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==Criticism== |
==Criticism== |
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With the components development competency development, “Logic” and “value” became words in the literature on business models.<ref>Allan Afuah, Business Models: A Strategic Management Approach, 2007</ref> However over the past years, Business Model approaches have developed<ref>Amar Bhidé, The Origin and Evolution of New Businesses, Oxford University Press.</ref> and include today business model design, business model innovation and business model transformation. Even though IBM’s business model approach is good for mapping the components of a business model or product, the following criticisms have been identified. IBM's Component Business Model approach: |
With the components development competency development, “Logic” and “value” became words in the literature on business models.<ref>Allan Afuah, Business Models: A Strategic Management Approach, 2007</ref> However over the past years, Business Model approaches have developed<ref>Amar Bhidé, The Origin and Evolution of New Businesses, Oxford University Press.</ref> and include today business model design, business model innovation and business model transformation. Even though IBM’s business model approach is good for mapping the components of a business model or product, the following criticisms have been identified. IBM's Component Business Model approach: |
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| ⚫ | * Is built on components that are supposed to consist of people, processes and technology needed by this component to act as a standalone entity. As criticized rightfully<ref>http://www.ebizq.net/blogs/service_oriented/2010/01/business_architecture_and_ibm_component_business_model.php</ref> The 'technology' element in each block is definitely a tribute to IBM's primary business while it is not a mandatory part of many business models in reality. It is strategy that is vital within a business model,<ref>Allan Afuah, Business Models: A Strategic Management Approach, 2007</ref> not technology. |
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| ⚫ | * The term 'process' within IBM's component description, is also rightfully criticized<ref>http://www.ebizq.net/blogs/service_oriented/2010/01/business_architecture_and_ibm_component_business_model.php</ref> requires additional explanations because it has dual meaning in Business and single meaning in IT; which one has been meant here? And why each business component has to act as a "standalone entity" instead of being a compositions of business components as well (i.e. it cannot act standing alone)? |
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| ⚫ | At last, but not least, the IBM CBM appears rather empirical than conceptual. It is not obvious why particular cells present in the CMB matrix if "each component business map is unique to each company", are they common for all enterprises, are they typical to particular industry, and so on. If a company has a purpose and goal(s), how the IBM CBM relates to this purpose, what mechanisms are used for establishing this relationships in company specific/unique business landscape? Nonetheless, it is not possible to see how the IBM CBM mapping provides the view "which components of the business really create differentiation and value", "where you have capability gaps that need to be addressed", and how "you can identify opportunities to improve efficiency and lower costs across the entire enterprise. Identify the components where you can realise the greatest impact". Certainly, knowing what you have is the baseline for further modifications but this map is mute without additional information about corresponding components' values, deltas/gaps to your targets and component inter-dependencies (impacts). As of "opportunities to improve efficiency and lower costs", these categories are simply invisible on such map. So, what does IBM CBM actually provides beside a convenient single map of consultants' discoveries about your enterprise? |
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EDITED COMMENT - CRITICISM ON THE CRITICISM: |
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In general: CBM - Component Business Modeling - intends to model the business according components. So it does not pretend to deliver a COMPLETE definition of the business model; for doing the latter, more dimensions need to be looked at (like channels, pricing strategy, industry value chain position, etcetera). |
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For the points as mentioned above, some comment (numbers refer to the individual bullets / text sections above):<br /> |
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1*: a business components is defined as follows: A component is a business in microcosm; it has activities, resources, technology; it has a governance model; it provides goods and services (business services).<br /> |
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Regarding technology inside a business component, this can vary from a simple spread sheet to an ERP application. Technology, like the other elements, will support the business component in executing the component's purpose.<br /> |
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2*: the definition of a business component mentions that a component contains 'activities'. Looking at it from an APQC-perspective, what is called an "activity" in a business component, can be compared to a Level 4 APQC process. So on the one side one can map all Levels 4 from an APQC process framework to individual business components, from the other side Levels 3 APQC processes can be reconstructed by grouping all relevant Levels 4 from business components. From this latter perspective, Levels 3 APQC processes then literally run across business components, thus taking care of the necessary linkages<br /> |
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3*: a component business model (the one page overview with all business components) is per definition an organization agnostic view. And as mentioned above, component business modeling does not pretend to define all dimensions of the overarching business model. And even then one can argue that 'corporate structure' is not part of the business model, but part of the so called 'operating model'<br /> |
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4*: Business goals will be defined in the overarching business strategy. These subsequently can be translated to key performance indicators, which then can be mapped to business components. In other words: each business component contains specific key performance indicators; if each business component performs well, the business strategy subsequently will be executed effectively.<br /> |
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5*: a component business model is a new way to look at the business, by representing the business according components. Only when deploying criteria or attributions, one can get insight in the main issues and pain points, and subsequently visualize these on the one page overview. For example: where can we find our Top-5 performing business components (e.g. by measuring on relative performance on key performance indicators), and where can we find our Bottom-5 performing business components? Each business issue can be translated in an individual 'lense' in order to measure and visualise that issue across the business components<br /> |
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6*: measurement of the performance of each business component, by means of the key performance indicators per component, provides the necessary insight per business area / business competency, as well as for the total organization.<br /> |
