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Draft:E3value

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E3value is a methodology for modeling business value networks.[1] It is used to explore business models for innovative business ideas, in particular ideas about using new technology. The assumption of e3value is that a business model for new technology should represent the entire value network needed to create value, deliver it to customers, and capture value from this. The methodology includes simulation techniques to test whether all participants in the network can realize positive net cash flow.

Representing value networks

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A value network is represented in e3value by a graph in which the nodes represent economic entities and the edges economic transactions. The following e3value diagram represents a simplified business model of retailing books. It shows that buyers buy a book from a bookshop, who buys the book from a publisher, and buys transport from a logistics provider.

Book retail value network

An e3value diagram represents economic transactions in a value network during a time period, called the contract period. The contract period can be 15 minutes, a day, a month, a year, or any other period interesting for the modeling goal.

An e3value diagram contains the following elements.

  • Boxes represent economic actors. Stacks of boxes (Buyers in the above diagram) represent market segments, which are actors that engage in the same economic transactions.
  • Value objects are objects of economic value, such as money, goods, or services. They have a name, written between square brackets.
  • Economic actors and market segments have ports, represented by small black triangles that point inward or outward. A port represents a willingness to offer or request a value object.
  • Ports are connected by value transfers. A value transfer is a willingness to transfer a value object.
  • Ports are collected in value interfaces, represented by ovals. A value interface represents transactionality: If one of the transfers in an interface occurs during the contract period, then all others also occur in the contract period. The diagram gives no information about time ordering of value transfers.
  • A bull's eye, as can be seen in the Buyers box in the above diagram, represents a need.
  • To satisfy a need, a number of transactions in the value network must occur. These transactions are connected by a dashed line, called the transaction path. A transaction path can contain complex business logic, including and-splits, or-splits, and cardinality jumps.
  • A cross within a circle represents a model boundary. The transaction path could be extended further at this point, by including more economic actors and transactions in the model. But the modeler decided to stop extending the model at this point. It depends on the modeling goal where to stop a transaction path.

An e3value diagram contains no process information.[2] For example, the buyer could pay first and then receive the book, or first receive the book and pay later, or pay in monthly installments. At the publisher side, the bookshop probably buys books in bulk, and they may pay a publisher only when a book is sold. All of this is process information is not represented in an e3value diagram. The diagram only contains the information needed to understand which economic transactions take place.

Process information can be expressed using a process language such as BPMN. There are consistency requirements between an e3value model and a process model.[3]

Designing value networks

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An important part of business model design is deciding who does what. For example, the bookshop may decide to do logistics itself. In the following diagram, boxes with rounded corners represent value activities, which are activities of which the economic actor expects to generate a profit. The symbol inside the Book Selling value activity is an and-split.

In this diagram, boxes with rounded corners represent value activities, which are activities of which the economic actor expects to generate a profit. The symbol inside the Book Selling value activity is an and-split.

In this model, the book transporting activity is expected to be profitable. To increase profitability, the bookshop may decide to offer this activity as a service to other bookshops as well.

Simulating business models

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An e3value diagram can be quantified by stating the size of market segments, the number of need occurrences, the value of money objects and of any other value objects the modeler wants to quantify, and the distribution of choices in transaction paths. By adding information about investments and expenses, the net revenue of each actor can be computed. By varying these quantitative assumptions, different market scenarios can be explored.

It is also possible to quantify a model for a time sequence of two or more contract scenarios. This allows break-even computations and, if investment risk is added, the discounted net present value of an investment.

Applications and extensions

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E3value has been applied to energy management,[4][5][6] blockchain-based value networks,[7] the use of IoT in health care[8] estimating the value of green ICT practices,[9] and assessing the financial sustainability of a community network project.[10] Heim et al. use it to model the SAP university alliances ecosystem[11] and Krupskiy to analyze coopetition in software ecosystems.[12] Kharmoum et al. use e3value to align business value with process models.[13]

Several extensions have been proposed. Danesh proposes an integration with the goal modeling language i* to represent the goal as well as the value network of a virtual organization.[14] Kundisch and John extend the quantitative analysis of e3value with real options theory to improve its role in supporting decisions about business models.[15] Schuster and Moral combine e3value with the REA model of binary exchanges developed in accounting.[16] Weigand et al. also propose an integration with REA, with a service accounting example as use case.[17]

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Verna Allee defines a value network as "any set of roles and interactions in which people engage in both tangible and intangible exchanges to achieve economic or social good"[18]]. Where e3value emphasizes reciprocity of exchanges and offers a quantitative analysis, Allee's approach focusses on network health and the optimization of value realization. The two approaches are complementary.

The Business Model Canvas of Osterwalder & Pigneur is used to generate new business ideas. It focusses on a single business and its immediate context.[19] E3value focusses on a later stage in business development by modeling and analyzing the value network needed to realize a new business idea.

