Business Modeling Drivers in e-society Formation

55

Special Talk Contribution to e-society 2003

“Business Modeling Drivers in e-society Formation”
Prof. Dr. Masao Johannes Matsumoto†
Graduate School of Business Sciences
University of Tsukuba, Tokyo
Otsuka 3-29-1 Bunkyo, Tokyo, Japan 1120012
mjm@m.ieice.com
Abstract
One of crucial issues in e-society formation is how to innovate value proposition and process laid down among
parties involved. This paper describes some insight obtained through Japan e-society formation research. Value
provision innovation must be accomplished prior to process innovation, even both of them have to be tried one after
another in dual spiral way.

1. e-society Business Formation
e-society comprises of business enterprise, government
and individuals. It is featured by implementation ofsocio information systems which serve for business andnon-business purposes. This paper deals with only
business realm of the e-society and never touch on the
non-business realm, see Fig.1. One major concern inthe business realm is how to furnish business modelingthat is a framework of pursuing business goals that eachparty of the e-society upholds. Mathematical simulation
modeling is a frequently used method for businessmodeling, but it can only simulate such business aspectthat could be represented by mathematical model.
Though the mathematical model can simulate suchmodel behavior under the model condition set out for
certain simulation purpose, but even going throughsuch modeling it is hard to innovate value and/or
process in e-society formation.

Process - its meaning varies depending on disciplineand context the term used, from systematic series ofactions or changes directed to some end in general, tonatural out growth i†n bio, to court action in law. This
paper assumes the generic definition of process.
Value – attributed or relative worth, merit, or usefulness
and not restrict its meaning only to monetary or
material worth, so that value includes even such worth
as convenience provided in services and products. This
paper means value by products or services offered.
Business Model – means conceptual come-up frombusiness design and practical value exchanged between
parties utilizing resources. e-business model means aframework where each party gets benefits from value
contributors through interacting each other, especially
utilizing merits brought by socio IT infrastructure likeinternet.

2. Issues in e-society BusinessInter
e-Business

Non-businesse-govee-enterprise rnment individual
Socio IT Infrastructure

Fig.1 e-society Business Formation

Since e-business has drawn people’s attention in mid
1990’s, e-business modeling has been tried in almost
every types of parties such as business companies,
customer, government, citizen and furthermore has
been experimented in the relationship of each one ofthem.
In almost e-society concerns, we have to deal withinter-organizational business modeling as well as
intra-organizational business modeling. However,“organization” is a generic term and varies its

Definitions† 2003 年 4 月九州産業大学情報科学部着任

56

boundaries for each organization with different
granularity, e.g., from single stand-alone company toallied corporate enterprise to governmental office.
Therefore we should consider issues in internetworked
enterprise, interprise in short that is an interrelated
enterprise through for example internet4. A typicalexample of interprise is e-trade where different types oforganizations are involved from darts to darts, e.g.,value provider, mover, insurance, bank, tariff andauthorization offices. e-trade still hold several issues
such as gap in inter-organizational process and lesscompatibility of format of data exchanged.
In specific industries such as banking, trade, logistics,
they have high demand for process innovation.
Manufacturing industry has needs for value proposition
innovation as well as needs for process innovation overtheir supply and demand chains.
In case of supply and demand chains, there are issues incombination of how to renew collaborative process andhow to have distributed organization. More specifically,
those issues are around how one should innovate
enterprises that are fallen into one of four category
types, i.e., the distributedorganization andnon-collaborative
processing,the
distributedorganization and collaborative process, the centralizedorganization and non-collaborative process, or thecentralized organization and collaborative process. The
third type must be omitted.
In case of international banking, clearance still takes
longer time and the banking is lack of straight throughprocessing ability, STP for reasons of complexity ofbusiness procedure. There exists high needs for theprocess integration throughout banking and otherfinancial institutes involved in order for reinforcementof their competency. Process integration in banking
could be accomplished in several different levels suchas the intra-organizational, the electronic authenticate,
and the inter-organizational. However almost existingsupports like Enterprise Application Integration, EAI,
BusinessWare, work-flow management are limited tothose capability that interconnects systems such aslegacy, ERP package, database handling in-houseapplication. There seldom to find methods and tools forsupporting Process Innovation.
The localization business industry serving for global
value providers is facing at needs of process and value
innovations, since the industry is suffering from costand quality problems caused by inefficient utilizationsof skilled human resources due to Multi Language
Vendor’s enclosure strategy that blocks seamlessprocess integration spanned from client to Single

