Abstract

While more and more companies leverage business models in an innovation context to ensure the
economic viability of new products and services, their enormous potential to manage businesses
over their entire life cycle is widely ignored. That is astonishing because business models help to
design and maintain the business logic in a simple and unprecedented manner, whilst assisting to
bridge the gap between strategy and daily business.

16

360 the Business Transformation Journal No.14 | November 2015

 DRIVERS

BUSINESS MODEL
BASED MANAGEMENT
Bridging the Gap Between Strategy and
Daily Business

In todays economy, competitive advantage is progressively based on business

models. Hence, companies will need to carefully consider their business model
portfolio in order to stay on top of the market. This requires a new and innovative
management approach in order to control the life cycle of business models and
monitor the complete portfolio.
17

by Uli Eisert and Julia Doll

There is an enormous hype around busi-
ness models these days (Amarsy, 2015).
Whether discussing the internet giants or
the blurring of entire industry segments,
people always refer to new business mod-
els as the key to their success. We under-
stand that differences in products and ser-
vices alone are not enough to explain the
success or failure of companies. The win-
ners are those that embed their offerings
into the right business model.
Consequently, many companies have fi-
nally started to manage business model
innovation with the same level of profes-
sionalism as product or process innova-
tion. If done right, they utilize the capa-
bility of business models to design the
appropriate business logic in a very un-
derstandable and tangible manner that is
to a large extent a craft rather than an art
(Doll and Eisert, 2014).
However, the enthusiasm about business
model innovation mostly stops after the
initial design of the business model. Very
few companies handle the implementa-
tion of new business models in an explicit
and systematic manner, and even less use
business models continuously to manage,
optimize, and transform their current busi-
nesses.
Challenges of Management Today
While academics are looking at business
models from a strategic management per-
spective, practitioners are still using the
traditional mechanisms to manage, mon-
itor, control, or optimize (Teece, 2010; Hal-
ecker and Hartmann, 2014). A recent re-
port reveals that the ten most used tools
for management are based on concepts
written 2040 years ago (Rigby and Bi-
lodeau, 2015). While 74% of the CEOs
worldwide are concerned with new en-
trants disrupting their business model,
and 44% do not feel comfortable with their
own business model (KPMG, 2015), most

360 the Business Transformation Journal No.14 | November 2015

 Business Model Based Management (BM)

of them have not yet started to continu-
ously manage and transform their portfo-
lio of businesses using the business mod-
el concept as the central framework.
If we take the optimization of business-
es as an example, most initiatives focus
on operational excellence and efficiency
only. These initiatives run the risk of op-
timizing only parts of the business in an
isolated manner, which do not lead to an
overall improvement. This is where busi-
ness models can make a difference (see
box 1). Understanding that optimization
activities are an effort to re-design and
re-implement the overall business logic
would ensure a more comprehensive and
balanced approach. It supports ambitious
results that go beyond operational excel-
lence to increased competitive advantage
or organizational agility.
The same happens on the portfolio man-
18 agement level. If we take mergers as an
example, the typical post-merger process
is focusing on pure integration of the ac-
quired businesses assuming that this is
sufficient to leverage synergies. Again,
the focus is mainly on efficiency gains.
However, if the existing and acquired
business models would be mutually opti-
mized, businesses could achieve signifi-
cantly better results (see box 1).
Even worse, strategy and daily business
are loosely coupled and develop indepen-
dently from one another. To a large extent,
this is due to a strategy formulation that is
too high-level, too vague, and too ambigu-
ous. People struggle to make the strategy
and the corresponding business logic as
tangible and concrete as managers and
employees alike would like it to be. Con-
sequently, there is no consistent and com-
monly accepted management and deci-
sion framework. Overall, todays situation
is characterized by a striking inability to
bridge the gap between strategy and dai-
ly business. There seems to be a need for
a new approach and it is the right time to
put business models in the center of it.
Business Model Based Management
Wouldnt it be logical to leverage the
strengths of business models over the

