, Hoboken, NJ,US (2014)
[6]
Echterfeld, J. ., Gausemeier, J.: How to use business model patterns for exploiting
disruptive technologies. In : 24th International Conference on Management of Technology,
pp.2294-2313 (2015)
17
[7] Lodhi, A., Koeppen, V., Wind, S.,
Saake, G., Turowski, K.: Business Process Modeling
Language for Performance Evaluation. In : HICSS, Waikoloa, HI, USA, pp.3768-
3777
(2014)
[8]
Gassmann, O., Frankenberger, K., Csik, M.: The Business Model Navigator: 55 Models
That Will Revolutionise Your Business. Financial Times Pret. (2014)
[9]
Robertson, D., Hjuler, P.: Innovating a Turnaround at LEGO. Harvard Business
Review(September) (2009)
[10]
Su, Y., Huang, S.: Business Model Innovation with Effective Innovation: An Exploratory
Study on TSMC.
In : 2006 IEEE International Symposium on Semiconductor
Manufacturing, Tokyo, pp. 483-486 (2006)
[11]
Bider, I., Perjons, E.: Defining Transformational Patterns for Business Model Innovation.
In : Perspectives in Business Informatics Research: 17th Intern
ational Conference, BIR
2018, Stockholm, Sweden, LNBIP, vol. 330, pp.81-95 (2018)
[12]
Rolls Royce: Power by Hour. (Accessed 2017) Available at: https://www.rolls-
royce.com/media/our-stories/discover/2017/totalcare.aspx
[13]
Bider, I., Perjons, E., Elias, M., Johannesson, P.: A fractal enterprise model and its
application for business development. Software & Systems Modeling 16(3), 663–
689
(2017)
[14]
Bider, I., Lo
dhi, A.: Using Enterprise Modeling in Development of New Business Models.
In : Proceedings of the 21st International Conference on Enterprise Information System
(ICEIS) 2019, Heraklion, vol. 2, pp.525-533 (2019)
[15]
ISO: ISO 22400-1:2014. Automation systems and integration --
Key performance
indicators (KPIs) for manufacturing operations management --
Part 1: Overview, concepts
and terminology. Standard, International Organization for Standardization (2014a)
[16]
ISO: ISO 22400-2:2014. Automation systems and integration --
Key performance
indicators (KPIs) for manufacturing operations management --
Part 2: Definitions and
descriptions. Standard, International Organization for Standardization (2014b)
[17]
Etia, M. C., Ogajib, S. O. T., Probertb, S. D.: Re
ducing the cost of preventive maintenance
(PM) through adopting a proactive reliability-
focused culture. Applied Energy 83(11),
1235-1248 (2006)
[18]
Davenport, T., Harris, J.: Competing on Analytics: The New Science of Winning. Harvard
Business School Press (2007)
[19]
Eckerson, W.: Predictive Analytics. Extending the Value of Your Data Warehousing
Investment. Technical Report Q1 (2007)
[20]
Lustig, I., Dietrich, B., Johnson, C., Dziekan, C.: The Analytics Journey: An IBM View of
the Structured Data Ana
lysis Landscape: Descriptive, Predictive and Prescriptive
Analytics. INFORMS Analytics Magazine(November-December), 11-18 (2010)
[21]
Give Team: Insightmaker. (Accessed 2014) Available at: http://insightmaker.com/
[22]
ADOxx.org: ADOxx. (Accessed 2017) Available at: https://www.adoxx.org
... FEM technique is relatively new, being fully introduced in a journal paper in 2017 [9]. Even though it has been tested in several research-oriented and practical projects, such as described in [11] [12], its capabilities and limitations are not thoroughly investigated. Also, the initial paper [9] envisions several areas of usage, but the list is generic and does not include a detailed set of problems/scenarios where FEM can be applied. ...
Conference Paper
Full-text available
Managing organisational change is becoming increasingly important in an ever-changing world. A novel "lightweight" enterprise modelling technique called Fractal Enterprise Model (FEM) can be helpful in this effort. This technique is formally established, but the range of application areas for it is not yet fully explored. This paper aims to fill the gap, at least partially. This goal is being achieved by using FEM in an industrial project in which a water utility company wants to digitalise its business operations and external communication. The paper follows the Action Design Research paradigm, which combines theory generation with solving organisational problems. The project was structured along a generic Business Analysis process and contained elements from a number of fields, such as requirements engineering, information systems engineering, enterprise architecture management, and business process management. The paper describes 11 different generic problems that were solved with the help of FEM, the project-specific constraints and how FEM was applied in the process. As the same person carried out both the research and the practical work, the usefulness of FEM is examined via reflecting on the experience and generalising the knowledge. FEM supported the business analysis activities by enabling quick and systematic information gathering and comprehensible communication with various internal stakeholders. These insights can be used as a guideline for future practitioners planning to use FEM and for conducting further research regarding the applicability of FEM.