九州産業大学情報科学会誌

２巻１号（2003 年 9 月）

Language Vendors and translators.
Government and its parties have more serious problems
than those business and its parties have. For example,
trade business has difficulty of having sound interface
of process and data, since each government officerequires business enterprises and individuals adapt theunique interface each government defined. Generally
speaking, in e-society X2G or G2X, where X={B|C|G},
lack of interoperability is still the biggest bottleneckproblem.
Some of these problems noted above are caused by thetechnical drawbacks of less standardization oncommunication protocol and document format eachparty uses. There is the other cause, e.g., conservative
attitude to resist against change of their business modeland practices, their privileged responsibilities andauthorization and after all the documentation format,
unless observed change reasonability.
3. Primal Drivers of e-society Business Formation
It is crucial to choose approach to solve the problems
stated in previous chapter. Which should be innovatedfirst, Process, Value or else in e-society businessformation? As the process and value are major aspects
and can be identified relatively clearer than the rest,
let’s concentrate in the pros and cons of Process
Innovate First (PIF) and them of Value Innovate First(VIF).
PIF Pros
1. Method Availability
Useful methods are available for making process
innovation, while value innovation methods are lessavailable for use.
2. Easy to understand
Process innovation is much easier to be understoodby people concerned than value innovation is.
3. Process makes value
Process innovation can make value proposition
innovation happen, for example, bank process
innovation can make such value proposition
innovation as faster clearance, settlement happen.
PIF Cons
1. Opportunity LossPIF concentration often leads to loose opportunity ofvalue innovation.
2. Non-value
Process optimum doesn’t always ensure value
proposition optimum, e.g., Process optimum is to try
to achieve its goal by such indicators as complexity,
cost and time duration.
3. Higher Cost

Business Modeling Drivers in e-society Formation

Development cost is unnecessarily increased due topossible fallback. Value innovation often requires
rework for process innovation.
VIF Pros
1. Key concern
Value is the first and ultimate concern. People wants
pursue to earn value first. Once people are convincedof value proposition, then they are motivated toinnovate process and other factors.
2. Value innovation as Major Driver
Process can be innovated following to and based on
the consequence of value proposition innovation,
let’s say, Value Map -> Sequencing Actions ->Process -> Process Innovate.
3. Value as Premise
Local Value Innovation-wise Process Innovation,
LOVPROI is good enough. Though local optimum
solution does not ensure total innovation including,for example, dis-intermediary, it is only practicallypossible way to find appropriate e-society
innovation.
For each business range
P1
VI Result

VI for certain biz range
P2
PI Result

PI based on the VI Result

D1
Done all?
All PI Chain
Fig.2 LOVPROI

yes
D2
Optimum?
No
E

No

Yes

VI:Value Innovation
PI:Process Innovation
LOVPROI:Local Value
T Innovation-wise Process
Innovation

A purpose of the process denoted P1 is to innovate
value proposition for a certain range of value chain andprovide the value innovation scheme. The process P2 is
to innovate process based on the value proposition
scheme obtained in the P1. The decision box denoted
D1 is to see whether there remains any range of chain
in the underlining case unchecked. The processes P1
and P2 have to be repeatedly done until all chains havebeen checked. The decision box D2 is to see whether allof processes for all underlining chains have been
optimized. These series of processes is called Local
Value Provision-wise Process Innovation, LOVPROI in
short. The LOVPROI does not always assure to provide
Total Optimum Solution, since result from series of
local value innovations simply do not ensure the total
optimum. Re-Process Innovation repeatedly took placemaybe assure to find a total optimum solution.