Box 1: Quotes of Early Adopters

We have seen that Business Model Based Management (BM) has a huge potential for the holistic as-
sessment of potential acquisition targets and the post-merger integration (PMI) of acquired companies.
Some companies we acquire utilize business models that are different from the ones we already have in
house. Some might not fit into our way of doing business or might not be able to deal with our constraints;
others might be a great fit, but nevertheless require special consideration during the PMI phase. There
might even be business models that we are actively looking for to enhance our business model portfo-
lio. (BM) provides tools we use to identify business model innovation early-on, during the due diligence
phase. And it offers a great framework to help with implementation and optimization of such models
during PMI.
Frank Schuler, Senior Director, M&A Expert at SAP Corporate Development

(BM) is the logical next step after BMDI. Applying the optimization workshop to a successful business
such as SuccessFactors helped us rethink our current business and figure out our core strengths. The
term rethink is broadly being used here to really mean creatively challenge, innovate and confirm the
key priorities that should be pursued in our business activities with SAP SuccessFactors partnerships.
Utilizing portfolio optimization for SAP business models should prove to be extremely helpful in order
to simplify mergers and acquisitions at SAP and smooth the integration process of acquired business
models (such as SuccessFactors). I think there is great potential in the new business model based man-
agement services for our colleagues at SAP - and definitely our customers.
Natasha Loeffler-Little, Senior Director, Global Business Development, Cloud Global Partner Operations

360 the Business Transformation Journal No.14 | November 2015


(Re-)Design and (Re-)
Implementation
Management and
Optimization
entire business life cycle and throughout
the entire company? We believe that this
could bring a new level of consistency and
simplification to management on all levels
of the corporation. We call this new ap-
proach to management Business Model
Based Management or simply put (BM).
If companies grasp the importance of the
business models underlying their busi-
nesses, the foundation for (BM) is al-
ready laid. In many cases, companies
run various businesses in different stag-
es in parallel, increasing the complexity
of their management and the need for a
(BM) approach. This approach leverag-
es business models strengths to provide
a structured, consistent, and simplified
approach. These aspects are captured in
the five principles of (BM) (see box 2 on
the next page).
Understandably, (BM) has to support
all phases of the life cycle of a business.
The first phase deals with the initial busi-
ness model design and implementation.
While the initial design helps to embed
360 the Business Transformation Journal No.14 | November 2015
DRIVERS
Transformation
Exit
Adaptation and 19
Continuous Disruption
Improvement
the new business idea into an appropri- Fig. 1: The
ate business model, the initial implemen- business model
tation phase helps launch commercializa- life cycle (business
tion. The implementation ends when the model canvas adapt-
expected volume of the business and oth- ed from Business
er KPIs are reached that justify a hand- Model Foundry AG/
over to the regular operation of the busi- CC BYSA 3.0)
ness. The second phase consists of the
management and continuous optimiza-
tion of the implemented business model
supported by comprehensive monitoring.
Once there is a valid reason to optimize
the business model, activities are started
accordingly. These activities are direct-
ed at conquering upcoming threats and
seizing new opportunities. These activi-
ties consist of a re-design, re-implemen-
tation, and execution of the modified busi-
ness model until the next optimization is
required. Due to the highly dynamic and
sometimes disruptive environment, at
one point, optimization is no longer suffi-
cient and the business needs to be fun-
damentally transformed or completely
abandoned (see figure 1).
 Business Model Based Management (BM)

Box 2: The Five Principles of (BM)

Business Models as an Instantiation of Strategy

Business models provide the means to instantiate the strategy, to make it illustrative, tangible, under-
standable, and ultimately implementable. While strategies leave room for interpretation, business mod-
els ensure that the key questions are tackled: What is flowing back and forth between you, your partners,
and your customers? How is the value created and for whom? How is the value delivered and captured
in a sustainable and profitable way? Answering these questions enforces the accountable managers to
transfer the strategy into concrete business logic and to verify their assumptions.

