6 business values-tf-li

FInES ClusterTask Force: Business Values, Business Scenarios &Business Models (Re-visited) Man-Sze Li msli@icfocus.co.uk 1

Key Drivers for Enterprise Transformation and Future Enterprise Environments• The Overall Context: Digitalisation, Individuals and Enterprises – Europe is set to become ever more digital in the years to come.• Policy & Governance: Knowledge, Ownership and Control – Knowledge as a fifth freedom and the “European Knowledge Area”• Technology: Infrastructure Models – In the future, a potentially unlimited array of high value-added capabilities, fine-tuned to the precise needs of the end-user, will be enabled by software-based services, delivered on-line, on-demand and in real-time… the need for a universal ICT infrastructure model that all could exploit• Business & Economics: Towards a New Value System – Our present system of business values is no longer adequate in supporting the full range of business goals that future enterprises would consider as relevant and important … enterprises should be given new rights to capabilities that would help them to innovate in a changing world, of which ICT should be a key enabler Source: FInES Research Roadmap FInES Cluster meeting, Brussels, 25 January 2011 2

State of the Art and Analyses within the FInES Cluster (2005 to present)EI Research Roadmap V4/5 Business-Economic as 1 of 3 dimensions of the(2006/8) research framework, with a focus on b-e environment, b-e scenarios & b-e impactValue Proposition for EI Changing business context analysis, EIVPReport (2008) Framework, Business model analyses & categorisation, Direction towards a new value analysis at Enterprise/Individual/Society levelsFInES Cluster Position Paper Business-Economic context analysis, discussion of a(2009) new way of doing business, The future of European enterprises: sustainable value creation, new business models, flexible & agile business processes, research recommendation on a new notion of ‘enterprise’ & ‘enterprise network’Overview of the State-of- Snapshot of the status, available results & prelimthe-Art Research in Business conclusions of business model research workModels (2009)FInES Research Roadmap Towards a new business value system(2010) Re-consideration of: how to create value, how to capture value FInES Cluster meeting, Brussels, 25 January 2011 3

FInES Position Paper on Orientations for FP8 (2011)From the Recommendations section• The Socio-Economic circle. A new scientific approach to finance and economic science is urgently required … At the macro-economic level, there is a need to re- define key notions of business and economic theories such as value, growth and competitiveness, taking account of profound changes at all levels of society in recent decades, the emerging world order, new visions and alternative future scenarios. Ultimately, the impact of the immaterial economy on businesses and society will have to be systematically and comprehensively analysed, leading to better insights and potentially better policy making and governance.FInES Cluster meeting, Brussels, 25 January 2011 4

TF activities – implementation of FInES RR ambition on value system• Update of Cluster publication on Overview of State of the Art Research in Business Models• Interfacing with projects (within & outside Cluster) working on business model related research – Address new ideas early – Facilitate ideas sharing & collaboration – Publish joint work – Support and consolidate the development of new concepts, metrics, and tools (1) within the Cluster; (2) in other research domains; (3) in the market?• Initial timeframe: one yearFInES Cluster meeting, Brussels, 25 January 2011 5

Task Force Members• NEFFICS (Lead): Man-Sze Li (IC Focus), Andrew Hinchley (IC Focus), Peter Lindgren (Aalborg University), Henk de Man (Cordys), Cyril Carrez (SINTEF)• NisB: Victor Shafran (SAP Israel), Boris Otto (University of St Gallen), Verena Ebner (University of St Gallen)• COIN: Daniel Field (Atos)• VENTURE GATE, ACCESS ICT & YMIR (ICT Financial Marketplace related projects): Anton Theuma• OPAALS & its follow-up Open Knowledge Space Initiative: Paolo Dini• ADVENTURE: Americo Azevedo (INESC)• ComVantage: Lior Fink (BGU), Sigal Berman (BGU), Reinhard Willfort (ISN), Dimitris Karagiannis (UNIVIE)• ExtremeFactories: Eero Korhonen (VAIBMU), Aitor Elorriaga Elorza (INNOPOLE)• Additional Interested Parties: TAHI: Stephen Pattenden; ActionPlanT: Klaus-Dieter Platte; UNIVERSELF: Makis Stamatelatos; Telenor Group: Hanne Stine Hallingby FInES Cluster meeting, Brussels, 25 January 2011 6

