Component business model

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 investments, 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.

Criticism:

With the components developmentcompetency development, “Logic” and “value” became words in the literature on business models^[1]. However over the past years, Business Model approaches have developed^[2] 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^[3] 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^[4], not technology.
• The term 'process' within IBM's component description, is also rightfully criticized^[5] 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 design
• Business process modeling
• Business plan
• Business reference model

References

1. ^ Allan Afuah, Business Models: A Strategic Management Approach, 2007
2. ^ Amar Bhidé, The Origin and Evolution of New Businesses, Oxford University Press.
3. ^ http://www.ebizq.net/blogs/service_oriented/2010/01/business_architecture_and_ibm_component_business_model.php
4. ^ Allan Afuah, Business Models: A Strategic Management Approach, 2007
5. ^ http://www.ebizq.net/blogs/service_oriented/2010/01/business_architecture_and_ibm_component_business_model.php

• Introduction to CBM
• Component Business Models