Component business model
Encyclopedia
Component Business Model (CBM) is a technique developed by IBM
to model and analyze an enterprise. It is a logical representation or map of business components or "building blocks" and can be depicted on a single page. It can be used to analyze the alignment of enterprise strategy with the organization's capabilities and investment
s, identify redundant or overlapping business capabilities, analyze sourcing options for the different components (buy or build), prioritizing transformation options and can be used to create a unified roadmap after mergers or acquisitions
.
The model is organized as business components along columns and "operational levels" along rows. The Business components are defined partly as large business areas with characteristic skills, IT capabilities and process. The three operational levels are "Direct", "Control" and "Execute" - they separate strategic decisions (Direct), management
checks (Control), and business actions (Execute) on business competencies.
At last, but not least, the IBM CBM appears rather empirical than conceptual. It is not obvious why particular cells present in the CMB matrix if "each component business map is unique to each company", are they common for all enterprises, are they typical to particular industry, and so on. If a company has a purpose and goal(s), how the IBM CBM relates to this purpose, what mechanisms are used for establishing this relationships in company specific/unique business landscape? Nonetheless, it is not possible to see how the IBM CBM mapping provides the view "which components of the business really create differentiation and value", "where you have capability gaps that need to be addressed", and how "you can identify opportunities to improve efficiency and lower costs across the entire enterprise. Identify the components where you can realise the greatest impact". Certainly, knowing what you have is the baseline for further modifications but this map is mute without additional information about corresponding components' values, deltas/gaps to your targets and component inter-dependencies (impacts). As of "opportunities to improve efficiency and lower costs", these categories are simply invisible on such map. So, what does IBM CBM actually provides beside a convenient single map of consultants' discoveries about your enterprise?
IBM
International Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...
to model and analyze an enterprise. It is a logical representation or map of business components or "building blocks" and can be depicted on a single page. It can be used to analyze the alignment of enterprise strategy with the organization's capabilities and investment
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...
s, identify redundant or overlapping business capabilities, analyze sourcing options for the different components (buy or build), prioritizing transformation options and can be used to create a unified roadmap after mergers or acquisitions
Mergers and acquisitions
Mergers and acquisitions refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or...
.
The model is organized as business components along columns and "operational levels" along rows. The Business components are defined partly as large business areas with characteristic skills, IT capabilities and process. The three operational levels are "Direct", "Control" and "Execute" - they separate strategic decisions (Direct), management
Management
Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...
checks (Control), and business actions (Execute) on business competencies.
Criticism:
With the components developmentcompetency development, “Logic” and “value” became words in the literature on business models. However over the past years, Business Model approaches have developed and include today business model design, business model innovation and business model transformation. Even though IBM’s business model approach can be used to map components of a business model or product, the following critic points have been identified. IBM's Component Business Model approach:- Is built on components that are supposed to consist of people, processes and technology needed by this component to act as a standalone entity. As criticized rightfully The 'technology' element in each block is definitely a tribute to IBM's primary business while it is not a mandatory part of many business models in reality. It is strategy that is vital within a business model, not technology.
- The term 'process' within IBM's component description, is also rightfully criticized requires additional explanations because it has dual meaning in Business and single meaning in IT; which one has been meant here? And why each business component has to act as a "standalone entity" instead of being a compositions of business components as well (i.e. it cannot act standing alone)?
- Doesn’t include Corporate structure & responsible, which a business model should include.
- Doesn’t include a representation of the main business goals, e.g. strategic business objectives, critical success factors and key performance indicators, which a holistic business model approach should include.
- Doesn’t include a representation of the main business Issues/pain points and thereby corporate weakness, which a holistic business model approach should include for they represent the threat to the company’s business model.
- The linkages among business competences, measurements and results is not explicit.
- Doesn’t have a clear cause and effect linkages between the competencies, desired outcomes and measurements. Thereby the business model can help with possible strategic decisions.
- Doesn’t consider the issue of performance measurements, which is vital for business modelling.
- Doesn’t consider the important issue of goal setting, which is critical for developing the business model.
- Doesn’t place enough emphasis on business model management and is thereby missing a continuous improvement and governance approach to the business model.
At last, but not least, the IBM CBM appears rather empirical than conceptual. It is not obvious why particular cells present in the CMB matrix if "each component business map is unique to each company", are they common for all enterprises, are they typical to particular industry, and so on. If a company has a purpose and goal(s), how the IBM CBM relates to this purpose, what mechanisms are used for establishing this relationships in company specific/unique business landscape? Nonetheless, it is not possible to see how the IBM CBM mapping provides the view "which components of the business really create differentiation and value", "where you have capability gaps that need to be addressed", and how "you can identify opportunities to improve efficiency and lower costs across the entire enterprise. Identify the components where you can realise the greatest impact". Certainly, knowing what you have is the baseline for further modifications but this map is mute without additional information about corresponding components' values, deltas/gaps to your targets and component inter-dependencies (impacts). As of "opportunities to improve efficiency and lower costs", these categories are simply invisible on such map. So, what does IBM CBM actually provides beside a convenient single map of consultants' discoveries about your enterprise?
See also
- Business model designBusiness model designBusiness model design refers to the activity of designing a company's business model. It is part of the business development and business strategy process and involves design methods.Business model design includes the modeling and description of a company's:...
- Business process modelingBusiness process modelingBusiness Process Modeling in systems engineering is the activity of representing processes of an enterprise, so that the current process may be analyzed and improved. BPM is typically performed by business analysts and managers who are seeking to improve process efficiency and quality...
- Business planBusiness planA business plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals....
- Business reference modelBusiness reference modelBusiness reference model is a reference model, concentrating on the functional and organizational aspects of the core business of an enterprise, service organization or government agency....