PROFILE

Dr. Ir. Benny Ranti, MSc.

Applegate, L.M., Austin, R.D, and Soule, D.L., Corporate Information Strategy and Management, 8th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009

Chapter

1 Graduate Program in IT University of Indonesia

Dr. Ir. Benny Ranti, MSc. benny.ranti@infosolusi.co.id

Understanding Business Models

Corporate Information Strategy and Management

Key Learning Objectives for Chapter 1:

Understand the concept of a business model

Learn how to analyze the three components of a business model –

strategy, capabilities, and value – through a business model audit

Understand the different ways that business models can evolve and

recognize potential drivers of business model evolution

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009

Chapter 1: Understanding Business Models 3

Business Model Framework and Definition

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009

Chapter 1: Understanding Business Models 4

Analyzing Strategy (see Appendix 1-A)

Competitive strategy is about being different. It is about deliberately choosing a different position and

set of activities that enable you to deliver unique value (Michael Porter, 1996)

Strategy is a series of choices that define strategic positioning along

four key dimensions:

Market positioning to determine customers to serve.

Product positioning to determine products and services to offer.

Business network positioning to determine extended network of

suppliers, producers, distributors, and partners.

Boundary positioning to determine businesses that will not be pursued.

Assess business context

Asking “What business are we in?”

Consider relevant demographic, economic, political, regulatory,

societal factors, and IT trends that influence the business.

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009

Chapter 1: Understanding Business Models 5

…Analyzing Strategy

Analyze customers

Analysis of current and future customers.

The ability to use IT to collect and analyze real-time and historical

market information.

Analyze competitors and substitutes

Analysis of alternatives (4W 1H) that customers have for meeting their

needs.

IT can serve as an important source of differentiation and proprietary

advantage.

Assess the business network (see Appendix 1-B for detail)

Analysis of network of suppliers, distributors, and other partners.

IT is used to build and manage the networks and relationships.

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009

Chapter 1: Understanding Business Models 6

Impact of IT on Industry Structure and Relationships

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009

Chapter 1: Understanding Business Models 7

Analyzing Capabilities (see Appendix 1-A)

The fundamental purpose of organizations is to enable the attainment of goals that require

coordinated efforts. Interdependence and uncertainty make goal attainment more difficult and create

the need for organizational solutions (McEvily et al, 1998)

Analyze processes and infrastructure

Analysis of core processes required to produce products, deliver

services, acquire and serve customers, manage relationships, and

deliver a continuous stream of new products, services, and innovations.

IT forms the foundation for the processes and infrastructure within a

firm to create value.

Evaluate people and partners

Analysis of expertise needed to carry out the required activities and

processes.

IT is a powerful tool for defining, organizing, and building knowledge

assets within a firm and a business network.

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009

Chapter 1: Understanding Business Models 8

…Analyzing Capabilities

Assess organization and culture

Analysis of organization design that makes it easier or harder for

people to make decisions and get work done.

IT is used to share relevant information and closely monitor decisions

and actions made.

Evaluate leadership and governance

Analysis of leadership and governance system to prolong business

success.

The need to implement good IT governance to support good corporate

governance.

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009

Chapter 1: Understanding Business Models 9

Analyzing Value Created for All Stakeholders

Behind every major resource allocation decision a company makes lies some calculation of what that

move is worth (Tim Luehrman, 1997)

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009

Chapter 1: Understanding Business Models 10

…Analyzing Value Created for All Stakeholders

Identify internal and external stakeholders

Analysis of internal and external stakeholders’ interests and

expectations.

Identify business model drivers and alignment

Analysis of SWOT (see Appendix 1-A) to identify key revenue, cost,

and asset efficiency drivers and develop a business model dashboard

that reflects linkages and alignment among the various components.

IT is used to develop a business model dashboard and monitor

business model performance.

Develop the financial model and determine financing needs

Analysis of assumptions about the drivers of revenue, costs, and asset

efficiency.

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009

Chapter 1: Understanding Business Models 11

Analyzing Business Model Linkages

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009

Chapter 1: Understanding Business Models 12

Assessing the Impact of IT on Business Model Alignment

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009

Chapter 1: Understanding Business Models 13

Evolving Business Models

Enhance

Incremental improvements to an existing strategy or capability.

Expand

Launch new product categories, enter new markets, or expand

capabilities.

Explore

Launch new businesses and build new capabilities.

Exit

Exit a product or market or outsource a capability.

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009

Chapter 1: Understanding Business Models 14

Evolving the Amazon.com Business Model (1995-2000)

Applegate, L.M., Austin, R.D., and Soule, D.L., Corporate Information Strategy and Management, 8th edition, Burr Ridge, IL: McGraw-Hill/Irwin, 2009

Chapter 1: Understanding Business Models 15

Summary

It is tough to build a business model when the world is changing at

warp speeds.

Building successful businesses in these challenging times requires

that executives understand how to define and execute strategy,

develop and leverage capabilities, and create value for all

stakeholders.

In today’s turbulent times, business models must be aligned, yet

flexible, requiring even more skill and deep understanding of the

linkages among the business model components as business evolves

and grows over time.

During the last decade, IT has dramatically transformed business

models in most of the major industries. The impacts have

jumpstarted innovation and entrepreneurship around the world.