R e l a t i n g B Relating Business Modelling u s i n e s and Enterprise Architecture s M o d e l l i n g a n d E n t e r p r i s e A r c h i t e c t u r e L u c a s O n n o M e e r Lucas Onno Meertens t e n s Relating Business Modelling and Enterprise Architecture Lucas Onno Meertens Chairman and secretary Ph.D. dissertation committee: Promotor Prof. dr. K.I. van Oudenhoven-van der Zee University of Twente, the Netherlands Assistant Promotor Prof. dr. ir. L.J.M. Nieuwenhuis University of Twente, the Netherlands Members Dr. M.E. Iacob University of Twente, the Netherlands Prof. dr. Y. Pigneur University of Lausanne, Switzerland Prof. dr. J. van Hillegersberg University of Twente, the Netherlands Prof. dr. R.J. Wieringa University of Twente, the Netherlands Prof. dr. A.J. Groen University of Twente, the Netherlands Prof. dr. ir. P.W.P.J. Grefen Eindhoven University of Technology, the Netherlands CTIT Ph.D. Thesis Series No. 13-271 Centre for Telematics and Information Technology P.O. Box 217, 7500 AE Enschede, the Netherlands This work is part of the IOP GenCom U-Care project (http://ucare.ewi.utwente.nl), which is sponsored by the Dutch Ministry of Economics Affairs under contract IGC0816 Cover design: Proefschriftmaken.nl || Uitgeverij BOXPress Printed & Lay Out by: Proefschriftmaken.nl || Uitgeverij BOXPress ISBN: 978-90-365-1209-1 ISSN: 1381-3617 (CTIT Ph.D. Thesis Series No. 13-271) DOI: http://dx.doi.org/10.3990/1.9789036512091 Relating Business Modelling and Enterprise Architecture PROEFSCHRIFT ter verkrijging van de graad van doctor aan de Universiteit Twente, op gezag van de rector magnificus, prof. dr. H. Brinksma, volgens besluit van het College voor Promoties in het openbaar te verdedigen op vrijdag 11 oktober 2013 om 12.45 uur door Lucas Onno Meertens geboren op 23 november 1984 te Lima, Peru Dit proefschrift is goedgekeurd door: Prof. dr. ir. L.J.M. Nieuwenhuis (Promotor) Dr. M.E. Iacob (Assistent-promotor) English Summary This thesis proposes a methodology for creating business models, evaluating them, and relating them to enterprise architecture. The methodology consists of several steps, leading from an organization’s current situation to a target situation, via business models and enterprise architecture. The problems with Business-IT Alignment Currently, increasing amounts of businesses rely on IT systems to do their business. However, success rates of IT implementations projects are low. Difficulties exist in aligning existing IT systems with business objectives. A consensus exists among researchers and practitioners alike that business-IT alignment (BITA) is necessary to improve business performance. Typical symptoms of lack of BITA include: • • People cannot use the systems effectively. • Changes in systems often do not consider the financial impacts. Systems cannot be changed easily and quickly to adapt to new situations. Difficulties also exist with technological innovations. Most difficulties are not caused by technical issues. Lack of consideration for financial and organisational aspects is a cause for projects not surviving after the pilot phase. A lack of attention is paid to financial aspects of innovations. Projects are often more expensive than planned due to changing requirements. Projects are often more expensive than planned because demands are not well known. Therefore, we have a problem to build and adapt IT systems to changing business needs. This thesis attempts to combine two partial solutions to this problem, Enterprise Architecture (EA) and Business Modelling (BM). A partial solution: Enterprise Architecture Enterprise Architecture comprises a collection of simplified representations of the organisation, from different viewpoints and according to the needs of different stakeholders. A coherent description of enterprise architecture provides insight, enables communication among stakeholders, and guides complicated change processes. ArchiMate provides a language to create such descriptions in a precise and formal way. While Enterprise Architecture helps to manage change, it includes insufficient business strategy, and use of ArchiMate is limited to expert users. Another partial solution: Business Modelling In the basis, business models are used to describe businesses and explore possibilities for future development. Business modelling is intuitive to use by managers, consultants, V and entrepreneurs alike. The business model concept is a young and emerging field of research. The state in which this field finds itself is one of “prescientific chaos”: several competing schools of thought exist, and progress is limited because of a lack of cumulative progress. Links to other research domains are vital to establish the business model as a distinct area of investigation. This lack of cohesion in the field clearly diminishes the added value of business models for organizations and makes business modelling an art, rather than a science. A combined solution: Relating Enterprise Architecture and Business Modelling Individually, business modelling or enterprise architecture does not seem to solve the problem completely. However, each of their weaknesses seems to be countered by the strengths of the other. On one side, where EA is limited to experts and lack business strategy, BM is intuitive to use and focusses on the business. On the other side, where BM lacks a methodology, is barely formalized, and lacks scientific underpinning, EA has an Architecture Development Method, and is standardized in ArchiMate. Therefore, combining EA and BM appears to be an advance towards solving our problem. While solving the problem of building and adapting IT systems to business needs, thereby increasing success rates of IT implementation projects is the final goal, this thesis is limited to relating enterprise architecture and business modelling. This thesis proposes a methodology for creating business models, evaluating them, and relating