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Canberra BPMLink Presentation: “We need a business model – can you create one for us please?”
In December last year I presented at the Canberra BPMLink chapter on the subject of government business models. These are fast becoming my niche interest and something that I'm continuing to develop and refine. In this presentation I concentrated on taking participants on the journey to show them that business model frameworks that work for commercial entities aren't appropriate when you're talking about government departments who focus on innovation, delivering government policy outcomes and value adding to their public constituents.
The presentation itself may not be useful as I attempted to use minimal notes and instead concentrate on images that told a story. I'm a big fan of Garr Reynolds's Presentation Zen blog and subsequent books and I used his techniques as inspiration.Documenting Government Business Models
Business models generally have a commercial focus. Quite rightly too, as that’s been their mainstay. They are used to lay out the combined elements of marketing, pricing model and value proposition in a way that communicates exactly how the business will run. From there it can be used to build detailed business plans or specific plans such as marketing.
The Business Model Canvas This example below, from the book Business Model Generation by Alexander Osterwalder and Yves Pigneur shows how their business model canvas is used to document the Apple iPod/iTunes business model. In this case it is used retrospectively, but the canvas can also be used to document a completly new business model too.
The question that I’ve been working with my colleagues to solve, is how the business model canvas can be adapted to meet a government context.
The Government Business Model Context
In his 2004 thesis, The Business Model Ontology – A Proposition in a Design Science Approach, Alexander Osterwalder examined the definition of business models as defined by proceeding authors and his own understanding:
Later on he references the work of Paul Timmers to define the concept of a business model:
“In my opinion a business model has to be understood as a much more holistic concept that embraces all such elements as pricing mechanisms, customer relationships, partnering and revenue sharing.”
Later on he references the work of Paul Timmers to define the concept of a business model:
“He understands a business model as the 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. In order to understand how a company realizes its business mission he adds a marketing model that is the combination of the business model and the marketing strategy of the business actor under consideration.”
While a business model would appear to be widely applied within a commercial context, from the two definitions above, it is clear that the building blocks of a business model are as applicable in a government context as they are in a commercial one. However the role of a government business model is not to make money and the elements of the business model have to be changed to reflect that aspect. Customers in particular, aren’t always apparent within a government context because the role of government is serve community interests. Generally government is concerned with providing value to multiple segments of the community. In my view the role of a government business model is to:
Provide a representation of how the Government funds services, fairly and transparently, to benefit citizens.
Changing the Canvas to Represent Government Business Models
I have been involved in adapting the business model canvas to a number of different government entities. Each time I’ve done it a little differently. Here is how I’ve worked with my colleagues to produce a canvas that is applicable for the Health environment.
1. Revenue and cost are generally irrelevant within a government context. Money is distributed through either a New Policy Proposal or through the Portfolio Budget Statements. Either way, by the time someone is ready to document the business model, the financial aspect of the model is sorted.
2. Instead of just documenting the key partners, within a government context you often want to cast the net wider and document the key stakeholders.
3. Key activites also gets expanded to document the key business processes. This is helpful when you want to use the model to drive requirements gathering and link directly to your high level business requirements specification.
4. Determine what kind of capabilities you need to make this model work. Capabilities can then be mapped to those that exist and those that need to be acquired. You can also judge if they require ICT provisioning.
5. Rather than talking about value proposition, I often tend to speak about business outcomes. This has a rather nice mapping to project outcomes. Mapping to a project management environment is important, as it is generally a project driving the documentation of a business model. Additionally, this term tends to sit better with people operating within a government context than value proposition does. While I understand there is specific intent behind the original canvas heading, value propsition, the improvement in communicatin makes the change worth it. Within a project and programme environment, there is also a well understood heirarchy for the mapping of business outcomes to contribute to programme benefits and eventually organisation goals. This can be done visually through a Results Chain if necessary.
6. Stakeholders have already been documented so there is no need to belabour the point. Instead determine what the key inputs to your business model are.
7. Channel is a marketing term that may sometimes be relevant to government. However it is not always applicable. My colleagues and I have changed it for entity outputs within this example.
8. Segmenting customers makes no sense within a government context, however there is often significant levels of governance and interfaces that need to be documented, hence the changes to reflect that.
The resulting canvas is illustrated below. I’d love to hear how you’ve gone about developing business models for your government organisation.
