Monday, June 8, 2009

Toward a Universal Business Model

In my quest to define Business Architecture as an Integral Discipline, I have constructed a "universal" operating model. It is my interpretation and extension of Dr. Osterwalder's excellent work in his Ph.D. thesis. I have said before that that businesses - and architects - focus too exclusively on the "throughput" processes. And this model is really no different, but having said that, it does provide a sound framework for the "value delivery" aspects of an organization. Here are the related throughput elements. The model is larger, but I wish to focus on this section. Please contact me if you would like to discuss the entire model.


In order to quickly grasp the essential elements, I have organized them into a value wheel:

Value Wheel
Value Proposition
Target Customer
Distribution Channel
Value Configuration
Cost Structure
Revenue Model

These elements are the targets of organizational change and each element belongs to one of three primary concerns: Achieve-ability, Affordability and Sustainability. The Value Wheel above is color coded to allow us to quickly assess which elements have the largest contribution to these three concerns.

Yellow = Achieve-ability
Red = Affordability
Green = Sustainability

Achieve-ability is primarily determined by how value is configured. The quality of inherent capabilities and partnerships have a profound impact on achieve-ability. Affordability is primarily centered around cost structures and the revenue models and sustainability is about maintaining and cultivating valuable relationships with your customers through various channels of distribution.

If you cannot align these value wheel elements in demonstration of a program's primary concerns, you should not move forward with the change.

With respect to completeness, the model, as I said does a fine job of looking at the throughput or operational aspects of an organization. To be complete, however, we must layer Performance and Learning. Performance takes place in an environment - it must be measured in context - and learning occurs through observation and insight. Borrowing from the work of Donella Meadows and Jamshid Gharajedaghi, I can extend the throughput model as follows.

Extended Model

In the above model, the original throughput elements are represented by the element box at the top. I have extended performance as an aspect of Organizational Fitness which is determined by effectiveness and efficiency. I have also added the learning component which is the primary input to Strategy Planning. The hexagonal shapes represent a variation on Gharajedaghi's high level organizational systems - only one of which is throughput.

The Structure or body of the organization is composed of these systems and all of the systems support needs of the organization. The Structure of the organization enables or constrains organizational fitness. Strategy shapes the organizational structure (and visa versa). The ways in which the structure of an organization is changed - short is through the use of leverage points (see Meadows). The call-out that connects to the Structure Element is a list of those levers. The list begins with the simplest of the levers, parameters and moves toward ever more effective levers.

It is essential that a Business Architect (BA) understand the major elements of a business model, and their relationships to each other. It is also essential that the BA understands how these elements are related to the larger structures of the organization and how each might be manipulated to increase the overall fitness of an organization.

The models demonstrated here are fully represented in my Framework for Organizational Fitness.

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© 2009 Inside Business Architecture

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