The European Internet Economy: State of Play• The Internet economy contributes 4.1% of EU GDP; projected to grow 7 times as fast• Growth is currently driven more by demand than investment; size and embeddedness are therefore uncertain; PPP will rebalance towards productivity as main driver• Revenues are dominated by telecoms; this may not continue• Measured revenues far understate true contributions – infra marginal gains, unmonetised benefits, indirect productivity improvements and broader societal contributions• Performance is less strong in services and other rapidly-innovating sectors;• Largest sectors have lowest intensity; this is linked to the ‘productivity gap’ and is expected to reverse• Future challenges are to build and sustain domestic presence in innovative and/ or service layers; increase competitiveness; produce greater innovation- friendliness; rebalance returns towards end-user-facing part of value chain; increase societal benefits• FI PPP could potentially raise Internet contribution to GDP by 5.7% FInES Cluster meeting, Brussels, 25 January 2011 7 7

Evolution of Business Models A wide spectrum of scenarios for the future of businesses on the Internet, e.g.• Utility business models and Web enterprises (Rappa, 2004)• “IT doesn’t matter” and the “Big Switch” (Carr, 2003, 2004, 2008)• “Open Business Models” (Chesbrough, 2007)• The “generative” argument (Zittrain, 2008)• The business models of “free” (Anderson, 2009)• A new framework for the evolution of specific technologies (Arthur, 2009)• The rise and fall of “information empire” (Wu, 2010)• The “Apple / i-xxx” ecosystem (2009 onwards) FInES Cluster meeting, Brussels, 25 January 2011 8

From service platforms to service ecosystems: business model implications• Value-added applications based on a generic technology platform >> generic technologies in creating markets• Business partnerships based around a provider’s core offering, typically for expanding and/or customising the functionality of the offering for broadening market reach >> collaboration with a wider range of partners including third party developers, consultants and channels in expanding a specific, chosen market (segment)• A system of relationships and the supporting infrastructures (technical and business) involving suppliers and customers, potential or actual, that are tightly aligned with the activities, characteristics, objectives and value proposition of a company >> new types of market and even mode of exchange brought about by Internet and especially Web native companies FInES Cluster meeting, Brussels, 25 January 2011 9

”The 7 building blocks of a business model” Core question Core building blockValue proposition/s (products, services and What do we provide?processes) that the company offers (Physical, 1Digital, Virtual)Target customer/s, (customers, users, Who do we serve? Table 4: Core components of the business modelmarket segments that the company serves 2– geographies, physical, digital, virtual).Value chain [internal] How do we provide it?configuration.(physical, digital, virtual) 3Competences (technologies, human What are our competences?resources, organizational systems, culture 4-).(Physical, digital, Virtual) What are our core competences?Network - Network and Networkpartners What is our network?(e.g. strategic partnerships, supply chains 5and others (Physical, digital, virtual)Relations(s) Relationship(s) (e.g. physical, What are our relations?digital and virtual relations, personal, 6peers). (Physical, digital, virtual)Profit formula – both Turnover structure, How do we make money and business value?cost structure and revenue flow. (physical, 7digital, virtual) Table 4: Core components of the business model Source: Lindgren and Taran 2011 / FP7 NEFFICS, 2011 www.ici.aau.dk 22-12-11 Lindgren and Taran 2011 FInES Cluster meeting, Brussels, 25 January 2011 10

