Inf Syst Front DOI 10.1007/s10796-013-9474-1 Networked enterprise business model alignment: A case study on smart living Sam Solaimani & Harry Bouwman & Timo Itälä # Springer Science+Business Media New York 2013 Abstract One of the first steps in innovation projects and entrepreneurial initiative involves formulating a Business Model (BM) that describes the value creation, delivery and capturing logic of a business idea. However, when formulating a BM for networked enterprises, the alignment of the collective BM, supporting the joint service or product on offer, and the underlying operational processes of the networked businesses, need to be taken into account. This paper analyses the concept of Business Model Alignment (BMA) based on qualitative case studies of two Smart Living projects in Finland and China. To begin with, a Business Model framework (STOF) is applied to describe the high-level BM. Next, the Value, Information and Process (VIP) framework is applied to analyse BMA. The case studies show that an analytical framework, such as the VIP model, helps reveal the hurdles that may undermine BMA and, as a result, obstruct BM implementation. This paper contributes to existing BM literature by identifying the steps that are necessary to move from an abstract, often strategy-driven BM, of collaborating enterprises towards an aligned BM that can be implemented. This paper also contributes to S. Solaimani (*) : H. Bouwman Faculty of Technology, Policy and Management, Delft University of Technology, Delft, The Netherlands e-mail: h.solaimani@tudelft.nl H. Bouwman e-mail: w.a.g.a.bouwman@tudelft.nl H. Bouwman IAMSR, Åbo Akademi, Turku, Finland T. Itälä Helsinki University of Technology, Helsinki, Finland e-mail: timo.itala@aalto.fi theory formation by identifying the issues that play a role in achieving BMA. Keywords Business model . Alignment . Implementation . Smart living . Health and care platforms . Case study 1 Introduction Many (R&D) innovation projects and new entrepreneurial initiatives fail to commercialize the services or products in question (Bouwman et al. 2012). In this paper, it is argued that a viable, feasible and sustainable business requires a clearly formulated Business Model (BM). Generally speaking, a BM describes what a business should do to create, deliver and capture value (Afuah and Tucci 2003; Chesbrough and Rosenbloom 2002; Linder and Cantrell 2000). Although the relevant factors involved in BM have been classified in numerous studies (Alt and Zimmermann 2001; Pateli and Giaglis 2004), and many alternative ontologies, taxonomies and frameworks have been developed (Al-Debei and Fitzgerald 2010; Bouwman et al. 2008, Osterwalder 2004), empirical research into the implementation of BM is scarce. BM implementation refers to the formulation and application of a specific set of policies and activities of a business as well as operational level, with the aim of effectuating the BM. Crafting a BM, using any BM framework, helps describe and visualize an entrepreneurial vision (e.g., a new service, product or bundle of product and service, start-up, spin-off, joint-venture) in a simplified and abstract way, which in turn allows companies to play with the typical components of a business (e.g. new business market combinations, new customers, new enabling technologies, changes in the ecosystem, etc.) with the aim of innovating and obtaining a sustainable market share. However, the abstract vision of a BM, often described at a highly abstract, strategic level, generally Inf Syst Front speaking focuses on an individual firm, often neglecting the fact that a BM is created by networked business partners. Such a high-level BM often indicates that business partners lack a proper understanding of the operational interactions and interdependencies between networked business partners, which is underlined by a statement of Tom Graves on BM. “People like building business-models. It’s wonderfully abstract, and it’s fun—like playing with model-trains, where the passengers are only imaginary and the trains really can run on time. Unfortunately (or fortunately?) the real world is a bit different from that… Real-world detail can break the best-looking business-model without even breaking out a sweat. We need to know that detail—or at least have a better sense of that detail—before committing ourselves and others to a lot of hard work and ultimate heartache (from Graves’ personal weblog, 2011).” To understand the exceedingly complex, uncertain and dynamic reality of networked enterprises, this paper argues that it is important to look beyond a BM as such and engage in the analytical process of Business Model Alignment (BMA). Although BM literature emphasizes the networked nature, business networks, value networks or (micro-) ecosystems are often discussed only at a strategic level. The aim of BMA is to move beyond the strategic level and reconcile the business objective(s) of a company or networked-enterprise, as described in a strategy-level (collective) BM, with the underlying operational and informational processes and/or business activities of companies involved in their business ecosystem. Although Osterwalder (2004) positions his approach between strategy and business processes, he focuses mainly on individual firms, and his approach uses brainstorming, the internal alignment of business model components, the alignment of the BM with the external environment of the firm and with future scenarios. In line with the traditional alignment concept (e.g., Henderson and Venkatraman 1993), in this paper, the alignment concept is used to bridge the gap between strategic business and IT thinking with operational execution, specifically in the context of networked enterprises. In bridging this gap, inter-organizational business processes and the exchange of information and value have to be discussed in relation to the leading BM, which is why, in this paper, a generic framework is proposed, as discussed in detail in Solaimani and Bouwman (2012). Based on two cases, this paper analyses the concept of BMA in a networked enterprise setting, examining how cumbersome inter-organizational operational processes as well as the exchange of value and information may obstruct the implementation of a BM. The cases, which are set in Finland and China, involve businesses that work together in offering smart living solutions. Examples of networked enterprise collaboration and innovation can be found in the Smart Living domain. Today’s homes are mainly equipped with technologies that were invented decades ago, while countless innovative smart solutions and technologies (e.g., robotics, advance telecommunication, sensor networking) are ready to be deployed outside laboratories. Companies that provide services and products to increase people’s quality of life, inside and outside residential homes, often find it hard to commercialize those products and services (Harper 2003; Peine 2008; Shadbolt 2003). For a long time, technology-related limitations, including interoperability, privacy and security, production costs, usability, usefulness, etc., were responsible for commercial failures (e.g., Aarts 2004; Chan et al. 2008; Demiris et al. 2004; Gann et al. 1999; Harper 2003; Leitner et al. 2007; Remagnino and Foresti 2005). However, given the unprecedented fast-paced improvements in technology and the understanding of user behaviour, that situation is gradually changing. With respect to commercialization, this paper argues that having an operationally feasible BM is a prerequisite for networked enterprises offering Smart Living platforms, services and products. Key processes and resources describe how the intended value will be delivered to (and captured from) customers as well as business partners (Johnson et al. 2008). Given that business operations are described by business processes, an alignment between an enterprise’s (or networked enterprise’s) business processes and its (collective) BM is essential. The goal of this paper is to propose a BMA approach to analyse the interdependencies between networked enterprises offering a joint solution and the way they create value, exchange information and align inter-organizational processes (from design and development up to and including value provision and capturing processes). This paper contributes to both BM and alignment literature by answering the question “what are the challenges that networked-enterprises face in dealing with a joint BM and inter-organizational process alignment, and the exchange of value and information?” This paper is structured as follows. In the next section, existing literature on BM and BMA is discussed, highlighting a number of shortcomings of the existing approaches. In addition, a concise description of the proposed VIP approach is provided. The methodology applied in this paper is explained in Section 3. Section 4 contains a detailed description of the two cases, while Section 5 discusses the theoretical and practical implications, conclusions and limitations of this study, and suggestions for future research. 