57

VIF Cons
Non-Total Solution
VIF is not always possible to ensure optimum
solution of e-society totally. There might exists
opinion conflicts among parties involved withrespect to value criteria they deem optimum.
Inconsistency problem often exists among intra andinter value chains. PIF has the similar problem, buteasier to solve.
Discussions
In spite of PIF Pros, there are some useful methods for
Value Innovation and one can get sound results byusing those methods. The problem stated in VIF Cons isof totality of optimization and not of PIF superiority
over to VIF. The totality issue should be discussed
separately from VIF or PIF selection. Practicallyspeaking, local optimization for a certain scope oforganization is only possible way of doing. Practicalsolution might be derived from and thoroughconsideration based on putting local solutions together.
.
Locally limited within a scope of an underlining
organization, it’s possible to get value proposition
innovation, VPI, while it is thougt to make VPI totallyencompassing all of the relevant organizations, since
total VPI has to resolve possible conflict of interests
raised by parties involved. For example in chain of
business to government, B2G, government andcorporate enterprise have different value senses eachother. How one could resolve it? Does top down
approach of value proposition innovation assure to havesuccess? It may be possible. One way to do it ishierarchical approach that starts to innovate value
proposition at higher hierarchical level and proceed on
to next level down until reach end, e.g., International –National – Value Chain – corporation levels. A problem
is that the decision making in the course of hierarchicalvalue proposition innovation takes much longer timeand likely loose business opportunity.
Through scrutinizing of all these pros and cons, Value
Proposition Innovation First has bit more advantages
than PIF in e-society business formation. However thisdoes not mean there is no need of PIF. It is noted thatboth of them are used complementarily in the course of
the formation.
VPI Approaches
At least three types of value proposition innovation
approaches are on hand use, i.e., Hierarchical,
Distributed, and Federated.

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九州産業大学情報科学会誌

Table 1 Types of Value Innovation Approaches
Hierarchical

Distributed

Federation

Features

Usually Top Down,
rarely Bottom Up

Distributed

Whole Chain andComponent

ExampleToyota, especially
their supply chainSonye-TradeApproach

Organizational layer
by layer Top Down
Optimization

Look for Local
Optimization

Harmonize Whole
Chain and each
Component
Elements

Remarks

Timely decision
making is crucial.

Hard to coordinate
each local optimum
otherFederation levelvalue proposition
must be clear enoughto follow by eachelementary.

4. e-business Evolution Agenda
What one should do for evolving e-society business, inshort e-business? For a given enterprise run in certain
business life cycle stage, one have to accomplish seriesof tasks including at least business visionary planning,e-business architecture modeling and implementation,
evaluation of the model and the e-business, and making
evolution of the business.12,13,14 The businessarchitecture modeling includes the value proposition
planning and e-business process design. Usually
information systems modeling and other enterprisesub-models have to be accomplished based on thebusiness architecture, more strictly speaking based on
the e-business process, if top down approach is taken.
The other sub-models are those needed for comprisingof whole business enterprise. They include organization,
resource, economics or financial sub-models. Value
proposition plan and business process model compriseof the business architecture model.
Strategic visionary plan and architecture modeling areimportant tasks for modeling e-business.1,6,11 However,these are not exhaustive. The other important andnon-trivial tasks for e-business modeling are at least
evaluation and evolution. Evaluation is needed, since
one want see how the e-business is going on.
Evaluation basically takes place in two different
timings, i.e., modeling and operation. Evaluation taken
during modeling phase allows one to make decision
whether or not one should go with the e-business model.
Evaluation during operation phase allows one to seemeasured data of indicators which shows how thee-business has been run.
Model evolution is essentially needed if one are looking
for success all the time. Without having model
evolution, no one could be survival in e-businesscompetition. We have to be careful that e-businessevolution is one thing and information systems