Business Models as a Management Framework

Business models can replace traditional units of analysis (Amit and Zott, 2001). They offer a manage-
ment framework consisting of three layers (Bucherer, 2010): First, business models are used as descrip-
tion models to visualize, communicate, and share the business logic (Osterwalder et al., 2015). The de-
scription provides the common ground needed for collaboration and smooth operations in the daily
business. Furthermore, business models are used as explanatory models. Because the business model
captures the overall business logic in a condensed manner, managers and experts can understand why
and how the business works. Finally, business models are used as decision models so all decisions can
be based on a common and holistic reference framework. This ensures that the best option for the over-
all business is chosen and it considers that all aspects of the business prevents local optimization.

20 Business Models as a Structural Approach

If you think of a company as a combination of different businesses that are utilizing appropriate business
models, the segmentation of its structure into business units becomes obvious and simple. A segmen-
tation along business models provides a more holistic view that combines external and internal aspects.
Business models ensure consistent and more complete criteria to assess which business activities be-
long together and where businesses should be split because they require different business models.
Each business requires a responsible owner or management team and a sufficient degree of indepen-
dence to steer and manage all business activities. Nevertheless, it can make a lot of sense to group dif-
ferent businesses into one strategic business unit or some kind of division to ensure critical mass and to
prevent micromanagement and sub-optimization.

Business Models as a Common Ground

The compact description of the business model deserves to be print it on posters and to be hanged up in
every meeting room or even in the cafeteria. The plain explanation of what is going on in the business is
something most people appreciate, because they can relate their own contribution easily to it. This com-
bination of simplicity, tangibility, and proximity to the daily business makes business models extreme-
ly powerful. The common ground e.g., between different lines of business, also fosters collaboration. As
soon as people see and understand what others contribute to the common business, they start to appre-
ciate the needed alignment and collaboration.

Business Models as an Organizational Link

As a vertical link, business models can connect different organizational levels. The different business
models need to be consistent over the different levels in a way that the higher-level business model can
be deconstructed into the lower-level models, and that the business models on the lower level can be
condensed into the higher-level model. Thus, they can support a concrete alignment of all business ac-
tivities across the various levels of the organization.
As a horizontal link, business models are useful for the exchange between different business units. Re-
sponsible managers can share best practices based on the aforementioned common language and un-
derstanding of their respective business activities. Moreover, similarities of businesses can be easily de-
tected, which might allow the exploitation of synergies.

