A Business Model (BM) Development Methodology in Ubiquitous Computing Environments

Choon Seong Leem, Nam Joo Jeon, Jong Hwa Choi, and Hyoun Gyu Shin
School of Computer and Industrial Engineering, Yonsei University, 134 Shinchon-dong Sudaemoon-gu, Seoul 120-749, South Korea {leem, jeonnj, jhchoe, coolshg}@yonsei.ac.kr http://ebiz.yonsei.ac.kr

Abstract. Even though the importance of a Business Model (BM) in ubiquitous computing environments has been growing, current research mainly focuses only on technology. Without a proper evaluation method for a BM, a promising BM has not been verified. In this research, we suggested a BM development methodology for ubiquitous computing, which contains the Business Model Analysis (BMA) framework for analyzing a BM and the Business Model Feasibility Analysis (BMFA) framework for evaluating a BM. The methodology is composed of phases, activities, and tasks in detail and depth, having systematic relations to each other. A prospective BM of ubiquitous computing environments could be extracted by this methodology.

1 Introduction
The development of Information Technology has been carried on through the technological revolution of information and communication. The means for the revolution are the changes in the computing environment, which consists of four stages [13]: The first step is a main frame computing revolution, and the second is a personal computing revolution. The third is a breakup computing revolution and the final is a ubiquitous computing revolution. The ubiquitous computing revolution, which is considered as an Information Technology to fuse real space and cyber space, based on the networks among existing things in the real world, has been conducted over the whole of society. Even more, the future oriented technology has changed the axis of the paradigm of Information Technology. Accordingly as the ubiquitous computing technology appears, the importance of a suitable Business Model (BM) has been increasing more and more in these new Information Technology environments. Nowadays, many studies about suggesting BMs of ubiquitous computing environments and the implementation of these have been tried by many researchers. However, most of these researchers focus only on the technological views of the development of BMs, and its procedure has a short logical process and systematic design. Besides, it is not easy to measure the BMs' value because a suitable estimation method for a BM does not exist. From this point, this research will present a methodology, which can be used for developing a BM of ubiquitous environments, according to a systematic and logical approach in a BM field.
O. Gervasi et al. (Eds.): ICCSA 2005, LNCS 3483, pp. 86 95, 2005. Springer-Verlag Berlin Heidelberg 2005

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This research is composed of five chapters: Chapter two discusses the concept of ubiquitous computing and a BM, Chapter three discusses a BM development methodology which reflects technological and environmental characteristics of ubiquitous computing, Chapter four is a case which is applied to the methodology, and Chapter five discusses the conclusions and directions for further research.

2 Previous Research
2.1 Ubiquitous Computing Definitions and Characteristics Even though there are many common factors about the definition of ubiquitous computing, these vary and are slightly different according to the scholar, time and organization. Table1 arranges the definitions of ubiquitous computing [4], [11], [12], [19].
Table 1. Concept comparison of ubiquitous computing by scholars and research institutes Scholars and research institutes Friedemann Mattern (2001) K. Sakamura (1987) Definition Tomorrow everyday objects will become smart and they will all be interconnected. Ubiquitous computing is making us to be able to use computers anywhere and anytime. Ubiquitous computing has as its goal the enhancing computer use by making many computers available throughout the physical environment, but making them effectively invisible to the user. Pervasive computing delivers mobile access to business information without limits from any device, over any network, using any style of interaction. It gives people control over the time and the place, on demand.

Mark Weiser (1993)

IBM (2004)

With many changes of the definition of ubiquitous computing according to technological progress, we have refined the definition of ubiquitous computing in this research. We defined that ubiquitous computing is a technology, in which invisible computers are embedded and connected with all things so that anyone can communicate, exchange and share information anywhere anytime. Based on these characteristics of ubiquitous computing, the United States of America, Europe, Japan and Korea recently have chosen their own concepts of ubiquitous computing, and have been trying to benefit from the highly focused R&D. Table 2 compares the concepts of ubiquitous computing of each country [18]. To sum up these various concepts of a BM, a BM is to identify diverse components such as the products and services, business strategies and processes, and stakeholders of a BM, to express the value created between the players by combining the components, and to set up long-term business strategy for an operating company.