２巻１号（2003 年 9 月）

evolution in the e-business is another. What we should
do for e-business evolution include first identifying
what should be improved and the reason why it shouldbe.
Secondly, it is important to identify where the problems
come from, the model, the information systems or theelse.7 Causes of the problems may be around the way of
implementing of the model and putting it into practice.
Causes may be from possible deficit that the model per
se has.
Third, identify which part of the model has to be
improved if the model is the root cause of the problems.
One has to trace and identify what extent of the modelhas to be changed. One has to make the change analysis
through out the entire e-business models and the
sub-models. After complete change analysis, one has to
re-build whole e-business systems including theinformation systems, otherwise no one can makee-business well matching to the surrounding
circumstance and more fit to the goal.16 Re-building
entire e-business systems must be a big mess. See Fig.3
Structure of e-business agenda.
Surrounding Environment
Evolvee-business Evolution Scheme
Strategic Visionary Plane-business Architecture
・Value Proposition
・Business Model・Business Process
・Information Sub-Model
・Other Sub-Models
・Model Verification

Evaluate
ModelingTime

RuntimeFig.3 Structure of e-business agenda
5. Requirements to e-business Evolution Scheme
How one can accomplish the activities shown in theagenda in Chapter 4. What follows are itemized list ofrequirements for the agenda with priority, but the list is
not exhaustive.
1) Strategic Visionary
Traditionally there has been needed for methods fore-business strategic visionary planning and architecture
modeling Recently there is a strong need for especially
linking the visionary plan and the architecture model,
since people becomes want to design the scheme moreseamlessly.

Business Modeling Drivers in e-society Formation

2) Architecture Modeling
Method is needed for e-business architecture modeling.
Several methods are currently available for businessprocess modeling, but one should be careful to makesure whether it is possible to meet requirements frominter-enterprise process. Even in case of intra-enterpriseprocess only, one still must be careful to see whether it
is possible to design web based business process. It isnoted that not only process but also value proposition
innovation method is needed.
.
2.1) Value Proposition
The method for value proposition is definitely needed,since inspiration based way of innovating would beinsufficient to find competitive solution. Value model is
one of the major concerns in e-business design. The
method should be useful for innovating value
proposition, since the proposition innovation would
ensure a core competency that the enterprise might relyon.
2.2) Linking Value Proposition to Business Process
and Information Models
There is need of the method for seamless linking
innovated value proposition and business processmodel. The link must not only handle inter-relationshipbetween value proposition and business process but
also inter-relationship among the proposition, theprocess and the other sub-models like information
systems. Unless using linking method, no one canaccomplish e-business architecture model in a coherentway.
3) Building Information Systems
If the method and tool are available for building
information systems directly from and based on thee-business architecture model, it would makeinformation systems building easier as well as thesystems revising. That would be appropriate forkeeping the e-business be competitive.
4) Evolution
All the methods mentioned above have to have suchcapability as making evolution of the model and/or
systems until the e-business life cycle reaches to its
end.
4.1) Evaluation
Definitely there is need for the method and/or
capability of evaluating the business performance andeffectiveness at the modeling time as well as at business59