360 the Business Transformation Journal No.14 | November 2015


Business Model
Portfolio Level
Business Model Design
and Implementation
Business Model
Level
Business Model Management and
Optimization
If a company runs more than one busi-
ness, it also needs to manage and opti-
mize its portfolio of businesses over time.
Therefore, (BM) supports the re-design
and re-implementation of the portfolio
dealing with various business models in
parallel. This is about an ongoing optimi-
zation of the portfolio of businesses deriv-
ing the appropriate strategy for each busi-
ness and ensuring that all synergies are
fully leveraged.
As a result, (BM) supports both the man-
agement of the entire life cycle of each in-
dividual business as well as the manage-
ment of the portfolio of businesses on all
levels of the entire corporation. This is re-
flected in the three disciplines of (BM),
which are closely linked with each other
as depicted in figure 2.
To provide a suitable, common, and con-
sistent underlying approach for these
disciplines, we use the Business Model
Development and Innovation (BMDI) ap-
proach as the foundation for (BM) (see
figure 3 on the next page). However, each
discipline has a different context and a dif-
ferent set of objectives, so the underlying
360 the Business Transformation Journal No.14 | November 2015
DRIVERS
e.g., Corporate
Level
Portfolio
Management and
Optimization
Disruption
e.g., (S)BU
Level
21
approach needs to be adapted accord- Fig. 2: The disci-
ingly. plines of (BM):
With its five principles that form a consis- Design and Im-
tent understanding of business models as plementation, Man-
the primary management framework and agement and Opti-
the three disciplines that support the en- mization, Portfolio
tire business life cycle based on a com- Management and
mon underlying approach, (BM) is a new Optimization
way of management that addresses the
short comings of existing concepts.
Business Model Design and Imple-
mentation
Designing a business model from scratch
can be a challenging task, but given the
right tools and methods, you can devel-
op and evaluate ideas in an elaborate way
that gives you the security to have con-
sidered all crucial aspects. The afore-
mentioned BMDI approach is an intuitive
methodology used to develop and vali-
date business models (see box 3 on the
next page).
The implementation phase is concerned
with scaling the business, more specif-
ically, how to get from the first custom-
er to the targeted market share. Hence,
 Business Model Based Management (BM)
Box 3: Business Model Development and
Innovation (BMDI)
Business Model Development and Innovation (BMDI) is a
targeted approach to develop and evaluate business mod-
els. It can be applied to many use cases such as the de-
velopment of business ideas, the analysis of unsuccess-
ful businesses, or the optimization of successful business
models. BMDI can also be utilized at several levels to in-
novate business models of companies, business units, or
products and services. It offers a toolset of methods, which
can be selected and combined in multiple ways in order to
meet the specific needs of each business context.
BMDI consists of four iterations that can easily be under-
stood and applied: Analyze and Improve, Challenge and
Change, Test and Verify, and Evaluate and Decide. To learn
more about BMDI, read Business Model Development and
Innovation - A Strategic Approach to Business Transforma-
tion (Doll and Eisert, 2014).
22 you need to define a roadmap, describ-
ing step-by-step how to accomplish this
final state. To scale your business, you
need to decide on an appropriate growth
strategy from day one. Each company
runs through similar growth stages. By
being aware of their existence and char-
Fig. 3: Business acteristics, you can shape the future for
Model (Re-) De- your business. To succeed, the progress
sign and (Re-) Im- has to be carefully monitored (Scott and
plementation as Bruce, 1987). A new development of sup-
key activities of porting these stages are growth hacks.
(BM) Growth hacking is based on the target-
ed utilization of marketing strategies in
Time
Status before (Re-)Design
Monitoring (Re-)Design Using
the BMDI Approach
Set-Up of (Re-)
(Re-)Implementation
Design Project
360 the Business Transformation Journal No.14 | November 2015
order to scale the business as quickly as
possible. It can be considered an explor-
atory mode, where you try to understand
what works best for your business and
the industry through trial and error. There
is no one strategy that is suitable for all.
As in the design of your business model,
it takes a creative process inspired by a
pool of different growth hack patterns to
trigger ideas. These growth hacks can in-
fluence the design of your business mod-
el and hence, need to be part of the busi-
ness model design process. For example,
a growth hack applied by Apple was to
give out their Square device for free in or-
der to encourage customers to try their
product. This would mean initial changes
in your revenue model that should be re-
flected in your initial business model can-
vas. Finding the right growth hacks is hard
to predict, they heavily rely on current
trends and context. There are different
examples of successfully applied growth
hacks: Airbnb addressed Craigslist mem-
bers to post on their site in order to utilize
an existing user network, Facebook and
Pinterest generated buzz by using an invi-
tation-only approach, and Dropbox imple-
mented an incentive-based referral pro-
gram. However, growth hacking should
be seen as a continuous process, you
should not rely on one single growth hack
but rather a smart combination of multi-
ple growth hacks used to support your
company through the different growth
Transformation Status after (Re-)Design
Monitoring

