Digital Business Engineering

1. © Fraunhofer DIGITAL BUSINESS ENGINEERING Prof. Dr. Boris Otto Dortmund, January 2015 Source: Financial Times, 2014.

2. © Fraunhofer CONTENT  Digitization  Digital Business Engineering Approach  Business Benefits

3. © Fraunhofer Digitization is a term describing an array of various influential developments Society Business Technology  Individualization  »Shareconomy«  Data privacy  Consumer-centricity  Hybrid services  »Industrie 4.0«  Cyber-physical systems  In-memory-computing, Hadoop etc.  Mobile and ubiquitous computing Digitization

4. © Fraunhofer These developments ask for the impact of digitization on existing business models

5. © Fraunhofer In this endeavor, companies across all industries are confronted with a set of open issues  How does digitization affect our business model?  Which digital services offer most value to our customers?  What data is required? Where does the data come from?  Whom do we need to partner with in order provide these services?  What capabilities does our organization need to provide these services?  What technology must be in place?

7. © Fraunhofer Companies have to overcome various challenges when developing a digital business model 52 % Inappropriate organizational structure 51 % Missing IT infrastructure and systems 46 %Poor data quality 45 %Lack of leadership 43 %Lack of functional expertise 31 %Lack of IT expertise Source: McKinsey: Minding your digital business. In: MicKinsey on Business Technology (2012) Nr. 27, S. 24-31.

8. © Fraunhofer Digital Business Engineering is a methodology for sustainable digital business transformation Digitization Digital Business Model Strategic Perspective Process Perspective Systems Perspective E2E Customer Process Design Ecosystem Design Digital Product & Service Design Digital Capabilities Design Data Mapping Digital Technology Architecture 1 2 3 4 5 6 Legend: E2E - End-to-End.

9. © Fraunhofer Digital Business Engineering (DBE) is a model-oriented and method-driven approach DBE Phase Description Goal Involved Roles Techniques 1 Customer Process Understand end-to-end customer process from outside- in  Digital business development  Sales and marketing a. Customer journeys b. Multi-channel analysis c. Consumer process modeling 2 Ecosystem Understand actors within customer process and customer interaction points  Digital business development  Sales and marketing  Product management a. SWOT analysis b. Network analysis 3 Digital Products and Services Design digital products and services based on end-to-end understanding of customer process  Digital business development  Sales and marketing  Product management  Business architect a. Business model canvas b. Digital artifact design c. Design thinking 4 Digital Capabilities Identify capabilities needed to provide digital products and services  Digital business development  Business architect  IT architect a. Capability modeling 5 Data mapping Identify data assets needed to provide digital products and services  Digital business development  Data architect  IT architect a. Data architecture 6 Digital technology architecture Sketch digital technology architecture  Data architect  IT architect a. Digital tool chain

10. © Fraunhofer Technique 1a: Customer Journey Approach Orientierungsphase Finanzierungsphase Abschluss KundeMobiliar Kunden- berater Externe Partner Immobilien- plattform SuchtImmobilie Objektdaten Angebote Rückkaufwerte Lebensversicherung Bank Angebot Bestätigung eRechnung Bearbeiter Kunden- betreuer BearbeiterBearbeiter

11. © Fraunhofer Technique 1b: Multi-Channel Analysis Channel used in consumer process illustrative channel use. Information Advice Return ServiceShipment Track and Trace SaleAvailability Payment Print TV/Radio Mailing Store Internet E-Mail Phone Fax Text message Channels Consumer Process Source: Migros.

12. © Fraunhofer Technique 1c: Consumer Process Modeling «Ecosystem» Information Flow.Process Scope Interact w/ Service Provider Use Service Reflect Customer Experience Book Search and Get Info Consumer Process Legend:

13. © Fraunhofer Technique 2b: Network Analysis in the Ecosystem 2007 Media 2012 NB: Graphs show betweenness centrality, i.e. the distribution of power in a network.

14. © Fraunhofer Technique 3b: Digital Artifact Design  With digital technology the content and services gets separated from the physical medium  This leads to a modular layered product architecture  The modular layers can be decoupled  Products become digital platforms by themselves  Multiple stakeholders can contribute – and compete! – at different stages across the four layers  Ex.: Apple and amazon with iPad vs. Kindle and iPad & Apps cables, transmitters network standards application functionality data products computer hardware operating system Source: Yoo et al. (2010).

15. © Fraunhofer Technique 3c: Design Thinking Design Thinking Stage Gate TRIZ Six Sigma Scrum Improvement / Development Incremental innovation Revolutionary innovation Disruptive innovation ... creates a new market which unexpectedly overtakes an existing market. ... an unexpected innovation in an existing market. ... the gradual improvement of a product by using new insights. ... the improvement/development of a product through better use of existing resources. Source: University of St. Gallen, Institute of Information Management, 2014.

16. © Fraunhofer Technique 4a: Digital Capability Modeling Hybrid (modular) product platform management Innovation & market capitalizing agility Value proposition Business analytics & information-driven problem-solving/ decision making Operational adjustment agility Process automation & digitization/ virtualization Digital / IT mindset & abilities Value architecture Multi-channel connectivity to ecosystem Value network Revenue creation models for hybrid modular products Cost optimization & scalability of ordinary capabilities / resources Value finance Organizational capabilities (“competitive priorities for digital business”) IS capabilities Ecosystem control Clear lead / ownership of digital initiatives IT business partnerships Analytics ability: recognize and prepare the relevant data Metadata: data provenance & data credibility transparency MDM & metadata mgmt. „The golden record“ across systems and ecosystem New databases and BI tools understanding IT personnel expertise Ad-hoc, predictive & prescriptive analytics Visualization & self-service BIDWH & BI Data integration Data privacy & data security Scalability, speed & cost efficiency Data architecture Governance of external and shared data Source: University of St. Gallen, Institute of Information Management, 2014.

19. © Fraunhofer The Digital Business Engineering approach delivers multiple business benefits  Accelerated time-to-market  Guided digital business design  Fast deployment  Leading edge  Built on latest knowledge on digital business models  Research-driven  Proven methodology  Sound method engineering expertise  Used in real-life cases  Neutral approach  Combines best practices