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C.S. Leem et al. Table 2. Ubiquitous computing concept comparison of U.S, Europe, Japan, Korea

Country Concept

U.S Ubiquitous computing, Pervasive computing

Europe Disappearing computing, Ambient computing

Japan Ubiquitous network

Korea Ubiquitous Appliance Single function appliance using short range wireless Interface Appliance

Anywhere connection by Value small chip, smart card, context roaming Research field Computer devices Every objects Network Core Short-distance radio communication, Sensor, MEMS, Technology Small size object chip Intelligent Service by smart cooperation by devices information artifacts

Even the researches of each country for ubiquitous computing have slightly different strategies, they pursue the three common characters: Smart, Seamless networks, and Mobility. 2.2 Business Model (BM) Concept The concepts for a BM are different according to the researcher, transaction channel and so on. Table 3 shows representative concepts of a BM [1], [2], [15], [17].
Table 3. Business Model (BM) definition by scholars Scholars Timmers (1998) Definition An architecture for the product, service and information flows, including a description of the various business actors and their roles; and A description of the potential benefits for the various business actors; and A description of the sources of revenues. A business model is the method of doing business by which a company can sustain itself - that is, generate revenue. Establishment and management strategy of enterprise for revenue model, business operation and cooperation for providing customer services. The business model depicts the design of transaction content, structure, and governance so as to create value through the exploitation of business opportunities.

Rappar (1999) Leem (2000) Amit & Zott (2001)

To sum up these various concepts of a BM, a BM is to identify diverse components such as the products and services, business strategies and processes, and stakeholders of a BM, to express the value created between the players by combining the components, and to set up long-term business strategy for an operating company. Having dealt with the development of IT, most researchers have been concerned about classifying a BM or analyzing success factors for a BM. Despite these re-

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searches to define structural forms of a BM and establish a suitable strategy for a BM, they do not present a specific method to develop a BM. The demanded for research for developing a BM are the analysis methodology for a BM based on the BMs component, the design methodology to define the flow of goods, services, and values etc., and the measurement methodology for the value of a BM. Table 4 shows research of existing development methods concerned with a BM [1], [5], [6], [7], [9], [10], [14], [16].
Table 4. Business model analysis, modeling and evaluation method by scholars Category Analysis method Design method Evaluation method Scholar Gordjin (2000) Barnes (2002) An, et al (2003) Gulla & Brasethvik (2000) Kang, et al (2002) Reilly (1996) Amit & Zott (2001) Kim, et al (2003) Research model e3-valueTM ontology The m-commerce value chain Business model analysis framework Business model process design Multi-layer design framework The feasibility analysis Value creation model Value creation indices

2.3 Limitations of Previous Research While the present ubiquitous computing related research is mainly technology oriented, recent research tends to show that the interest of developing a BM is increasing gradually [3]. However, there is still not enough research to suggest the necessary processes and specific contents for a BM development, beside some limits in applying the prior research related to developing for a BM in a ubiquitous computing field are exist. They are as follows: It is difficult to understand the factors such as analysis, design, and evaluation for a BM configurationally because of the separation of the related research for each area. They do not present a synthetic process and roles for BM development. When they come to the evaluation of a BM, they do not deal with all viewpoints but mainly with the viewpoint of cost and profit. Because most of them are the studies based on the limited channel circumstances such as e-business and m-business, they need to be modified and corrected so as to adjust for a ubiquitous computing field. To develop a suitable BM in ubiquitous computing environments, a logical and systematic development method reflecting the characteristics of ubiquitous computing is needed. In this research we defined a suitable standard BM development methodology, which is based on ubiquitous computing environments, has 4 phases. They are planning, design, implementation, and management. Each area has its own specific tasks.

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3 A Business Model (BM) Development Methodology in Ubiquitous Computing Environments

A BM development methodology in ubiquitous computing environments consists of 4 phases which are a BM planning, design, implementation, and management, and each phase has 14 activities composed of 26 detailed tasks. Each step of the methodology is related as are the results from each step. Fig. 1 shows the whole structure of the methodology.
Phase 1 Business Model Planning
Activity 1_A Environment Analysis
External environment analysis Internal environment analysis

Phase 2 Business Model Design

Activity 2_A Description for customer scenario
Definition of main and potential customers Description for customers activity scenario

Phase 3 Business Model Implementation

Activity 3_A Implementation of value map
Identifying that exchange values between stakeholder Drawing relation architecture between stakeholder

Phase 4 Business Model Management

Activity 4_A Revenue management
Analysis of revenue source and type Guideline for managing the revenue

Activity 1_B Requirement Analysis

Customer requirement analysis Market requirement analysis

Activity 2_B Description for enterprise scenario

Definition of enterprise business boundary Description for enterprises activity scenario