stages. For platform or marketplac-
es, when deciding on your growth hack
strategy, special consideration needs
to be given to the network effects that can
be exploited by reaching a critical mass.
For example, in the first growth stage of
platforms, special focus needs to be giv-
en to solving the chicken and egg prob-
lem. That is, when you want to address
two segments that are interested in inter-
acting, but neither one perceives value in
being the first to join.
Overall, you need to work out the details
of your implementation roadmap to cov-
er the different stages of growth. For this,
you need to define a timeline subdivid-
ed into several phases guiding your road-
map. For each phase, you have to deter-
mine certain KPIs allowing you to monitor
and control your progress. KPIs can be
manifold, such as reaching the first 50 cus-
tomers, 5% market share, and establishing
a reliable business network. Each phase
is described with a detailed project plan,
business case, and a business model can-
vas that explains the business logic in the
respective phase. Here, you should imple-
ment the growth hacks chosen for the cor-
responding phase. You should also con-
sider adaptations in the business model
canvas. In the initial canvas, you may not
start addressing all planned customer seg-
ments or, you might not offer the full value
proposition from the beginning and start
with offering parts of the product or ser-
vice. Summing up all stages, you should
achieve the final business model where
you have reached all customers, offer the
full value proposition, collaborate with all
planned partners, and more.
While you are implementing your busi-
ness model you can always compare the
as-is situation with the expectations for
the respective phase. If gaps occur, you
can always adapt your business model
stages and project plans to any insights
found along the way. This is the beau-
ty of BMDI and business models in gen-
eral; they represent dynamic tools that
follow an iterative process. They should
always reflect your current knowledge and
360 the Business Transformation Journal No.14 | November 2015
DRIVERS
insights, which is why it makes them the
perfect tool for monitoring and controlling
your execution.
Business Model Management and
Optimization
After the implementation of a new busi-
ness model is finalized, the regular
management of a business starts. In this
phase, it is important that the business
model is used as the management frame-
work to make sure that all business deci-
sions are taken from the perspective of
the overarching business logic. To find out
whether the business is running accord-
ing to the expectations and to understand
how the business model is performing,
one should (1) frequently monitor multiple
indicators, both internal and external, (2)
identify gaps between the designed and
the running business model, and (3) pro-
vide the necessary improvements. 23
That is why the management of a busi-
ness model always involves its optimiza-
tion. Under the term optimization, we re-
fer to the reaction to a set of internal and
Four optimization themes were
identified in our research: Nurture
and extend, reduce and get lean,
seize and expand, and protect
and sustain.
external dynamics related to an imple-
mented business model subsuming all ef-
forts for adaptations and improvements.
In general, optimization activities can ei-
ther be a reaction to a gap that was deter-
mined (e.g., a regular analysis of the cus-
tomer requirements might indicate that a
readjustment of the value proposition is
required) or, they could be triggered rath-
er proactively when the responsible man-
agers see a threat or an opportunity (e.g.,
digital technologies provide new options
for companies and their competitors). This
requires an understanding that a business
model is a transformational rather than a