2 Business model (BM) and business model alignment (BMA) Although there is as yet no consensus as to what the correct definition of BM is, generally speaking the term to the values businesses need to create, deliver and capture from their services (or products) to meet their strategic objectives. Existing literature on BM proposes various conceptual frameworks and ontologies to guide BM design, including the Inf Syst Front Business Model Ontology (BMO) (Osterwalder 2004), the STOF framework (Bouwman et al. 2008), e3value (Gordijn and Akkermans 2001), the Four-Box Business Model (Johnson et al. 2008), the IBM’s Component Business Model (Tian et al. 2008), C-SOFT (Heikkila et al. 2010), and the models developed by Hedman and Kalling (2003), Shafer et al. (2005) and Timmers (1998). While a BM describes what a business should do to generate value, the question as how this is (or can be) done requires an in-depth and broad understanding of the operational business processes and activities of the businesses involved. In other words, the implementation of a company’s BM requires (and is determined by) processes and activities, including the way the company interacts with its business ecosystem (i.e., customers, partners and vendors) (Alt and Zimmermann 2001; Morris et al. 2005; Teece 2010). Business Process Models (BPM) and Enterprise Architectures (EAs) provide detailed insight into the operational construction of a business. Davenport (1993) defines Business Processes as “a specific ordering of work activities across time and place, with a beginning, an end, and clearly identified inputs and outputs: a structure for action”, while EA is defined as “a coherent whole of principles, methods, and models that are used in the design and realization of an enterprise’s organizational structure, business processes, information systems, and infrastructure” (Lankhorst et al. 2009). In contrast to BPMs, which focus on business processes, EAs attempt to provide a holistic blueprint of the enterprise that captures business and operations alike (Lankhorst et al. 2009). BM, BPM and EA have all been examined in a large number of publications. Extensive literature studies on Business Models (e.g., Al-Debei and Avison 2010; Morris et al. 2005; Pateli and Giaglis 2004; Zott et al. 2011), Business Process Models (e.g., Aldin and Cesare 2011; Van der Aalst et al. 2000; Weske 2007) and Business/Enterprise Architecture approaches (Versteeg and Bouwman 2006; Bernard 2012; Lankhorst et al. 2009) hint at the sheer volume of literature in these areas. Many studies, however, indicate there is a conceptual gap between a BM and a company’s operational processes (Al-Debei and Avison 2010; Bouwman et al. 2008; Gordijn and Akkermans 2001; Osterwalder and Pigneur 2002). On the other hand, the number of studies is limited, especially in networked-enterprise settings with highly complicated and multi-level interactions and interdependencies. Attempts to address BMA have yielded a few approaches that try to distill operational models (e.g., BPMN, ArchiMate) from the BM of individual companies, for example Andersson et al. (2005, 2006), Edirisuriya and Johannesson (2008), Iacob et al. (2012). However, none of these approaches try to analyze BM alignment with the operational processes of companies that work together in an organizational networked environment. Instead, they describe and prescribe operational processes by following a set of converting steps, with limited attention to the multi-level interactions and interdependencies between multiple stakeholders, which means it is reasonable to classify them as converting approaches. For instance, Edirisuriya and Johannesson (2008) propose six transformation rules to transform an e 3value model into an Activity Dependency Model (ADM) (Hruby 2006). The converting approaches have four major shortcomings: they are not comprehensive and they are tool-specific, onesided and descriptive (Solaimani and Bouwman 2012). The fact that they are not comprehensive implies that not all the essential components of BM or BPM are included, which means they cannot serve as a wide-scope business management tool. For example, using BMO as a starting-point does not offer any detail about the operational processes in terms of the exchange of information and knowledge between stakeholders involved. That being said, communication, interaction, and knowledge sharing is underlined as challenging aspects of networked enterprises and systems (e.g., Barjis et al. 2011; Retzer et al. 2012). Another example is that of value-modeling approaches (Allee 2008), which merely focus on the values being exchanged between actors, and pay insufficient attention to operational business processes or the process-dependency between stakeholders. Business processes often span multiple departments or even across various stakeholders, i.e., the inter-organizational business processes (Xiao and Zheng 2012). Tool-specific means that most of these approaches do not have a generic approach to dealing with various Business Modeling or Business Process Modeling tools (e.g., methodologies to transform e3value model into BPMN). As such, these models are not particularly useful in a networked enterprise setting, where, for example, different process models are being used. Many of these approaches adopt the individual company as the level of analysis, and as such provide a one-sided account of the alignment problem, which, again, makes them less useful in a networked-enterprise environment. The descriptive characteristic of most of these approaches implies that none of them facilitate an in-depth analysis of BMA, instead rather describing/prescribing processes based on a series of steps. 2.1 The VIP framework To bridge the conceptual gap between BM and operational processes, and to overcome the limitations of the existing converting tools discussed above, the authors of this study use the VIP framework to analyse BMA in two cases. The aim of the framework is to facilitate BMA analysis using the three dimensions of value, information and processes (Fig. 1). Each dimension contains a number of sub-components that are interconnected horizontally and vertically (indicated by the vertical and horizontal lines between layers and components). The value is positioned as the first layer, because it is directly related to the high-level BM. This layer includes stakeholders Inf Syst Front Fig. 1 The VIP framework and their interactions in terms of the tangible and intangible value exchange related to, for instance, funding, the value of the product offered, contracts describing financial arrangements, and the value of having access to customers. The Vlayer components are interrelated, as “actors perform activities by exchanging values objects to meet their (collective) business goals, and this process leads to all sorts of value interdependencies”. The second layer contains the exchange of information, which is a vital asset for networked enterprises. Information, as defined in this paper, is a generic concept that includes data and knowledge (e.g., experts and expert systems). Issues like the creation and possession of information resources, access to information, information flow, and information dependencies, need to be considered separately. The information layer inherits insights from the V-layer components, while it interacts with (and sometimes prescribes) the operational business processes. In this layer, the components are interrelated, as “actors possess and create information objects to exchange (or authorize access to) information according to a specific flow (that is in accordance with the higher level value goals), and this flow leads to all kinds of informational interdependencies”. The Value and Information-layers prescribe the operational BPs, which means that the BPs are described at the lowest level of the model. The P-layer implies that “confined within stakeholders’ process boundaries (e.g., a unit within a company), the stakeholders’ primary business processes and their behavior (i.e., what a process exactly does), are interconnected