run time. Unless such method and/or capability would
be available for use, no one can identify what is wrong.
4.2) Change
Need the methods of changing e-business model in asound way along with improvement requirements.
Sound way means not the traditional one that results ina “chaos” situation causing one work a lot with
confusions even if changing just a bit of systems andmodel. Dog year requires need of quick evolution andnot take a longer time for changing.
6. Methods
As the author stated in the ICEIS’02 panel21, there areextensive numbers of methods that are available for use
in modeling e-business architecture. However, very few
methods have been provided as solutions for fixing theissues stated in Chapter 2 and very few methods
allow one to model e-business architecture seamlessly.
There are un-neglected gap laid down between businessand technical architectures to model.19 Most of themethods serve for exclusively either businessarchitecture or technical, and seldom serve for both ofthem. The author has already presented some of thesolutions like VPI method for fixing these problems ine-business modeling19. The whole method is called
Value-centric e-Business Architecture modeling, VeBA.
Value Proposition Innovation Method
In order to have enterprise competitive, value
proposition innovation must be a key factor.5 As
competitive situations always change, enterprise value
proposition must be kept innovating and should notstall all the time at the same proposition level. How tokeep innovate value proposition would become a key
factor for enterprise survival. Therefore, value
proposition innovation method plays crucial role ine-business architecture modeling. In the VeBA project,a method called Value Proposition Innovation, VPI has
been developed and continuously enhanced. The VPI
method facilitates diagrammatic representation ofwhatever innovated and the diagram presents two
folded-views, say, descriptive (as is) and normative(to-be), so that architect can make distinction between
normative view of value proposition and existing viewof it. Therefore architect could be convinced in the
proposition.
The VPI method provides procedural steps for value
proposition innovation. Though the VPI method itself issomehow complicate, only summarized steps arepresented here:

601) Existing Value Proposition
Describe the existing value proposition and ask reasons
about as-is: Evaluation is often made from customerview.

２巻１号（2003 年 9 月）

九州産業大学情報科学会誌

disintermediate the trader and government. This
innovation brings merit to customer and other parties,
though this innovation idea has a possibility ofsurrendering to strong resistance from disintermediarycandidates.

2) Disintermediation
Disintermediation of agent: Explore any possibility ofdisintermediation of existing agents and study any
feasibility of disintermediation to see performance andvalue total increase.

Marginal
Products

TraderDisinterned3) New Value Proposition
Envisage new value proposition: find new value
proposition carried out by enterprise5.

Customer4) Reintermediation
Reintermediation: determine new value proposition indetail including redefinition of agent role.

Existing
Serviceｓ

TariffGovernment

Relevant Service Industies

Disintermedi

Minimum
Services

Legend5) Value Map
Depict value map: visualize value map in which value
contributors can exchange their value each other.
Under the e-business goals and/or objectives, one can
explore value proposition innovation as much as one
want utilizing method like VPI. Fig. 4 demonstrates anexample of value map from e-trade value proposition
innovation, though detail explanation will appear in thenext section. .
6) web-based VPI
Design web-based VPI focusing on interaction among
parties. See Fig.6

Manufacturer

Lowest Price

Upper:current value
Lower:Normative valuemeans disintermediaryFig 4 Global View of VPI in

e-tradeFig 4 shows an idea of Value Proposition Innovation
given and taken among parties involved in case of
e-trade. In this innovation, trader and government arethought disintermediary, so that they will disappear in
the value chain. The other parties like manufacturer andlogistics, insurance and bank will not disappear andprovide product and services with lowest price.
Value Map

Upper: as-is value
Lower: to-be value
Simply-participate
Request to Coference7) Action Sequencing
Checking sequence of actions taken and concluding
e-business model. See Fig 7 and 8.

Context Provider

Conference Oppertunity
Consultation Chance

Advanced Knowledg

7. Case Study
7.1 Value Innovation

Practical Knowhow
Customer
Answer to Questionaire
Just get to know
Qualification

Let’s look at trial e-society formation assuming no
obstacles mentioned earlier in the Issues Section. In
e-trade as an case study, let’s assume more than six
different parties are involved, say, customer,
manufacturer, trader, logistics, services like insurance
and bank and government. The value proposition
innovation for this example is took place following to
the procedures stated above. For simplifying thediscussion, every step results are not shown in thispaper except most crucial steps. Fig 4 Global Value
map shows existing value exchanged between therelevant parties in upper box and normative value
proposition in lower box in the figure. After study ofthe value innovation, a model has been decided to