 Business Model Based Management (BM)
static concept (Demil and Lecocq, 2010).
Through our research, we identified four
optimization themes that can be applied
to different contexts.
Nurture and Extend. The underly-
ing assumption for this type of optimiza-
tion is that there are just a few elements
in your business model that are crucial for
its success. Also, that the systematic ad-
vancement of these elements would sig-
nificantly contribute to competitive ad-
vantages and to an improved financial
performance. We call these elements
Portfolio management should shape
the future by creating synergies,
strengths, and opportunities that can
be leveraged in the long run.
24 core assets that could be resources, ac-
tivities, processes, capabilities, compe-
tencies, values, standards, and more.
This type of optimization is about identi-
fying these core assets, improving their
utilization directly, or, if required, nurtur-
ing them and extending their usage as
they grow.
Reduce and Get Lean. This type of op-
timization carries the assumption that
there are several elements in your busi-
ness model that are unvital for its suc-
cess. Moreover, that a systematic
reduction of these elements would sig-
nificantly contribute to efficiency and re-
duced costs. In the context of all types of
lean approaches, these elements are at
least to some extent considered as waste
because they do not adequately contrib-
ute to the value that is created, delivered,
and captured. We call these elements dis-
pensable assets. These elements could
be resources (in the broadest possible
sense), activities, or something in be-
tween. Using the business model as a ref-
erence, it becomes clear what adds value
and what adds waste. This type of optimi-
zation is about identifying these dispens-
able assets, and systematically assess-
ing if they could be eliminated, reduced,
360 the Business Transformation Journal No.14 | November 2015
or carried out in a more efficient way (e.g.,
by somebody else) in order to get lean.
Seize and Expand. The underlying as-
sumption for this type of optimization is
that the environment provides frequent
opportunities that can be seized in or-
der to expand your own competitive posi-
tion. These opportunities can arise due to
changes in the environment, in particular
on the customer side, the competitor side,
and in regards to strategic partners. While
these changes might simply occur, there
may be changes that one can proactive-
ly trigger in his or her own favor. What you
want to accomplish in a Seize and Ex-
pand optimization is to comprehensive-
ly identify and seize opportunities in order
to expand your footprint, i.e., to increase
your market share or to enter new mar-
kets. That is why this type of iteration is of
particular interest if you pursue a growth
strategy.
Protect and Sustain. Here, the assump-
tion is that threats frequently arise in the
external environment that can endan-
ger the companys competitive position
and long-term success. Thus, you have
to protect your business to make it sus-
tainable. These threats can arise due to
disregarding certain aspects during the
initial business model design and imple-
mentation phase or they occur due to
changes in the environment, in particular
on the customer or competitor side. Be-
sides quick and adequate responses to
changes, this type of optimization is main-
ly about proactive measures to make a
business model less vulnerable and more
sustainable.
Business Model Portfolio Manage-
ment and Optimization
The objective of business model portfolio
management and optimization is to im-
plement and reflect the corporate strate-
gy by the creation, maintenance, and op-
timization of a portfolio of businesses. It
supports the management of a portfolio
of business models on the corporate lev-
el with the goal of an ongoing optimiza-
tion of the composition and alignment of