and that leads to all sorts of process interdependencies between the stakeholders involved”. The primary business processes are those processes that are required for the creation and offering of the intended service or product. The framework is the starting point for the case studies. In the next section, the methodology that was used in this study is discussed. nature and complexity of the processes taking place” (Benbasat et al. 1987, p.370) and to “derive general conclusions” (Gummesson 2000). In addition, since the object of this research is a complex network of actors with heterogeneous interactions and interdependencies at various levels of abstraction, a holistic approach is required. A multiple case-study approach is used, focusing on two related Smart Living cases, in Finland and China. Fourteen semi-structural interviews were conducted with key stakeholders from both cases. On average, each interview took two and half hours and all the interviews were recorded. During the interviews, several memos were made containing meta-information, including the emphases, reactions and expressions of the interviewees, and key concepts they discussed. Immediately after each interview, a brief report was written about essential topics that were discussed during the interview. In order to triangulate (Yin 2009), multiple additional data sources were used, including company websites, relevant marketing presentations, formal contracts and other available documentation about services and products (Tables 1 and 2). The search for new Table 1 The ILP case (Finland) Strategic Title/Role Acronym Company No. of interviews The project initiator PI-F 1 DIR-F CEO-F PM-F University (professor and entrepreneur) Platform provider Data integrator Platform provider DM-F University 1 EA-F University 3 OM-F University 1 3 Methodology Director CEO Project manager Operational Development manager Enterprise architect Operational manager 1 1 4 Case studies are an appropriate research methodology “to answer how and why questions, that is, to understand the Additional data sources: companies websites, marketing presentations, meeting minutes, service/product guiding documents, demonstration lab and device guiding documents Inf Syst Front Table 2 The HSC case (China) Strategic Additional data sources: companies websites, marketing presentations, meeting minutes, formal contracts, service/product guiding documents, demonstration lab and device guiding documents, business integrator terms of condition, business integrator Service Level Agreements (SLAs) Operational Title/Role Acronym Company No. of interviews CEO Project manager Director Project manager Process manager CEO-C PM1-C DIR-C PM2-C PRM-C platform provider (Chinese) business intermediary Smart home-lab (Finnish) business intermediary Smart home-lab 2 4 1 1 2 Development manager Development manager Developer DM1-C DM2-C DVL-C University University University 1 1 1 interviews and other data sources stopped only when saturation was reached. Interviews were conducted with strategiclevel managers and operational-level staff (Tables 1 and 2). The interviewees were asked to describe the BM of their projects using the STOF framework (Bouwman et al. 2008), which made it possible to provide a holistic and high-level representation of BM in both cases. The framework includes four dimensions, i.e., Service, Technology, Organization and Finance (STOF) (Bouwman et al. 2008). The service domain offers a description of the value proposition (added value of a service offering eventually enabled by new products) and the market segment at which the offering is targeted. The technology domain describes the technical functionality, platforms and architecture necessary to realize the service offering. The organization domain offers a high-level description of the structure and governance of the multi-actor value network required to create, operate and manage the service, while the finance domain contains a description of how revenues from a particular service offering are generated, as well as the risks, investments and revenues involved. In both cases, through iterative interview rounds with one or two key informants, the BM, based on STOF framework, was analyzed, verified and validated (Appendix A, Q2). Next, the VIP framework was used to enhance the highlevel description by adding operational details. Various questions were asked to gain an in-depth understanding about 1) the underlying structure of value and information and how they are created and exchanged, 2) the structure and flow of the primary business processes that are shared between stakeholders, and 3) the way BM and the operational processes are related and how/which operational issues (with regard to value and information exchange and inter-organizational business process) (may) undermine the BM (Appendix A, Q3). Insights gained from the BM description, combined with the interviews concerning the operational business processes, made it possible to visualize the operational structure in both cases through the VIP diagrams. In addition, the VIP diagrams were reviewed, verified and validated by the interviewees. To identify the alignment issues at various levels of analysis (i.e., value, information and processes), the interview transcripts were coded, with a focus on keywords, sentences and paragraphs that indicated attributes that (could) impede BM implementation (Appendix A, Q4). First, an open-coding approach was applied to identify, name and categorize the issues (Strauss and Corbin 1998, p. 223). In both cases, this process resulted in the identification of a number of operational issues that could not be directly derived from the high level BM description. Next, the codes were categorized into larger data segments, the so-called patterns (Miles and Huberman 1994, p. 69—or selective coding, as proposed by Strauss and Corbin 1998, p. 236), which resulted in the classification of three core factors that influenced BM implementation and alignment with the operational processes. These factors manifested themselves at all three levels of value, information and processes. To improve the internal validity, the authors of this paper were involved in the process of coding and code analysis. Through recursive discussions, they were able to establish a consensus with regard to the code names, codes classifications and patterns. The results are discussed in the next section. 4 Case description 4.1 The independent living project (ILP)1 Service The Independent Living Project (ILP) is a collaborative project aimed at developing and commercializing a common healthcare services platform for the elderly. Various companies provide their services and products to elderly people through a single entry point, occasionally with intermediate actors like geriatric nurses or helpers. Providers combine and exchange their resources, among other things to increase usability (e.g., one interface instead of multiple interfaces), reduce production costs (e.g., one collective device instead of multiple devices), improve the service quality (e.g., using each other’s user-related data to customize the services), and strengthen their strategic position (e.g., the consortium provides more services than the individual competitors would be able to provide). Examples of services and products provided 1 For the sake of confidentiality, fictitious names are used. Inf Syst Front through the platform are medicine dispensers and reminders, home security, sleep quality analysis, location tracking and social video conferencing. Ultimately, in response to the ageing population in Finland, the project aims to help the elderly to stay at home longer and to improve the quality of their lives through affordable healthcare services with a high level of usability. Although the services are mainly geared towards the elderly, no other user groups are deliberately excluded. Technology The ILP project connects digital communication, sensor technologies and security services in people’s homes to create an intelligent and integrative service/product platform, which integrates at three levels: user interface (ILP Portal), the information level (Activity and Health Record, AHR) and the device level (Home Gateway). The ILP portal, which was developed by one of the universities involved, contains the user database of different user groups, including elderly people, their families, nurses, doctors and other caregivers, administrators and others. The portal manages access rights to various services and products, and provides single-sign-on to the vendor systems involved. The