Transaction Value Resource- Game theory Coordination Network New Innovation Neoclassical cost theory Chain based view theory economics institutional economics economics economics Transaction as Competitive Competency Decision Coordination Positive “Institutions Assessment of Efficiency an differentiator as key support to of structures, feed-back matter” – innovation driven Focus organisational (margin) & resource & the prevent lock- resources, and critical broadening the uncertainty competition & concept and competitive application of in situations people for mass as scope of and success; competitive cost as an strategy a bundle of for software advancing features of economics from argument for markets economic heterogeneous services; economic network resource innovation as friction and not argument for welfare economy; allocation to the a growth perfectly commonly new notions broad context driver mobile defined of network for institutional resources for solutions externalities arrangements creating and demand sustainable side competitive economies of advantage scale Utility service support No compelling No compelling No compelling Provides Provides a Provides a Critique of Provides No compelling support as support based support based major insight useful useful assumptions arguments for support based focus is on on stable on competition into the conceptual conceptual surrounding utility services on Pareto transactions markets and for scarce development basis for basis for production- infrastructure efficient between static value resources, of utility assessing assessing based as a growth pricing organisations chains which in turn services, e.g. utility services development economies & driver, and and drives an the Web as a as an overall of utility firms as a potentially as transactions as organisation’s major enabler fundamental services in “black box”; an enabler for differentiator network for all infrastructure, volatile, contribute radical for different dependency (serendipitous) but not dynamic ideas / innovation market types . internet necessarily for markets; conceptual tools (and high developments; coordination Penguin for ownership, growth) Game theory of tasks or effect etc. governance and supports resources as a delivers investment coordinated determinant evidence considerations actions of for individual for utility players to utility services services in achieve an information optimum intensive but solution also information imperfect modernSource: Li and Eschenbächer / FP7 COIN, 2011 economies FInES Cluster meeting, Brussels, 25 January 2011 11

Baseline of Value Analysis Entities Worlds People Things Real Virtual Merged Value Creation (inputs) Value Distribution (flows) Value Consumption (outputs) Drivers / Factors Culture & Structures Regulations Technology Volatility & Social Norms (intra- & inter- ): Risk Market / Organisation/ Community Knowledge TimeFInES Cluster meeting, Brussels, 25 January 2011 Source: Man-Sze Li / FP7 NEFFICS, 2011 12

Back up slides 13

Task Force Focus (initial ideas)• From NisB: – “Makes value network a tangible asset”, by developing (1) business model “archetypes”; (2) “Wisdom of the Network” valuation.• From NEFFICS: – Networked enterprises operating in cloud-based environment and value creation through innovation: (1) Define the established baseline in Value Networks; (2) Propose a new Definition for Business Values; (3) Define a Value Delivery Model; (4) Define a corresponding Framework for Value AnalysisFInES Cluster meeting, Brussels, 25 January 2011 14

Conclusion from Cluster work on Business Models so far• A variety of business model activities within the FInES Cluster• The rising prominence of the utility paradigm as a driver for new business models for the supply side of ICT, including in the Future Internet contexts• There is a critical, but also long and difficult path, to market acceptance• Balance between state-of-practice, state-of-play and research ambition for “innovation” and “level playing field” (especially relevant for SMEs)• A challenge to the status quo: economic values and their foundations• What about the demand side?FInES Cluster meeting, Brussels, 25 January 2011 15

Vision StatementFuture Internet Enterprise Systems By 2020, the Internet will become a universal business environment on which new values can be created by competing as well as collaborating enterprises through innovation in a level playing field. Within this environment, FInES will become a transparent and invisible part of the business operation, available and affordable to all enterprises as required. It will make optimal use of the capabilities provided by a universal service infrastructure based on the concept of the Interoperability Service Utility (ISU)[1]. It will support and enable the full range of enterprise qualities as described in Chapter 2 of this Research Roadmap. Source: FInES Research Roadmap [1] The first Grand Challenge of the Enterprise Interoperability Research Roadmap [European Commission, 2006 and 2008]. FInES Cluster meeting, Brussels, 25 January 2011 16

What has changed?• The exit from the crisis should be the point of entry into a new sustainable social market economy (as already enshrined in the Lisbon Treaty), which is moreover a smarter, green economy• The new drivers for prosperity and growth will come from innovation and from using resources better, where the key input will be knowledge• Future competitiveness will be driven by factors far beyond conventional economic dynamics … increasingly the focus is on conserving and making more effective use of energy, natural resources and raw materials; it is also on social cohesion, tackling unemployment and fostering social inclusion• European enterprises have the opportunity to thrive in the post-crisis landscape by means of environmentally and socially responsible business innovation and creativity• The time has come to re-consider value creation, business values and practices Source: FInES Research Roadmap FInES Cluster meeting, Brussels, 25 January 2011 17

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