Activity 4_B Activity 3_B Implementation of process map

Identifying that occur input/output of BM Drawing process of BM

Competency management
Analysis for enterprises competency Guideline for managing the competency

Activity 1_C Business Model Analysis

Development of BM analysis framework Analysis for existing BM of ubiquitous computing Analysis for new BM of ubiquitous computing

Activity 2_C Description for partners scenario

Definition of business partner Description for partners activity scenario

Activity 4_C Activity 3_C Implementation of platform map

Identifying core IT for BM Drawing technology architecture

Risk management
Analysis for internal risks and external risks of enterprise Guideline for managing the risk

Activity 1_D BM Feasibility Analysis

Development for BM feasibility analysis framework Applying analyzed BM

Activity 1_E Choosing the promising BM

Generalization of results Choosing the hopeful BM

Fig. 1. A BM development methodology in ubiquitous computing environments

3.1 Business Model Planning (Phase 1) The first step of the ubiquitous business model development methodology is BM planning (Phase 1). This step defines the necessary activities and detailed tasks to draw out a promising BM in ubiquitous business environments. Analyzing the forms of a BM is conducted through environment analysis and requirement analysis in the BM planning phase. Subsequently, a series of activities and tasks for promising BMs are defined, which includes the development of the business feasibility analysis framework, applying and extracting a promising BM.

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3.2 Business Model Design (Phase 2) The BM design phase consists of activities and tasks so as to select a specific scenario, based on the events which might occur in the BM, with the perspective of major players such as operator, customer, and partner. This stage suggests a scenario as an operating plan for the promising BM which was selected in the earlier step, then uses it as a designing plan.
Table 5. Definition for detailed activities and tasks of BM planning phase Phase Activity Activity 1_A Environment analysis Activity 1_B Requirement analysis Phase 1 BM planning Activity 1_C Business Model Analysis (BMA) Activity 1_D Business Model Feasibility Analysis (BMFA) Activity 1_E Choosing the promising BM Description and detailed tasks Environment analysis for a company : competitive circum stances analysis, value chain analysis, and etc. for externa l and SWOT analysis, resource analysis, and etc. for inte rnal Requirement analysis about standardization, policy suppo rting and etc. for market and analysis about purpose of us e, satisfaction, and etc. for customer, which are influenced by emerging ubiquitous computing environments Development of Business Model Analysis (BMA) frame work to analyze the BM of ubiquitous computing environ ments, and applying existing and new BMs of ubiquitous computing to the framework Development for Business Model Feasibility Analysis (B MFA) framework based on ubiquitous computing environ ments, and applying the analyzed BMs to it

Summarization of results from BMFA, and choosing a pr omising BM in ubiquitous computing environments

Table 6. Definition for detailed activities and tasks of BM design phase Phase Activity Activity 2_A Description for customer scenario Phase 2 BM design Activity 2_B Description for enterprise scenario Activity 2_C Description for partner scenario Description and detailed tasks Definition of main and potential customers for the B M and description of the customers activity scenario Definition of enterprise business boundary, and descr iption of the enterprises activity scenario including d elivery ways of goods and service, and relationship of the business partners Definition of the business partner to be need for the B M operation, and description of the partners roles an d activity scenario

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3.3 Business Model Implementation (Phase 3) Based on the scenarios of customers, operators, and partners, the BM implementation phase consists of activities and tasks which describe factors needed for implementation of the BM and the relations of them. This phase classifies the factors such as value, process, platform layers, and suggests maps to structure the key values of each layer as architecture for commercialization of the BM.
Table 7. Definition for detailed activities and tasks of BM implementation phase Phase Activity Activity 3_A Implementation of value map Activity 3_B Implementation of process map Activity 3_C Implementation of platform map Description and detailed tasks Identifying the exchanged values between stakeholder s, and drawing the relations between them Identifying the flow of the inputs/outputs of BM from the start to end, and drawing the flow as a map Drawing technological architecture for implementing the BM

Phase 3 BM implementation

Table 8. Definition for detailed activities and tasks of BM management phase Phase Activity Activity 4_A Revenue management Activity 4_B Competency management Activity 4_C Risk management Description and detailed tasks Analysis on resources and types of revenue of t he BM, and proposal for revenue management Proposal for competency management to be nee ded for commercialization of the BM Proposal for risk management to overcome the r isk factors which might be existing among the c ommercialization processes

Phase 4 BM management

3.4 Business Model Management (Phase 4) The BM management phase consists of activities and tasks to propose guidelines for revenue, competency, and risk management. This step suggests management guides for commercialization of the BM, according to the results from the analysis of each BM carried out in the earlier planning phase.