user interfaces are implemented as ‘portlets’ on the portal, providing users with access to all the services and products on single screen. In most cases, family members or nurses who share responsibility for providing care to elderly customers access the portal. The Activity and Health Record is a key integrator of the data being collected. All device vendors have opened their Server Application Programming Interfaces (SAPIs) to allow relevant detailed data to be stored in the shared database, for instance ILP, provided by the data integrator company. The AHR database, which can be accessed from the ILP portal, shows the current status and recent events related to the customer. Most device vendors have some kind of homebased gateway that connects their devices to the server in their data centres. Elderly people with multiple devices would end up having multiple gateways in their homes. To avoid the added cost of multiple gateways and management systems, the university involved has developed an integrated home gateway. Organization The ILP brings innovative companies and communities together in the field, enabling interaction between service users, providers and technology. The project’s ecosystem includes service and technology companies in the area of health and well-being, public and third sector organizations. The central point in this network, which is made up of the platform providers, coordinates the project and activities, varying from fund raising and provider selection to stakeholder management and costumer contact. In all, 16 healthcare service/product providers take part in this project, a number of them only providing devices (non-integrated providers), while others provide devices that make use of the platform (integrated providers). Three departments of three universities are responsible for developing the platform. Care providers use (or help the elderly to use) the services and an in-house call centre is responsible for dealing with automated alarms (e.g., automatic alarm in case of forgotten medicine consumption) or customer questions. Finance The leading company in this project is the platform provider, a non-profit organization funded by the Finnish National Funding Organization, the local municipality, and three universities of applied sciences. The companies taking part in the project pay a participation fee to the platform provider. The customers pay for the service(s) they use, and the platform provider pays the service providers and the caregivers (including their call centre). Integrating and centralizing the front office enables the customers to use up-dated and consistent information, with greater convenience (onesingle help desk), and in a cost-efficient way (economy of scale). In case of commercialization, the university reaps the benefits in two ways. They have a share in the revenues, for instance from patents, as well as intangible benefits, in terms of scientific publications and access to student projects. 4.2 The home-based senior care (HSC) Service Like the previous case, the HSC case is a collaboration between a number of technology and health care providers, owned and coordinated by a platform provider, with the aim of improving independent living for the elderly in a city in China. The basic idea of this collaboration is to develop a platform through which various technology-enabled health care services can be provided, for instance medicine dispenser, location tracking, automated communication with family and medical staff. As the founder of platform provider put it during one of the interviews, “the platform can be seen as a marketplace, accessible for elderly at home, from which they could select one or bundled services”. By integrating the information flow between various service providers and customers, a rich collection of user behaviour data can be generated, which can be used to further optimize the services. At the same time, the user data is a source of income, for which many companies, such as insurance firms, are willing to pay. Like the previous case, centralization improves customer convenience, reduces production costs, increases insight into customer behaviour and needs and strengthens strategic market position of the participating providers. There is also a health care service provider involved in this case, who helps the platform provider to gain access to a large network of local customers. Technology Like the previous case, the HSC project aims at developing a portal-based platform to offer various care services to elderly people. However, there are a number of fundamental differences. Firstly, this case only offers devices Inf Syst Front that enable portal-based services, which means that all the providers involved are directly connected to the central database. Next, the project involves both national and international providers. Another difference is that the HSC uses local manufacturing for the reproduction of foreign devices, based on the design and functional requirements that are delivered by the platform provider. Finally, the university-based development teams are responsible for data integration. Organization Apart from four issues, the organizational structure of this project is similar to that of the previous case. Firstly, as mentioned earlier, only integrated service providers (i.e., providers with device directly connected to the service platform) are participating. Secondly, in contrast to the previous case, price plays a more crucial role in China, since a silent majority of the population has relatively limited financial resources, which is why a Taiwanese device manufacturer is involved in the reproduction of devices of foreign companies, 1) to adapt the devices to the Chinese market demand/ requirements (e.g., regulations, customers needs, compatibility), and 2) to reduce production costs and make them affordable for the mainly underprivileged local customers. Thirdly, the development teams have more responsibilities, for instance, some of the development teams are steering the service providers, as well as autonomy to manage the development process. There is also an IT development company involved, which supports the university, mainly with interoperability problems between the platform and the healthcare services/ devices. In addition, there are as many as 33 service providers ready to collaborate and contribute to the platform. Finally, an insurance company is part of the project ecosystem. Finance In contrast to the previous case, HSC is a for-profit project, which is why, in addition to funds from local government, the project management team is looking for other financial resources, for example from insurance companies. HSC provide an insurance company with integrated data about customer needs, wishes and behaviour, which can be used to set up or improve the insurance healthcare policies and service packages. As to the project owner (i.e., the platform provider), it is indispensable to accomplish and sustain a balanced debt (e.g., costs related to technical developments, marketing, project management) and income (e.g., providers participation fee, customers usage fee, data selling). In a similar way as in the previous case, the users will pay a small fee for the used service or service bundles. 4.3 The VIP descriptive analysis Based on the discussion of the core VIP concept with the business partners involved, the interactions and interdependencies at all three layers of the framework can be described. Figures 2 and 3 contain the integrated value, information and process diagrams for both cases. The squares represent the stakeholders, while the lines represent the processes, interactions and interrelationships. Based on the interviews, it became clear that some processes and interactions are more relevant and critical and have a bigger impact on BMA. The interviewees expressed their opinions on the primary interactions at all three layers, i.e., value, information and business process, and discussed issues that (may) undermine alignment. These critical processes and interactions are divided based on the pattern coding technique, as suggested by Miles and Huberman (1994) into three core factors, i.e., complexity, conflicts and co-dependency (see Section 3 for the applied methodology), which is discussed below in greater detail in order to move from a descriptive model towards a more explanatory model. 4.4 Pattern of alignment As discussed in Section 3, a long list of issues were identified with regard to value, information and processes. However, three factors stand out as being crucial for alignment: complexity, conflicts and co-dependency. 