the used business models. The key idea
behind any portfolio is to make decisions
in relation to other decisions (Bea and
Haas, 2013).
Business model portfolio manage-
ment and optimization becomes rele-
vant to achieving economic success in a
sustained manner when a company is
running more than one interrelated busi-
ness. Rooted in growth aspirations and
diversification strategies, active portfolio
management supports solving the prob-
lems of growing, multi-business firms
(Untiedt, Nippa, and Pidun, 2012). A re-
cent survey has shown that portfolio man-
agement is eminently important and rel-
evant with two-thirds of the interviewed
companies applying portfolio manage-
ment techniques regularly (BCG, 2011).
Typical triggers for portfolio optimization
are founded in the attempt to leverage ex-
isting strengths, opportunities, or syner-
gies. Nevertheless, portfolio management
should also shape the future by creating
synergies, strengths, and opportunities
that can be leveraged in the long run.
Because business model portfolio man-
agement and optimization is the only dis-
cipline within (BM) that takes place on the
corporate level, it has a distinguished role.
It acts as the link between the strategy,
corporate level, and subordinate level(s).
This is particularly important when the
decisions need to be made:
to develop a new business model or
to implement a newly developed busi-
ness model
to adjust running business models to
changes in the corporate strategy
to significantly invest into a business
model
to phase out a business or to start the
transformation of a business model with
the goal of the renewal of the business
to sell, merge, or acquire a business
 to prioritize key elements within the
business models
These decisions can be seen as trig-
gers for activities on the subordinate lev-
el. However, it would be wrong to assume
that the linkage between portfolio man-
360 the Business Transformation Journal No.14 | November 2015
DRIVERS
agement and optimization and the other
disciplines is only one-way, which is top-
down. In contrast, all levels should be ac-
tively involved in the strategy process.
This is true for the entire process from
triggering and creating initiatives, to their
Leveraging synergies can lead to
higher efficiency and lower costs as
well as to a better competitive
differentiation.
selection and implementation. Therefore,
in the same way the corporate level influ-
ences the development of business mod-
els on the subordinate levels, these levels
should be empowered and encouraged to
contribute to the optimization of the over-
all strategy and portfolio development on
the corporate level. 25
Similar to optimization activities on the
single business model level, optimiza-
tion activities on the portfolio level contain
widespread themes that can be re-used
in various contexts, such as the following.
Leverage and Optimize. The underlying
assumption for this type of optimization
is that there are potential synergies with-
in the portfolio that could be leveraged
to optimize the overall economic perfor-
mance. Leveraging synergies can lead to
higher efficiency and lower costs as well
as to a better competitive differentiation.
Optimization activities on the
portfolio level include the following:
Leverage and optimize; restructure
and grow; cooperate and strengthen;
and transform and renew.
However, leveraging synergies can also
lead to dependencies and conflicts. Thus,
this type of iteration is ultimately about
finding an optimal trade-off between syn-
ergy and autonomy between the differ-
ent businesses within the portfolio and be-
 Business Model Based Management (BM)
tween the corporate and the subordinate
levels. While the former is often called hori-
zontal optimization, the latter is sometimes
called vertical optimization.
We call the elements where synergies
could be leveraged synergy assets. The
first part of the analysis is to identify the
potential "synergy assets". According
to Porter (2010), these include tangible
(e.g., machines), intangible (e.g., know-
how), and competitive interrelations (e.g.,
aligned activities regarding a joint com-
petitor). These assets cannot just lead to
efficiency gains by centralizing or inte-
grating activities that different businesses
could do together, but also to competitive
advantages by complementing the capa-
bilities of one business with those that an-
other business could provide.
Restructure and Grow. For this type of
optimization, the underlying assumption
26 is that the structure of the portfolio could
be improved in order to grow in a well-
balanced manner according to the cor-
porate objectives. Thus, this type of opti-
mization is ultimately about deriving the
right strategic direction for all business-
The desired benefits should be the
focus, which are clustered in areas
such as time, costs, markets, and
more.
es of the portfolio in scope from a corpo-
rate perspective. In most cases, growth is
the dominant objective while balance (in
regards to: lower vs. higher risk and focus
vs. diversification) is rather an enabler for
sustainable growth.
When we look into the objective of
growth, of course companies can lever-
age traditional portfolio management
techniques such as the BCG- or McKin-
sey-Matrix. However, from a business
model perspective it makes sense to as-
sess the respective growth potential in a
more holistic manner for the established
and evolving businesses. Because a
business can be developed to go into dif-
360 the Business Transformation Journal No.14 | November 2015
ferent directions and in various ways, the
potential growth of a business is highly
dependent on how the responsible man-
agement team is shaping its future. This
is why the team should leverage existing
market data and stress its creativity and
ability to influence future developments.
Cooperate and Strengthen. The un-
derlying assumption for this type of opti-
mization is that various types of strategic
partnerships on the corporate or subor-
dinate levels can strengthen the compa-
ny in different dimensions. Compared to
an organic improvement of the competi-
tive position and organic growth, partner-
ships provide specific benefits that justify
focusing on them in a separate type of op-
timization. Cooperation is an instrument
that should be used frequently due to the
enormous scope of potential applications.
You should focus on the desired benefits
as a starting point, which are often clus-
tered into the following areas (Welge and
Al-Laham, 2011):
Resources: can provide access to ex-
ternal resources and competencies,
e.g., specific expertise.
 Time: provides almost immediate ac-
cess to new assets.
Costs: opportunity to share expensive
resources or to better utilize capacities.
Markets: can provide access to markets
that could not be reached beforehand
and a joint offering might be significantly
more attractive.
Risks: can be the basis to share risks
e.g., for expensive R&D activities.
Reputation: may allow partners to ben-
efit from the image and reputation of the
partner.
Market power: can result in an increas-
ing market power e.g., to carry through
industry standards.
When checking the business mod-
els in scope, the task is to deter-
mine where and how a partner could
make a difference and if a cooperation
would result in significant advantages.
Transform and Renew. Here the as-
sumption is that there is both the need
(at least in sporadic, irregular intervals)
 DRIVERS