Conference Paper
Full-text available
In the dynamic world of today, enterprises need to be innovative not only in their current line of products and services, but also in their business models. One of the challenges in Business Model Innovation (BMI) is to introduce radical changes in the current business model when entering new markets. Ideas for new models can come from various sources, however each such idea needs to be analysed from the sustainability and implementation perspectives. This paper evaluates whether enterprise modelling can help in analysis of hypotheses for radical changes of BMI. The evaluation is carried on a particular practice of an organization. Analysis of a new idea has been done using a so-called Fractal Enterprise Model (FEM). FEM ties various enterprise business processes together and connects them to enterprise assets (resources) that are used and/or are managed by the processes. FEM has been used to understand which new assets and processes should be acquired, and which existing ones can be reused when planning the implementation of a new business model
Chapter
Full-text available
The pace of changes in the business environment in which a modern enterprise operates requires the enterprise to constantly review its business models in order to survive and prosper in the dynamic world. This exploratory study investigates how to help the enterprise to innovate their business models based on the concepts of fractal enterprise model and transformational patterns. The paper suggests an approach to Business Model Innovation (BMI) where the focus is on transformational patterns. It discusses the structure of such patterns, and based on examples, it presents an approach on how such patterns can be derived from cases of completed business transformations.
Article
Full-text available
Purpose This paper aims to present a method for interpreting and reinterpreting business models as analogies to support the creation of new business model ideas. Design/methodology/approach The authors use the literature on cognitive frames and attention to demonstrate the often-overlooked potential of analogies. From this, the authors derive practical recommendations for the use of analogies in creative business model design. Findings Managers can design creative business models by seeking multiple interpretations of the way other businesses create and capture value. Originality/value Business model frameworks are commonplace, but there is little discussion on how to use them effectively. Furthermore, while analogies are helpful in inspiring novel ideas, their creative potential is limited if the questions asked of and insights found in the case study are not reimagined. The authors provide a practical solution to increase creativity in business model design by recursively reflecting upon issues and solutions.
Article
Full-text available
Paper is in open access: http://bit.ly/2c3RI8P This paper suggests a new type of enterprise models called fractal enterprise models (FEM), with accompanying methodological support for their design. FEM shows interconnections between the business processes in an enterprise by connecting them to the assets they use and manage. Assets considered in the model could be tangible (buildings, heavy machinery, etc.) and intangible (employees, business process definitions, etc.). A FEM model is built by using two types of patterns called archetypes: a process-assets archetype that connects a process with assets used in it, and an asset-processes archetype that connects an asset with processes aimed to manage this asset (e.g., hiring people, or servicing machinery). Alternating these patterns creates a fractal structure that makes relationships between various parts of the enterprise explicit. FEM can be used for different purposes, including finding a majority of the processes in an enterprise and planning business change or radical transformation. Besides discussing FEM and areas of its usage, the paper presents results from a completed project in order to test the practical usefulness of FEM and its related methodological support.
Conference Paper
Full-text available
Evaluation of business processes is important for analysis and improvement of an organization. Different methods are used to evaluate the performance like statistics or visualization. However, these methods meet demands mainly on the top organizational level. There is insufficient support to evaluate processes at the process managerial level leading to a limited visibility of deficiencies in business processes at process level. In this paper, we address this challenge and focus on the relation between evaluation of business processes and their representation at the process managerial level. In our research, we follow the design science methodology in order to provide business process models for performance analysis. We also provide constructs and patterns of our proposed modeling language for analysis and improvement of business processes. The analytical business process modeling language is further explained with the help of a case study and demonstrated by extending an existing modeling language.
Chapter
The first chapter of this book introduces the importance of studying business model innovation (BMI), the methodology we applied to study the subject, and specific statistics about the literature published in academic and practice-oriented journals in the last 15 years. Specifically, this chapter offers an overview of the processes followed for our systematic literature review (SLR) and the rigorous protocol that includes the three-stage procedure (i.e., planning, execution, and reporting) suggested by Tranfield et al. (Br J Manag 14:207–222, 2003). Gathering the most influential pieces on SLRs, this chapter also offers some hints for conducting a successful SLR and illustrates the benefits associated with doing so. In addition, this chapter describes the thematic and the informal ontological classification we adopted to analyze the 156 papers included in our systematic literature review. Thus, the first section of this chapter defines what is meant by an SLR. The second section offers an overview of the tasks of an SLR. The other sections present the process followed for the thematic and ontological analyses that are central to this work. The final section provides some statistics on the 156 papers included in our SLR, underlining specific information about the journals that published the articles, the methodological approaches applied in the papers, the industries included in the studies, the geographical contexts, and the disciplines that contributed to the understanding of BMI.
Article
Though the overall toy market is declining, LEGO's revenues and profits are climbing - largely because the company revamped its innovation efforts to align with strategy.
Article
Companies nowadays face a myriad of business opportunities as a direct consequence of manifold disruptive technology developments. As a basic characteristic, disruptive technologies lead to a severe shift in value-creation networks giving rise to new market segments. One of the key challenges is to anticipate the business logics within these nascent and formerly unknown markets. Business model patterns promise to tackle this challenge. They can be interpreted as proven business model elements, which reveal valuable insights about pursued business logics. The approach in general helps increasing efficiency in business models design processes, but especially lacks methodological support so far. The paper at hand, therefore presents a methodology for pattern-based business model design simplifying development and analysis of business models for disruptive technologies. The methodology has been validated within several industrial projects.
Article
The goal of this research is to explore what the main elements driving the business model innovation are and what the relationships between business model innovation and technology innovation are. Through analysis of TSMC's business model innovations, this study found that (1) Fierce competition and continual technology advancements in the semiconductor industry lead to TSMC's innovations on business model frequently. (2) There are three phases of TSMC's business model innovation: "pure foundry phase," "manufacturing service and value added phase, " and "inter-firm collaboration phase. " (3) Business model innovation and technology innovation drive each other in three phases and the relation of their innovative frequencies is positive.