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7*: when talking about strategic decisions, component business modeling can be helpful in identifying those business components which are most critical in executing the business strategy. By taking care that these critical business components perform well, execution of the business strategy can be facilitated<br /> |
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8* and 9*: as mentioned above in point 4, each business component has specific key performance indicators, which are linked again to the overarching business strategy (which has it's own strategy formulation process, including goal setting). In this way, performance measurement and goal setting are explicitly addressed.<br /> |
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10*: managing continuously the structure of the business component map and underlying (differentiating!) capabilities, is an explicit management responsibility. The component map is not a static construct, but a vehicle which can support in the regular/continuous strategy formulation process<br /> |
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11. Component maps can be 'predefined' for each industry. For industries with a high degree of standardization, and which use common process frameworks (like e.g. APQC), the business component map can have a high degree of similarity across companies. Even then names of business components can vary, depending on the 'company language'. When zooming in on individual components, individual 'activities' and key performance indicators can also be the same across different companies (if these use the same process framework, like e.g. APQC). But the performance of each of these business components can be very different (i.e. how well they are performing on their key performance indicators). In other words, business components and activities/key performance indicators across companies can be the same, it is the underlying execution which makes the difference. |
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Here also the power of benchmarking comes in: when the same key performance indicators are used in business components across companies, a benchmark on component level can be executed. |
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When looking at strategy impact, performance, cost levels, and other business issues/pain points (all on individual business component level!), and combining all these insights leads to what is called the 'heat map': 'at which specific business components do we have to take action'. All in a transparant and explicit decision making manner. |
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==See also== |
==See also== |
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Revision as of 21:58, 23 April 2015
 | This article relies largely or entirely on a single source. (February 2012) |
Component Business Model (CBM) is a technique developed by IBM to model and analyze an enterprise. It is a logical representation or map of business components or "building blocks" and can be depicted on a single page. It can be used to analyze the alignment of enterprise strategy with the organization's capabilities and investments, identify redundant or overlapping business capabilities, analyze sourcing options for the different components (buy or build), prioritizing transformation options and can be used to create a unified roadmap after mergers or acquisitions.
The model is organized as business components along columns and "operational levels" along rows. The Business components are defined partly as large business areas with characteristic skills, IT capabilities and process. The three operational levels are "Direct", "Control" and "Execute" - they separate strategic decisions (Direct), management checks (Control), and business actions (Execute) on business competencies.
Criticism
With the components development competency development, “Logic” and “value” became words in the literature on business models.[1] However over the past years, Business Model approaches have developed[2] and include today business model design, business model innovation and business model transformation. Even though IBM’s business model approach is good for mapping the components of a business model or product, the following criticisms have been identified. IBM's Component Business Model approach:
- Is built on components that are supposed to consist of people, processes and technology needed by this component to act as a standalone entity. As criticized rightfully[3] The 'technology' element in each block is definitely a tribute to IBM's primary business while it is not a mandatory part of many business models in reality. It is strategy that is vital within a business model,[4] not technology.
- The term 'process' within IBM's component description, is also rightfully criticized[5] requires additional explanations because it has dual meaning in Business and single meaning in IT; which one has been meant here? And why each business component has to act as a "standalone entity" instead of being a compositions of business components as well (i.e. it cannot act standing alone)?
- Doesn’t include Corporate structure & responsible, which a business model should include.
- Doesn’t include a representation of the main business goals, e.g. strategic business objectives, critical success factors and key performance indicators, which a holistic business model approach should include.
- Doesn’t include a representation of the main business Issues/pain points and thereby corporate weakness, which a holistic business model approach should include for they represent the threat to the company’s business model.
- The linkages among business competences, measurements and results is not explicit.
- Doesn’t have a clear cause and effect linkages between the competencies, desired outcomes and measurements. Thereby the business model can't help with possible strategic decisions.
- Doesn’t consider the issue of performance measurements, which is vital for business modelling.
- Doesn’t consider the important issue of goal setting, which is critical for developing the business model.
- Doesn’t place enough emphasis on business model management and is thereby missing a continuous improvement and governance approach to the business model.
At last, but not least, the IBM CBM appears rather empirical than conceptual. It is not obvious why particular cells present in the CMB matrix if "each component business map is unique to each company", are they common for all enterprises, are they typical to particular industry, and so on. If a company has a purpose and goal(s), how the IBM CBM relates to this purpose, what mechanisms are used for establishing this relationships in company specific/unique business landscape? Nonetheless, it is not possible to see how the IBM CBM mapping provides the view "which components of the business really create differentiation and value", "where you have capability gaps that need to be addressed", and how "you can identify opportunities to improve efficiency and lower costs across the entire enterprise. Identify the components where you can realise the greatest impact". Certainly, knowing what you have is the baseline for further modifications but this map is mute without additional information about corresponding components' values, deltas/gaps to your targets and component inter-dependencies (impacts). As of "opportunities to improve efficiency and lower costs", these categories are simply invisible on such map. So, what does IBM CBM actually provides beside a convenient single map of consultants' discoveries about your enterprise?
See also
References
- ^ Allan Afuah, Business Models: A Strategic Management Approach, 2007
- ^ Amar Bhidé, The Origin and Evolution of New Businesses, Oxford University Press.
- ^ http://www.ebizq.net/blogs/service_oriented/2010/01/business_architecture_and_ibm_component_business_model.php
- ^ Allan Afuah, Business Models: A Strategic Management Approach, 2007
- ^ http://www.ebizq.net/blogs/service_oriented/2010/01/business_architecture_and_ibm_component_business_model.php