and the possibility for a company to rein-

vent itself as a whole or in parts in order
to renew itself frequently for sustainable
success. While in the other optimiza-
tion types existing strengths or custom-
er relations were regarded as a key driv-
er for success, in this type of iteration we
look at the capabilities that companies
need in times of disruptive change. Now,
a dynamic approach is required: The re-
sources and competencies, which laid
the foundation for yesterdays success,
might be insufficient or even restricting to-
day. Thus, companies have to be able to
adjust their resources and competencies
and target the new requirements of future
markets. This transformation includes
the cannibalization of existing assets and
markets in the sense of the Schumpeteri-
an creative destruction (Herrmann et al.,
2007). This ability, allowing companies
to achieve new and innovative forms of 27
competitive advantage, is what Teece et
al. (1997), as well as Eisenhardt and Mar-
tin (2000) call dynamic capabilities. globalization, deregulation and liberal-
To sense and identify starting points on ization, and increasing market dynam-
how a business in the portfolio or even ics. Scenario analysis can be used to
the entire company could be re-invented, reflect potential impacts of these trends
these aspects should be considered: for a company.
 Disruptive technologies: Initially, dis- Blurring industry borders: Because of
ruptive technologies are rather limited advancing technologies, liberalization,
in their capabilities and can take some and hyper competition, industry bor-
time before their advantages are real- ders are blurring. A few well-known ex-
ized. It is important for companies to un- amples are the increasing economic
derstand this and look for niche markets convergence of IT and telecommunica-
or innovators on the customer side that tion, utility and telecommunication, high
would benefit from these advantages. tech and media, healthcare and tour-
Disruptive changes of customer behav- ism, banking and insurance, and bank-
ior: While the majority of customers in ing and retail. Positioning yourself in be-
B2B markets usually change their be- tween industries in order to come up
havior in a slow and predictive man- with new, highly attractive offerings can
ner, there are also those that sudden- be a strategy for new business models.
ly change their behavior, which comes
along with new needs and demands. Conclusion
That is why in some industries it is im- Business model design is only valuable
portant to keep an eye on trendsetters if it is well thought out for the life cycle of
or lead users. the business. Thus, one has to consider
Mega trends: Certain trends are clear- how to implement, monitor, and optimize
ly related to disruptive changes of busi- business models along the way. Without
ness models and totally new oppor- this essential extra step, the developed
tunities. These include digitalization, and evaluated business model will not

360 the Business Transformation Journal No.14 | November 2015

 Business Model Based Management (BM)

achieve the expected success. business models are decisive to shape

However, business model management
does not end there. Looking at the port-
folio of business models run by a compa-
ny provides further insights. Monitoring
and controlling a company based on the
business model portfolio is an innovative
framework for strategic management that
will give business executives the support
needed in a dynamic environment where
competitive advantage.
Business models are meant to support a
company on all levels. (BM) can help to
implement and align the strategy in a sim-
ple manner. It is a framework that can help
steer a company to come to the right de-
cisions for accelerated growth and suc-
cess. That is why (BM) will pave the way
for how we run businesses in the future.

Key Learnings

Implementing, monitoring, and optimizing business models is as important as designing them. It is

the only way of reaching and sustaining the success intended in business model design.
Companies have to manage business models throughout their whole life cycle from their design to
their end life or transformation. They have to look into the portfolio of business models in order to
understand their context and manage them holistically.
Companies mostly run multiple business models, which require managing the business model
portfolio. Looking at the interrelations in the portfolio allows to derive insights on synergies, conflicts,
28 growth potentials, needs for transformation and the like.

Service
AUTHORS

Dr. Uli Eisert is heading the Research and Innovation Hub in St. Gallen, Switzer-
land. The Hub closely collaborates with the University of St. Gallen and is part of the
global Innovation Center Network of SAP. Mr. Eisert has worked in the field of busi-
ness models for over eight years and has done multiple projects, workshops, and
trainings. He has published various journal papers and articles on innovation man-
agement and business model innovation. Before his current position, he was
heading the global PLM solution management at SAP and was working as a con-
sultant and project manager for SAP implementations. He holds degrees in me-
chanical and industrial engineering as well as a PhD in business administration.
uli.eisert[at]sap.com

Julia Doll is a senior project lead for business model innovation at the SAP Research
and Innovation Hub in St. Gallen, Switzerland. She has been working on the concepts
of business model innovation and business model based management. Ms. Doll has
coached many projects in business model innovation, implementation, and optimiza-
tion. Since she started working at SAP in 2007, she has worked on several projects
around the globe. Ms. Doll holds a Master of Science from the University of Mannheim,
Germany and a Master of Business from the University of Queensland, Australia.
ju.doll[at]sap.com

360 the Business Transformation Journal No.14 | November 2015

 DRIVERS

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360 the Business Transformation Journal No.14 | November 2015

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