4 Business Model Feasibility Analysis (BMFA) Framework

The ubiquitous computing BM development methodology suggested in this research includes a framework of Business Model Feasibility Analysis (BMFA). Not only does the framework play a crucial role in the planning phase but also the results of the analysis are significant factors as inputs for the activities of design, implementation

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and management phases. Fig. 2 illustrates the overall structure of the ubiquitous BMFA framework. The ubiquitous BMFA framework is a filtering system for suitable BMs of ubiquitous computing environments, and is composed of pre BMFA framework and post BMFA framework; The pre BMFA framework, which consists of technical characteristics, requirements for uses, and enterprise strategies, is a system to evaluate the feasibility of execution of BMs, while the post BMFA framework being composed of competencies of enterprise, return on investment, and risk factors is a system to measure the feasibility of achievement of the BMs.
Framework of business model feasibility analysis

Pre business model feasibility analysis framework Characteristics of ubiquitous computing technology Device characteristic Channel characteristic Using characteristic Requirements of user Service Quality Value proposition Strategies of enterprise Internal strategy External strategy

Post business model feasibility analysis framework Competencies of enterprise Technology Marketing Organization Return on invest Revenue Cost reduction Additional revenue Risks Internal risk External risk

Fig. 2. The structure of Business Model Feasibility Analysis (BMFA) framework

The procedures of the BMFA are as follows: Extracting the highly executable BMs through the result of the pre BMFA, evaluating the extracted BMs based upon the post BMFA framework, and selecting a promising BM of ubiquitous computing environments according to the results of the evaluation. In addition, the components of ubiquitous BMFA framework are systematically related to each other so that the outputs of former activities are used as inputs for following activities. The BMFA framework is much more meaningful in terms of the fact that various BMs could be evaluated objectively. Closely looking at the relations of the activities, the outputs of the environment analysis (activity 1_A) and requirement analysis (activity 1_B) are used as inputs for establishing the detailed evaluating indices of the pre/post BMFA framework. Likewise, the output of BMA (activity 1_C) is used for the detailed evaluation indices of the BMFA and used as basis inputs for performing the activity 2_A, activity 2_B, and activity 2_C of phase 2 as well. The output of BMFA (activity 1_D) is also used as inputs of implementation for platform map (activity 3_C) and phase 4 which comprise of activity 4_A, activity 4_B, and activity 4_C. In addition, the overall outputs of phase 2 serve as inputs for implementing the process map (activity 2_A) and value map (activity 2_B). Fig. 3 shows the relations between activities consisting of the ubiquitous BM development explained earlier.

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Activity 2_A Description for customer scenario Activity 1_C Business model analysis Evaluation criteria Activity 1_D Business model Feasibility analysis Activity 1_A Environment analysis Pre business model feasibility Analysis framework Activity 3_A Implementation for value map Activity 3_B Implementation for process map Activity 4_C Implementation for platform map Activity 3_B Description for enterprise scenario Activity 4_C Description for partner scenario

Technology Activity 1_B Requirement analysis

Requirement

Strategy

Post business model feasibility Analysis framework

Competency

ROI

Risk Activity 4_A Revenue management

Activity 4_B Competency management

Activity 4_C Risk management

Fig. 3. Relation between BM feasibility and other activities

5 Conclusions and Future Research

Recently there has been research about ubiquitous computing and efforts for applying that technology to various fields such as the government, education, culture, industry, etc. more than ever. It is forecasted that these efforts will gradually become reality and make improvements in the effectiveness for individuals and society. However, the actual situation is that no promising BM has been suggested despites of the many applicable areas of ubiquitous computing. In this research, we have suggested a suitable development methodology for ubiquitous computing environments, which has logical and systematic procedures, and defined the phases, activities, and tasks of the methodology. In addition, we have addressed that each activity of the methodology is not separated independently but has systematic relations to each other. The analysis framework for evaluating a BM and the feasibility analysis framework are also a vital result of our study. However, there are certain limits that the methodology is not verified practically and does not include the case of developing an actual ubiquitous BM. Nevertheless, the limits could be removed by further researches for applying the methodology to various applicable areas along with establishing a repository.

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