References

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References

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  1. ^ Gordijn, J.; Akkermans, H. (2001). "Designing and evaluating e-business models". IEEE Intelligent Systems. 16 (4): 11–17. doi:10.1109/5254.941353. ISSN 1541-1672.
  2. ^ Gordijn, Jaap; Akkermans, Hans; van Vliet, Hans (2000), "Business Modelling Is Not Process Modelling", Lecture Notes in Computer Science, Berlin, Heidelberg: Springer Berlin Heidelberg, pp. 40–51, doi:10.1007/3-540-45394-6_5, ISBN 978-3-540-41073-7, retrieved 2024-10-14
  3. ^ Pérez Blanco, Francisco Javier; Vara, Juan Manuel; Gómez, Cristian; De Castro, Valeria; Marcos, Esperanza (2022). "Leveraging Service Design by bridging business and process modeling". Proceedings of the 55th Hawaii International Conference on System Sciences. Hawaii International Conference on System Sciences. doi:10.24251/hicss.2022.897. ISBN 978-0-9981331-5-7.
  4. ^ Hammerstrom, Donald J.; Makhmalbaf, Atefe; Marinovici, Maria C. (2016-12-30). Diagramming Transactive Building Business Cases: Using Principles of e3 Value to Document Valuation Studies (Report). Office of Scientific and Technical Information (OSTI). doi:10.2172/1353353.
  5. ^ Koppenhoefer, Christine; Fauser, Jan; Hertweck, Dieter (2017). "Managing and Controlling Decentralized Corporate Energy Systems - Transferring Best-practice Methods to the Energy Domain". Proceedings of the 19th International Conference on Enterprise Information Systems. SCITEPRESS - Science and Technology Publications. pp. 532–540. doi:10.5220/0006388605320540. ISBN 978-989-758-249-3.
  6. ^ D'Souza, A.; Bouw, K.; Velthuijsen, H.; Huitema, G.B.; Wortmann, J.C. (May 2018). "Designing viable multi-commodity energy business ecosystems: Corroborating the business model design framework for viability". Journal of Cleaner Production. 182: 124–138. Bibcode:2018JCPro.182..124D. doi:10.1016/j.jclepro.2018.01.256. ISSN 0959-6526.
  7. ^ Curty, Simon; Fill, Hans-Georg (2023-11-25), "A Domain-Specific e3value Extension for Analyzing Blockchain-Based Value Networks", Lecture Notes in Business Information Processing, Cham: Springer Nature Switzerland, pp. 74–90, doi:10.1007/978-3-031-48583-1_5, ISBN 978-3-031-48582-4, retrieved 2024-10-14
  8. ^ Shoukry, Alaa; Khader, Jameel; Gani, Showkat (2019-04-24). "Improving business process and functionality using IoT based E3-value business model". Electronic Markets. 31 (1): 17–26. doi:10.1007/s12525-019-00344-z. ISSN 1019-6781.
  9. ^ Gu, Qing; Lago, Patricia (2013), "Estimating the Economic Value of Reusable Green ICT Practices", Lecture Notes in Computer Science, Berlin, Heidelberg: Springer Berlin Heidelberg, pp. 315–325, doi:10.1007/978-3-642-38977-1_24, ISBN 978-3-642-38976-4, retrieved 2024-10-14
  10. ^ WaiShiang, Cheah; XingZi, Chong; Bin Khairuddin, Muhammad Asyraf; Binti Jali, Nurfauza; Hidayat, Rahmat (2020-12-18). "Assessing Financial Sustainability of Community Network Project through e3value Modelling and Simulation". JOIV : International Journal on Informatics Visualization. 4 (4): 172–177. doi:10.30630/joiv.4.4.508. ISSN 2549-9904.
  11. ^ Wiesche, Manuel; Jurisch, Marlen C.; Yetton, Philip W.; Krcmar, Helmut (2017-03-03). "Grounded Theory Methodology in Information Systems Research". MIS Quarterly. 41 (3): 685–701. doi:10.25300/misq/2017/41.3.02. hdl:10536/DRO/DU:30105882. ISSN 0276-7783.
  12. ^ Goeminne, Mathieu; Mens, Tom (2013-04-30), "Analyzing ecosystems for open source software developer communities", Software Ecosystems, Edward Elgar Publishing, doi:10.4337/9781781955628.00021, ISBN 978-1-78195-563-5, retrieved 2024-10-14
  13. ^ Kharmoum, Nassim; Retal, Sara; El Bouchti, Karim; Rhalem, Wajih; Ziti, Soumia (2023-04-01). "An automatic alignment of the business process and business value models: a novel MDA method". Indonesian Journal of Electrical Engineering and Computer Science. 30 (1): 501. doi:10.11591/ijeecs.v30.i1.pp501-509. ISSN 2502-4760.
  14. ^ Mikalson, Daley; Guo, Yiping; Adams, Barry J. (2012). "Rainfall Derived Inflow and Infiltration Modeling Approaches". Journal of Water Management Modeling. doi:10.14796/jwmm.r245-08. ISSN 2292-6062.
  15. ^ Kundisch, Dennis; John, Thomas (2012). "Business Model Representation Incorporating Real Options: An Extension of e3-Value". 2012 45th Hawaii International Conference on System Sciences. IEEE. pp. 4456–4465. doi:10.1109/hicss.2012.139. ISBN 978-1-4577-1925-7.
  16. ^ Schuster, Rainer; Motal, Thomas (2009). "From e3-value to REA: Modeling Multi-party E-business Collaborations". 2009 IEEE Conference on Commerce and Enterprise Computing. IEEE. pp. 202–208. doi:10.1109/cec.2009.58. ISBN 978-0-7695-3755-9.
  17. ^ Weigand, Hans; Johannesson, Paul; Bergholtz, Maria (2015). "Accounting for service value - an ontological approach". 2015 IEEE 9th International Conference on Research Challenges in Information Science (RCIS). Vol. 21. IEEE. pp. 159–168. doi:10.1109/rcis.2015.7128876. ISBN 978-1-4673-6630-4.
  18. ^ Allee, Verna (2008-01-18). "Value network analysis and value conversion of tangible and intangible assets". Journal of Intellectual Capital. 9 (1): 5–24. doi:10.1108/14691930810845777. ISSN 1469-1930.
  19. ^ Johnson, Erik A. J. (2012-10-15). "Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers by AlexanderOsterwalder and YvesPigneur. Hoboken, NJ: John Wiley & Sons, 2010. 281 + iv pages. US$34.95". Journal of Product Innovation Management. 29 (6): 1099–1100. doi:10.1111/j.1540-5885.2012.00977_2.x. ISSN 0737-6782.
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