4.4.1 Complexity The concept of complexity refers to obscure, uncertain, ambiguous, poorly organized and/or unstructured processes or interactions between stakeholders in all three VIP domains. Value complexity An example of complexity at the value layer that became apparent in the HSC case involved the large number of actors involved in this case, their diverse objectives and the changing definition of the markets they want to serve, which creates uncertainty with regard to the commercialization of the BM. The enterprises involved are forced to continuously evaluate and compare their own BM to the joint BM. In the HSC case, applying stakeholder analysis helped one of the project managers to make strategic decisions: 1. “The business model needs to be assessed or evaluated to see whether it is going to be a success. Right now, we are not quite sure yet! …the question is whether we will help our clients and business partners while we are improving the care for the elderly… A challenge is how we can assess the benefits that our concept would have for our partners, for example by looking how the actors involved would operate without our company [platform provider].” {CEO-C} A vague notion of the collective value proposition makes it hard for stakeholders to position and profile themselves within the ecosystem, which means they have to analyse the questions around value creation and Inf Syst Front Fig. 2 The VIP diagram for Independent Living Project (ILP) delivery, i.e., what value is created for whom? One of the interviewees from the ILP case found it difficult to define the BM, because the identification of common values seemed to be complicated: 2. “Having a sustainable business model is about value creation, not only about the costs and what somebody is willing to pay, we need to have or create a common vision and work together! Unfortunately, it is too complex to really unravel the business objectives of the various partners…. I don’t know yet where the value is going to be, but I know that it will take a smart person to translate that value in an innovative way and to show who gets what value out of it.” {CEO-F} As is indicated by the last quote, ambiguous business strategies and objectives make it harder to deal with strategic trade-offs, e.g., the dilemma regarding short-term operational excellence versus long-term customer intimacy. In the HSC case, the providers need to keep the price as low as possible, while, as far as their European counterparts are concerned, service quality has a higher priority, which leads to higher production costs. The diversity of strategic priorities among the various stakeholders complicates BM alignment at the value level. The problems appear as soon as financial issues, such as service pricing, are discussed: Inf Syst Front Fig. 3 The VIP diagram for Home-based Senior Care (HSC) 3. “The pricing of the services is difficult, since European prices won’t work here [China]… the elderly here are quite poor, but the population is massive. This means prices need to be changed, which is difficult to arrange with our ILP partners, as production costs are much higher in Europe than they are here.” {CEO-C} A lack of consensus regarding a common strategy makes it difficult to formulate a common value proposition, which affects the complexity of the value activities required to realize a sustainable creation and exchange of value. The example is from the ILP case, concerning decision-making around a ‘local integrated system’ versus a ‘remote portal solution’, i.e. improvement of service usability for customers versus reduction of service costs for providers. 4. “…in the short term, working on the server level (portal layer) is beneficial to providers, because they can apply changes in their services with little effort and they don’t have the integration problem; however, in the long run, having local control (home layer) would improve usability, as one device can be used for various services or more local devices can be connected to the central device.” {DM-F} Inf Syst Front Informational complexity Information resources and the exchange of resources need to be separated from the exchange of value. Despite its similarity with value complexity, information complexity requires a stand-alone analysis, because it has a significant impact on BM alignment. The importance of exchanging information is explicitly separated from a business-driven intention to work together to create value (quote 2). In other words, although there may be an intention to create, deliver and capture value, the complexity of exchanging information or a reluctance to share information will cause problems: 5. “Despite the fact that companies are collaborating, in some cases companies do not know exactly what information to share with whom, but we [platform provider] will do everything we can to avoid this situation.” {CEO-C} In the HSC case, the need for operational intervention to improve inter-organizational communication is emphasized, which means that, in addition to the intention to work together, the companies in question need to consider activities designed to encourage and streamline the exchange of information: 6. “How stakeholders communicate and how we [the platform provider and its intermediary partner] could facilitate this communication, to generate innovative concepts, from innovative services to improved information and business processes, will be a challenging task for us in the very near future.” {PM1-C} The same topic also plays an important role in the ILP case. The next quote points out the significant impact that systematic communication interventions, such as weekly follow-up meetings, have on the exchange of information between stakeholders. At the same time, it shows how difficult (inter-organizational) interventions are in a multiactor project. Communication between stakeholders is not an obvious activity and it needs to be supported. 7. “Communication is a crucial tool in weekly follow-up meetings that helps to evaluate the project and to solve problems… What we have not done yet, but still need to do, is sit down with all the stakeholders and discuss everyone’s requirements to be able to define and redefine the business model.” {CEO-F} Business process complexity Complexity occurs at the operational layer as well, and it affects the management and modelling of the stakeholders’ business processes, for example their service quality evaluation processes. In the HSC case, monitoring the heterogeneous processes of the various stakeholders involved is a challenging task for the platform provider: 8. “To sustain our relationship with our customers, the quality of the services being provided needs to be evaluated. However, this is a very complex task, considering the fact that many actors with different backgrounds are involved.” {CEO-C} Another example is the resource allocation process in the ILP case, which is considered to be complex, due to the fact that it is difficult for stakeholders to see the flow of resources of the other stakeholders, which means that a detailed representation of the value and resource flows is needed (quotes 2 and 5): 9. “Small companies are involved in this project, and their resources are scarce. They need to have a clear insight into the complex process of resource exchange between other actors, while carefully deciding their own resource allocation. To sustain their involvement, we really need to help them in this complex process.” {CEO-F} 4.4.2 Conflicts Conflicting factors are interactions that are inconsistent with, opposing, or weakening other interactions. Like in the case of complexity, these conflicting interactions are found at all three levels of the VIP framework. Value conflicts At the value layer, the conflicting interactions are mainly strategy-oriented. Although the stakeholders have certain common goals, there are also many apparent and hidden conflicting goals that need to be taken into account throughout the project management. 