them to enterprise architecture. We do this by developing several steps of the methodology, which supports bringing an organization from its current situation to a target situation. The developed process steps help to formalize business modelling, and at the same time extend enterprise architecture to be more business focussed and easier to use. This would support our hypothesis the combining enterprise architecture and business modelling leads to better EA and BM models, and therefore, more successful business-IT innovations. A meta-meta-view on business modelling One of the main gaps in business model research was the lack of a conceptual model. We introduce a meta-modelling perspective on business models. By placing existing business model review literature in the context of meta-layers and structuring it following the components of design theory, we create the meta-meta-business model (Me2BM). This helps to see what we are talking about in the jungle of business models and their different interpretations. How to create business models? No widely accepted method existed for design and specification of business models. We propose the Business Modelling Method to create business models. This six-step method, named BMM, is developed, demonstrated, and evaluated in this thesis. The VI BMM provides a way to create business models systematically. Innovators can apply the steps to create business cases for their ideas. This helps them to show the viability and get things implemented. How to evaluate business models? Having built one or more business models, a need arises for a method to objectively compare alternative business models, and choose the best course of action. We propose the business case method as a way to evaluate business models. The designed business case method to compare business models objectively can be used to compare and choose the best business model successfully. This is what has to happen in the last step of the BMM. How to relate business models to enterprise architecture? We show how business models and enterprise architecture can be related. The contribution is threefold: 1. We relate Business Model Canvas building blocks to ArchiMate, 2. We demonstrate the value of that relationship in a cost/benefit-analysis, 3. We provide methodological support, clarifying the role of business models in the Architecture Development Method. The U*Care project serves as a case study to demonstrate the above three methods chained together. Business models are created, evaluated, and related to enterprise architecture. Combining enterprise architecture and business modelling leads to better EA and BM models, and therefore, more successful business-IT innovations. In conclusion Our main research contribution to the fields of enterprise architecture and business modelling lies in providing a way to deal with issues from business-IT alignment, by developing a design science methodology for creating business models, evaluating them, and relating them to enterprise architecture. VII VIII Table of Contents English Summary ...................................................................V 1 Motivation, background, and research design ................................1 1.1 Motivation and background: What is the problem?...........................1 1.1.1 Difficulties exist in aligning existing IT systems with business objectives......1 1.1.2 Difficulties also exist with technological innovations..........................2 1.1.3 Hence, we have a problem to build and adapt IT systems to business needs. ..4 1.2 We have Enterprise Architecture ............................................4 1.2.1 What is Enterprise Architecture? ............................................4 1.2.2 What can you do with EA?...................................................4 1.2.3 What you cannot do with EA!................................................4 1.3 To understand the business better, we could use business modelling .........5 1.3.1 What is business modelling?.................................................5 1.3.2 What can you do with business modelling? ..................................5 1.3.3 What you cannot do with business modelling! ...............................6 1.4 Solving the problem? Combining business modelling and enterprise architecture.................................................................7 1.5 Research Design: What to do? ...............................................8 1.5.1 Objective: Propose a methodology...........................................8 1.5.2 Question: What do we need to know?........................................9 1.5.3 Strategy: Which approach to take to answer the question? ..................10 1.6 Structure of the thesis......................................................18 2 Background: What has (not) been done?....................................21 2.1 Business modelling: A literature review.....................................21 2.1.1 Business models literature review method: justification of the approach, structure, sources and criteria, and a short literature overview ...21 2.1.2 Early evolution of business models .........................................24 2.1.3 Business models: what it is, what it is used for, and what it is not ...........28 2.1.4 Business model components ...............................................35 2.1.5 Business model evaluation .................................................39 2.2 Business cases: a literature review..........................................43 2.2.1 Literature criteria, search and selection process ............................44 2.2.2 Short literature overview...................................................46 2.2.3 Business case: what it is, what it is used for, and what it is not...............46 2.2.4 Business case components: two perspectives ...............................49 2.2.5 Business case evaluation ...................................................57 IX