Hounour
Actual MeritFig.5 Local View of VPI
Under the global value proposition innovation scheme,
Fig 5 shows a local view of value proposition between
customer and manufacturer. Consequently, this value
proposition scheme allows customer be able to get thebest product and services fit to their needs much fasterwith the lowest price, since extra handlings taking
marginal interests will be excluded.
If modeler wants to have information systems modelBusiness Modeling Drivers in e-society Formationthat will match to the value proposition scheme, thencontinue to do following the remaining steps of the VPI
method. See, Fig. 6,7 and 8 for the results of the design.
Fig. 6 represents an interaction scheme with value
exchanged between parties involved. Fig. 7 represents
chronological sequencing of actions taken by the parties.
Fig. 8 represents web-based e-business scheme
designed for the value proposition.
Inquiry
Catalogue info
Order placement

C

Commodity ship
InvoiceS

61

A process innovation method named Strategic
Dependencies deals with four types of dependencies
seen in dependers and dependees involved, i.e.,
resources consumed, task to perform, goal to achieve,and soft goal to hopefully achieve. The method is used
for clarifying interdependencies among parties involved.
Starting at existing dependencies, this method allows
modeler proceed on to simplify the interdependencies
step by step until reaching to the normative processmodel. Such a model is shown for the same case study
e-trade, See Fig.9.
Dependency Model

a:Customer b:Traderc:Manufacturer d:Government
ProductBeDelivered

Payment

ProductBeShipped

C:Customers、S:Seller、b：Bank
Serf and interaction

C

Clearing/confirm

S

CommoditycPayment

Estimate
BeBestCustomer
BeHappyb

PaymentforProductab

Product
ReportRepeatBusiness

Get
Authorization

Tariff and Others

Fig 6 Interactions
Customer

Allow Trade

Resource
Task
Gaol
Web

SellerClearing BankdSoft GoalFig 9 Strategic Dependencies

Up URL
Inquiry
Logistics

Serf
Order place

Pull order

Invoice with statement
Inventory
Draw
Ship
Payment

Fig 7 Action sequencing

Strategic Dependency Method allows modeler tosimplify existing process, but not always ensuremodeler to find optimum solution. For the reason themethod allows modeler to identify the means-end links,
the task-decomposition and the soft goal contributors
and their relationships immanently included inunderlining process agenda, so that the method helps
modeler to clarify the existing process and to findnormative process model, See Fig.10 for a normative
process model, a part for the e-trade case study.
Example e-Trade
Means-end Link
Tsk-Deｃomposition link

Seller+Response Receive Ordr Invoice

Logistics
Delivery+

Confirm clearing
Transaction-

Clearing Bank

PartiesCustmerBeHappy+＋

Ship order

Contribution to soft Goal

+

-

+

+

+

+

QuickDeliver

+

Alt1

Inquiry Order place Payment
Invoice

Customer

７

+
２

７

２
SmallProductHandledVeryfyPolicyFig 8 An e-business Model
7.2 Process Innovation Methods

+

６

５

４

３

３

HandleSmallProduct
MakeProduct１
OfferToSettle
PrepareProduct
Offer
１

62

Fig 10 Means-end Link
The other methods are also available for process
innovation purpose other than Strategic Dependency.
For example, ARIS, ARchitecture for Information
Systems invented by Prof. A. W. Scheer is primarilyoriented towards visualizing business process based on
the event process control scheme22,23. ARIS is proved
useful for business process management. The strategic
dependency modeling seems powerful for process
innovation purpose, while ARIS seems practicallyappropriate for process management including
understanding, improvement, deployment and put themodel into enacting information systems.
8. Concluding Remarks
Though those several methods mentioned in this paper
have been initially developed for business evolution,
the methods are gradually exploited to e-businessproject and are turned out into e-society project. The
methods have been field proven of its usefulness for themodeling purpose.
Acknowledgement
Author expresses sincere appreciation for all who haveextended their collaborations in this research project,
especially for development and exploit of VPI value
proposition method.
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