10. “One of the difficulties is to balance the interests of different service providers and stimulate collaboration. All these companies have common goals, which is why they can collaborate. However, beyond these goals, there are many conflicting values. Some are willing to create value for the government, some for their own pockets, some are interested in short-term profits, others in long-term profits.” {PM1-C} Another example in the ILP case involves government institutions, such as the municipality involved, that focus specifically on regulation and legislation, while the commercial service providers are more benefit-driven: 11. “An important restriction is the legislations from the municipality that prescribe how we should serve the customers. This should, of course, be part of our project and stakeholder management.” {PI-F} Also, competition between service providers leads to conflicting valuedriven interactions, for example involving the service providers in the ILP case, who attempt to gain a more dominant presence on the online portal to increase their market visibility: 12. “At the portal level, where all the providers and their services are presented, there is a ceaseless fight on who Inf Syst Front gets a bigger picture (link) and a brighter colour ad to be shown on the portal to the customers.” {DM-F} Informational conflicts At the information layer, various conflicts were also identified, for example the diversity of the information sources. Collecting and balancing system and user requirements in the HSC case is one of the conflicts were sharing and discussing information is an issue. The platform developer deals with two major stakeholders, i.e., service providers and customers, who both have their own specific requirements and constraints. These requirements can be conflicting: 13. “There are two types of requirements, one of which is related to user needs, while the other involves provider demands. Collecting and aligning these large sets of requirements should be done correctly, because there may be many serious conflicts in-between.” {DM2-C} Informational conflicts are not always functional in nature: they can also be inherited from a higher strategic level, i.e., value conflicts and co-dependencies (quotes 12 and 26), which, for example, can manifest themselves in the dissemination of disinformation to mislead competitors. 14. “If the companies were to lie or provide disinformation about their intentions, we would have several conflicts.” {DM-F} In both cases, the approach that was adopted to conflicts in this area was to define common standards (quotes 18 and 19). Business process conflicts The conflicting interaction at a process level has a number of causes. One is the overlap of processes. One of the interviewees from the ILP case recalls that overlap of business processes among stakeholders typically implies a more intense competition, probably because they provide similar, or even interchangeable services. That competition will, however, continue at process level as well: 15. “Some organizations are offering similar services, in which case we see conflicts, not only at a high level, where these companies are competing with each other, but also at a lower level, where processes sometimes overlap.” {DM-F} For instance, at the process intersection point, where various stakeholders link their processes, the (interorganizational) operational and technical interoperability conflicts become apparent: 16. “Right now, the providers don’t need to open their boxes, they just need to adapt their interfaces and integrate them with the platform, which is why conflicts between providers processes are at a minimum… but imagine when some companies are integrated at the homelevel. At a technical level, compatibility becomes a real challenge then. As a company changes its services, it has to apply these changes on the platform, which could create problems for other providers.” {DM-F} In the HSC case, one of the interviewees reflected on the execution of business processes and emphasized that processes cannot be executed flawlessly, and pre/post analysis of process—together with the other stakeholders involved—is required to adjust the processes in question and solve the operational problems: 17. “We need to pre-analyse the processes to prevent process frictions, but any conflicts in processes will also be communicated by users, through the platform provider, and then we will adjust them.” {DM1} Typically, standardization is an accepted approach to prevent conflicting informational interactions and conflicting operational business processes. In both cases, the platform providers define a standard that addresses various features of the intended service(s), including service delivery procedures, service quality indicators, but also data/inform ation forma ts and authorization. Standardization allows the platform providers to reduce informational and process-related conflicts, and to harmonize and govern the collaboration at both levels. In this regard, the interviewees underlined the need for process standardization to increase inter-organizational interoperability and reduce process conflicts: 18. “Standardization of service requirements helps to maximize the quality of services by increasing the process compatibility.” {DM1-F} 19. “…to prevent misunderstanding, the health provider, together with us, develops a standard that service providers can use for their service quality and service development.” {CEO-C} However, the same value complexities and conflicts (see quotes 2 and 10) are expected to impede the operational level process standardization. 4.4.3 Co-dependency Co-dependency implies that dependencies motivate, prescribe or sometimes force stakeholders to interact with each other at all three level of the VIP framework. Hence, it is crucial to scrutinize the interactions based on the dependencies involved and to reveal the ones that are problematic. Value co-dependency At the value level, value dependencies trigger different interactions and considerations. However, both dependencies affect (and are affected by) the need among high-level stakeholders to work together and interact with each other. An example of value dependency is the common interest that both the Chinese and Finnish governments have in initiatives like ILP and HSC, both aiming to improve Inf Syst Front healthcare for the elderly. The Chinese government needs to take concrete steps to deal with sub-optimal elderly care to keep their political promises: 20. “The [Chinese] government needs to solve the lack of care for the elderly at a national and a local level. Without these kinds of projects [HSC project], nothing will change!” {CEO-C} The relationship between municipality and the platform provider is another example of mutual value dependency (in this case monetary). In Finland, the municipalities are responsible for the public health care (HSR 2008). Accordingly, the municipality expects to improve healthcare through these project, while the platform provider relies on the municipality strategic position and continuous financial support: 21. “..local [Finnish] governments understand that they need to support us to generate the market [platform for health care service], as more than 60 % of their budget is spent on health care and well-being, but in 15 years it will be over 100%!” {DIR-F} Another example is that of the service providers involved in HSC and ILP cases, who want to expand their market and service more customers: 22. “The technology providers are small SMEs that will gain access to new markets [through the platform] to which they would normally never have access.” {DIR-F} In both cases, all parties (i.e., government versus platform providers and platform providers versus service providers), need to explicate their contribution and live up to their promises, in order to maintain and sustain the relationship. Consequently, platform providers need to demonstrate their added value, governments need to support the platform providers, access to platform should lead to service delivery to new customers and increased revenues for service providers, and service providers need to provide high quality services. Otherwise, the mutual dependency between these actors will evaporate: 23. “Convincing the service providers is not easy. They are small companies, very much sales-oriented, and if they can’t see how this integration can yield a profit in the a short run, they are less motivated, and we need to convince them that this is going to benefit them in the future… and that they are not able to do this by themselves.” {OM-F} In the HSC case, there is a critical dependency on (local) government support. One interviewee indicated that the platform provider needs to obtain government accreditation in order to gain trust among service providers and customers alike. In response, the platform provider put lot of effort in lobbying and networking among the various local and national government institutes: 24. “They [the Chinese government] help us communicate and collaborate with various business partners. Here [in China], we need the trust