Archive for the ‘Business Architecture’ Category

Business Model Canvas and Enterprise Canvas

August 2, 2011 17 comments

There are some discussions on connecting business architecture to enterprise architecture. It looks like everyone somehow agrees that Business Model Canvas from Osterwalder somehow needs to be connected to enterprise architecture models. As I spent some time already for creating business model with Business Model Canvas and enterprise architecture model with Enterprise Canvas from Tom Graves, I want to share my opinion.

First of all, although both models are talking about very similar things like organization, business, customers, partners, value proposition etc., they are telling really different stories. The mapping between them really helps understanding the modeling process when someone is familiar with one diagram but not the other. Other than that the mapping can be a bit misguiding and create impression that it’s two different ways of telling same story. It’s very common that people think they’re a little different version of same thing. So what’s the difference?

Well, first of all Business Model Canvas is about telling a story on how an organization is creating value for its customers, to be blunt how it makes money. Business Model Canvas is very useful for modeling the revenue and costs structures around customer and value proposition. So if you are interested in telling a story about how your company will make money with whatever it’s doing for it’s customers, you have Business Model Canvas. It’s not about how things are done in the organization but what needs to be done to make it work.

Enterprise Canvas on the other side is about telling a story of how organization (in the context of enterprise) is structured to do it’s value creation. The key word is the ‘structure’. If you want to understand what needs to be actually done in your organization to create value in the enterprise for the customers, which capabilities are needed, what are the external influencers, you have the enterprise canvas. Important point is that, enterprise canvas  is not about showing how organization is making money. In the enterprise context, it’s not about making money anymore. It’s about a vision, it’s about creating value in the enterprise.

In the enterprise canvas, we’re telling a story about how capabilities are structures to create value. In practice, when you get a post-it in your hand to put on the enterprise canvas, you write a name of a capability there. One important difference between two canvases is that enterprise canvas is recursive. So when you’re writing a name of a capability in your post-it, you need to make sure that capability belongs to the level you’re working one. Although some capabilities are really very important for the organization (costly, high focus,…), they may not appear in the canvas you’re doing for the first level which shows the relations with other parties in the enterprise. On the other side, Business Model Canvas is not about recursiveness, you need to show what’s important there. You can put any capability as a key activity or a key resource if it’s inherent to the business model, independent of the recursive levels. Here the most important this is to create a story of the business, not creating a model which reflects the structure close to reality. So whatever helps you to describe the business model as a story has a place in the Business Model Canvas.

Another important difference is about the partners. But before going into that I must make myself clear about what a capability is. Capability is the quality of being capable of doing work (or performing actions). It is not what is performed in business processes, it’s not what’s done to create value. Capability is what is needed for doing work/performing action for creating value. For example, I’m capable of creating business model and this is also my function in my organization. I’m also capable of translating documents, but this is not what one of my functions in the organization I’m working in. So in my definition, capabilities are not performed or delivered but simply possessed. The Business Capability definition in the Enterprise Business Motivation Model of Nick Malik is more like a Business Function to me, not Business Capability.

It’s possible and very common that some of the capabilities needed for creating value does not exist in the organization. Organizations rely to their partners for delivering them. In Enterprise Canvas it’s very important to show all capabilities, independent of who has them: an organization unit, a single person, a software, a machine or a partner. In case it’s provided by partner, one also has to think about supplier channels and supplier relations for the particular capability. In the Business Model Canvas the focus is not on the structure of the capabilities for delivering value, but what organization does to deliver value. So the capabilities supplied by the partners will not make it to Value Proposition, Key Activities, Customer Channels etc. If the provided capability is inherent in the business model, supplier should find its place in the Key Partners, otherwise not., that’s it. A side note about suppliers in Enterprise Canvas. I always group them into two: capability suppliers and asset suppliers. The difference appears to be very important.

Business Model Canvas models an organization from a particular view, a one which is generally a more familiar view to many. Enterprise Canvas models a different view on a larger scope. This vie w is not very easily understood, not even by most of the directors. When people are talking about vision being making money,  profitability being strategy, etc. it shows lack of understanding enterprise architecture scope and being too much business centric.