of our business partners to be able to collaborate with them, the way we want to collaborate, and the government is a great help in this… we can say the same about the clients. Government approval helps us enormously in gaining people’s trust.” {CEO-C} As is the case with competition (see quotes 10, 12 and 15), there is a significant dependency between service providers when it comes to value and information. Therefore, the platform provider needs to put a great deal of effort in managing, encouraging and streamlining the interaction between service providers, to improve mutual commitment, trust and even friendship. However, in line with quotes 2, 8, 10 and 12, it remains a challenging endeavour: 25. “Trust is needed between these providers, so they can work together and share information, for example. We need to carry out lot of project management activities to create this trust and, consequently, improve information sharing.” {PM1-C} 26. “Although it is not easy, we still need to set up activities that improve the commitment of different service providers, which will increase collaboration, even when it involves direct competitors.” {CEO-F} Information co-dependency Information dependencies trigger interactions between stakeholders with regard to access to information, and the exchange and ownership of information resources. Some of these interactions are more critical than others. Distinguishing these critical interactions increases understanding of the core dependencies between the stakeholders involved. In addition, the information codependency between service providers (quote 25), the need for access to data regarding customer behaviour on the part of the insurance company, can be seen as another example of information co-dependency. As a consequence, the platform data generation and data aggregation need to be designed and developed in such a way as to satisfy insurance companies, which in turn, will motivate insurance companies to invest in the platform: 27. “The platform stores different kinds of information, rich information, about clients’ daily lives, healthcare needs, client behaviour and circumstances, etc., much of which can be used for their [insurance company] policies, and we should take the needs of the insurance company into account.” {CEO-C} Another example is the service providers’ demand for the user requirements, without which it would be Inf Syst Front impossible for them to develop and provide customized services: 28. “Where else can they [the international service providers] get this essential information about the users?…without these insights an effective service provisioning is almost impossible… It is challenging for us to collect the user requirements… with this information a lot can be done. For example, using them [user requirements] for service development and technical engineering.” {CEO-C} Business process co-dependency At the most operational layer of the VIP framework, the two cases also show various business process dependencies, for example in the way the business processes of the various stakeholders are interconnected. Typically, the output of one stakeholder serves as the input for another: 29. “On the platform, providers work together, which means that helping providers change their processes and make them compatible with the platform is an essential task for us. This is also needed because we deal with crossactor processes that are followed by or initiate other processes.” {DIR-F} A specific example of these interconnections involves the sales teams that need to adapt their activities to the progress of the development teams. As such, the demands of the sales teams should be in line with the supply from the development teams. One of the interviewees referred to this issue as a challenging operational dependency, where the business processes of one stakeholder need to be aligned with those of the other: 30. “A lot of operational-level management effort is needed to organise a good collaboration between sales and developers. The commercial party always depends on the development party. The commercial stakeholders want their services fast, cheap and with a high quality, while the developer always need more time to develop the products or services further.” {EA-F} 5 Discussion and conclusion Many studies have examined business models, providing a wide variety of approaches. However, it is far from clear to managers and companies which BM they should use (Chesbrough 2010). In this paper, it is argued that an empirical evaluation of the operational implementation (or execution) of business models may prove helpful, especially in complex network-enterprise settings, where multiple enterprises are involved. BM implementation targets the actual commercial exploitation of a product or service. Although a BM captures the business logic for the creation, delivering and capturing of value (Johnson et al. 2008; Magretta 2002; Teece 2010), a description of a BM is merely a first step, and may not be enough to guarantee a successful BM implementation, let alone a fully-fledged commercialization, or an implementation that is focused on the Enterprise Architecture of the organizations involved. In addition to the BM, a deeper understanding is needed concerning the exchange of value and information within a given network, and the way inter-organizational processes are aligned. This paper has shown how an operational analysis of a BM provides insight into the issues that need to be taken into account for a BM to create and capture value. Based on two cases, three generic factors were identified as having an influence on BMA: complexity, conflicts and co-dependency. Based on the case study results, the analyses of the Business Model and VIP diagrams, it became clear that there are three factors that influence the alignment and implementation of business models, which help explain the rationale that underlies or causes alignment challenges and problems at all three VIP layers. Accordingly, three propositions can be formulated: P1. Uncertainties caused by or inherent in operational processes influence the implementation of Business Model. P2. Conflicting business processes influence the implementation of Business Model. P3a. Resource interdependencies, including operationallevel supportive resources, between stakeholders influence the implementation of Business Model. P3b. Resource accessibility (or availability), including operational-level supportive resources, influences the implementation of Business Model. The first proposition refers to operational level limitations, within and between stakeholders, which are hard to predict due to irregular or complex interactions of situational conditions. The case study shows that often complexity is manifested in activities and processes that are hard to evaluate, have uncertain or immeasurable outcome, ambiguously or poorly organized, fuzzy in nature and/or in a state of chaos. In addition, uncertainties and complexities at process level may be triggered by higher-level activities and decisions at value and information level and vice versa. The second proposition refers to all kinds of activities or operational processes, within or between stakeholders, that are inconsistent with, oppose or weaken other processes or cause value discrepancies. Examples from the case study are process and system compatibility and scalability issues (which is in line with the interoperability challenges in eHealth systems, emphasized by Weber-Jahnke et al. 2012). Similar to the previous proposition, conflicts at one level cause or are caused by other issues at the other levels (e.g., a conflicting perception of value proposition will likely affect the orchestration of [inter- Inf Syst Front organizational] business processes), which in turn, may lead to an instable and vulnerable process model. The third proposition refers to stakeholders interdependencies. It is apparent that not all interdependencies are problematic. In fact, it is the company’s interdependencies that bring them together. According to Pfeffer and Salancik (1978, p.2) “no organization is self-contained, and the key to organizational survival is the ability to acquire and maintain resources ”. However, within a networked enterprise, stakeholders are typically challenged by unavailable (or inaccessible) assets, capabilities and processes that are highly required to create and capture value and implement the BM. As such, a BM needs to address stakeholders operational requirements and constraints as well as problematic (network) interdependencies. In short, the propositions translate as follows: keep it simple, do not assume that, although parties have reasons to collaborate, collaboration in practice will be free of conflicts, and be aware that aligning processes is an issue in itself. By taking the proposed factors (and their typical indications and manifestations) into account, a better understanding of BM operational feasibility can be achieved. A careful analysis of the value exchanges is a prerequisite to achieve alignment. If the benefits are unequally distributed or costs are deferred by some but not by all party’s projects will fail, even if the intentions to succeed are there. Also transparent communication and information exchange has to be safeguarded. This doesn’t apply only to information exchange that is directly related to operational processes, but also motivations for behaviour as well as for exchange of relevant knowledge and know how related to core strategic as well as operational issues. Operational process alignment can be supported by orchestration and business process tooling (e.g., the architectural ontology proposed by Mouttham et al. 2012). In general open communication and governance bodies that are aware of these issues can be instrumental in searching for solutions. From a theoretical viewpoint, this paper contributes to existing BM and alignment literature by combining a BM ontology (the STOF framework) with an additional descriptive framework for analysing the alignment of value and information flows, as well as the operational processes of networked enterprises. This can be seen as an intermediate step that is necessary for further commercialization and in order to connect strategy, BM, business processes and enterprise architectures (EAs). Whereas Fritscher and Pigneur (2011) attempt to establish this connection for a single firm, this study focuses on networked enterprises. Future research will involve working out the approaches described in this study in greater detail, with the aim of connecting the intermediate VIP-model to EAs, and vice versa. To summarize, the message this paper aims to convey is that more attention is needed to the analysis of the operational feasibility of business models. Existing ontologies are mainly descriptive in nature, which means they can be valuable brainstorming tools, but they are not helpful when it comes to implementing business models in individual firms or networked enterprises. The latter is a more common practice. Generally speaking, BM tooling is relatively limited. The VIP framework can be seen as a modest attempt to develop a tool that helps enterprises develop a joint BM, and also understand the complexity, conflicts and dependency involved in aligning value and information flows, and in aligning operational processes. It is evident that VIP tooling needs to be developed further, as does the grounding of the approach proposed in this paper, due to existence of some limitations related to the case studies (number of studies, domain of the cases, scale of the cases, specific countries, and cultures, development phase of cases), the most important of which involves research generalizability, which makes it essential to repeat this study, using multiple projects with different scales (small versus large business ecosystems), industry sectors other than Smart Living, throughout various innovation/design phases (e.g., R&D, implementation and commercialization). In addition, the propositions have been formulated in a qualitative way (based on a limited number of cases) and are relatively highlevel. These propositions are open to further conceptual development and testing. It may be clear that further qualitative and quantitative research is needed to develop clear metrics that are directly related to business models, as well as metrics that can be used to assess the alignment of relevant processes within a networked environment. Acknowledgments We would like to thank the editor and the three anonymous reviewers for their suggestions on earlier drafts of this paper. We are also grateful to many friends and colleagues who have commented on earlier versions of the paper, especially Mark de Reuver, Fatemeh Nikeyin and Wally Keijzer-Broers. Particular thanks are due to Matti Hämäläinen and Yan Ke, for their collaboration and generous support. Appendix A: Interview questions Q1 Background What is the background of the interviewee, company (s)he is working for, and his/her role and responsibilities, within the case? Q2 Business Model a. What the project mission and vision? In terms of (intended) value proposition, technologies (to be) used, services (to be) provided, relationships with partners and customers, needed/available key resources. b. Who are the stakeholders and what are their roles? In terms of contributions, responsibilities, contracts, etc. Inf Syst Front c. What is the structure of the case costs and benefits? In terms of payments, revenues, ROI, etc. Q3 Operational arrangement 3.1 Value creation & exchange: a. What values are (should be) created and exchanged between, and captured from stakeholders? Referring to the core value objects and value goals that are required to drive the project towards the high level missions and visions discussed in Q2. b. How are (will) the values (be) created, exchanged and captured? Referring to the core value activities required for creation and capturing of values, and value dependencies (between stakeholders) created through exchange (or need) of value objects. 3.2 Information creation & exchange: a. What information (resources) is (should be) created and exchanged between stakeholders? Referring to the core data, information and knowledge objects required for the value activities discussed in Q3.2 b. How are the information (including data and knowledge) objects created and exchanged between stakeholders? Referring to the crucial information flows, information access (points and permissions), and information dependencies between information objects in the previous question. 3.3 Primary Business Processes: a. What are the primary business processes (will be) shared among stakeholders? 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He has a BSc. in Information Science, and a MSc. in Business Information Systems (Cum Laude), specialized in the topic of Business-IT Alignment. Currently, his research focuses on business model innovation, design, and analysis in networked-enterprise settings, in particular within the Smart Living domain. The key concepts of his research include business models/modeling, business operations and processes, business architecture and enterprise architecture. He has more than 20 academic journal and conference publications, some of which has recently appeared in the Business Process Management Journal (BMPJ), Journal of Design Research (JDR), and Electronic Markets (EM). Harry Bouwman is a Finnish Distinguished Professor at the Institute for Advanced Management Systems Research, Åbo Akademi University, Turku Finland and an associate professor at Information and Communication Technology Section, Faculty Technology, Policy and Management, Delft University of Technology, Delft, The Netherlands. His research is focused on (1) design and analysis of Mobile services and service platforms, (2) Business models, Customer Value, mobile eco- Inf Syst Front systems, and mobile web services, and (3) Strategy, Business Models, Enterprise Architectures, metrics and Systems dynamics. He is the coeditor of Mobile Service Innovation and Business Models and codeveloper of the STOF-model. He extensively published on usage of mobile services, and on (mobile) business models (see www. harrybouwman.nl). He is editor of several scientific journals. Timo Itälä received his MSc. in Helsinki University Computer Science, 1978. He has held several positions as a programmer, systems analyst, project manager, product manager, marketing manager and consultant. Also he was the project manager of the Mywellbeing research project (Citizen Centric approach to collaboration with the healthcare and wellbeing service providers) in 2008–2010 and participated in SOLEA (Service Oriented Locally Adapted Architecture) research project in 2008–2011. Dynamic Business Frameworks for Networks in Healthcare, Wellbeing and Active Aging domains is the topic of his forthcoming PhD, which is related to the concepts of business models, business processes, and SOA. Digital platforms, ecosystems and business models are also his other recent topics of interest. He is also involved in close cooperation with universities and companies in China in this area.