CHAPTER 3 - RESEARCH FRAMEWORK
3.3 The three levels of decision making
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Key Resources
Key resources are what resources a firm requires to support other compo-nents and offer services, containing physical, intellectual, human and fi-nancial resources.
Key Activities
Key activities refer to what a firm actually performs to make the business model work, including production, platform or network, R&D, problem solving, selling, information management, financial transactions, supply chain management, networking and resource leveraging, recruitment and training, etc.
Key Partners Key partners are the cooperative firms which acquire some resources or outsource some activities.
Value
Financial Value Financial value generates from the balance between revenues from cus-tomers as well as costs from other components.
Customer Value Customer value is defined as what value customers gain from the service in use or after use, including satisfaction and quality.
Operating Value
Operating value comes from the process of practicing the business model, and it brings benefits to a firm and stakeholders. It can be viewed form the perspectives of management and personnel.
3.3 The three levels of decision making
We adopt the three levels of decision making, which is proposed by Mitchell and Coles (2003). The three levels include the foundation, proprietary, and rules levels.
These levels reflect a firm’s increasingly specific managerial purposes. Three levels not only ensure general decisions in the industry, but they also can support the devel-opment of distinctive decisions that fit a firm’s individual characteristics.
Accordingly, we present our whole business model framework, which combines three levels of decision making with eleven components. At each level, eleven com-ponents, as basic decision areas, will be considered. Finally, through a process of de-cision making, an organization will define its own business model. The details of the three levels are explained as follows:
Foundation Level
At the first level, a service organization should make general decisions in the industry. These types of decisions can be made by answering some basic questions or addressing certain generic decisions that must be made by all organizations, such as what type of business they plan to conduct. The foundation level tries to find universal models as well as general
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sons across firms. We address some basic questions to provide references for each component. See Table 10.
Table 10 The basic questions in the foundation level Component Consideration
Organization
What are a firm’s structure, environment, culture, and mission?
What characteristics does a firm have?
What does a firm focus on most?
How is a firm different from its competitors?
What advantages does a firm have?
Which of a firm’s advantages are the most important?
What are a firm’s strategies?
How costly are these strategies?
What value do these strategies bring?
Customer Segments Who do a firm provides services for?
Who are a firm’s most important customer segments?
Service Proposition
What problems does a firm solve for customers?
What needs does a firm satisfy for customers?
What services does a firm deliver to customers?
What services does a firm offer to each customer segment?
Service Encounter
What type of service encounter is ideal for customer segments?
Which services have an established firm?
How costly are these service encounters?
How to integrate them with the rest of the business model?
What should a firm do in a service encounter?
Who are the contact personnel?
Who are the most important contact personnel in the service?
What should contact personnel do in the service encounter?
What should customers do in the service encounter?
Service Delivery
Through which service delivery do customers want to be reached?
How does a firm currently reach its customers?
What are the best modes by which to reach customers?
Which of these modes are most cost-efficient?
How to integrate service deliveries?
How to integrate service deliveries with customer routines?
Key Resources What resources do other components require?
Which component is the most important?
Key Activities What activities do other components require?
Which of those activities is most important?
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How to invest in employees?
How to use IT to enable employees?
What elements are critical for recruitment and training?
How much to pay for performance?
What abilities or knowledge should employees have?
Which abilities or knowledge are the most important?
Key Partners
Who are our key partners?
What resources does a firm acquire from partners?
Which activities do partners perform?
Financial Value
For what service propositions are customers willing to pay?
For what services do customers currently pay?
How are customers currently paying?
How would customers prefer to pay?
How much does each revenue stream contribute to overall revenues?
What are the most important costs that are inherent in our business model components?
Customer Value
What types of satisfaction and quality do a firm’s services provide for its customers?
How to evaluate customer satisfaction and quality of experience of a firm’s services?
What is the most important aspect of service that is provided to a firm’s customers?
Operating Value What operating value can a firm receive?
Which type of operating value is most important?
Proprietary Level
At the second level, a service organization hopes to reach its marketplace advantage by developing unique combinations among decision areas. In each of the eleven decision areas, by discerning what can make a firm dif-ferent or superior, a firm can determine its market position. The proprietary level mandates that a firm needs to customize its own business model.
Rules Level
At the last level, a service organization is supposed to establish specific guidelines and methods of execution to allow its business model to run.
Some disciplines, regulations, operations, execution, guidelines or manuals should be drawn up to provide regulations of range, limits, or indicators.
The rules level plays a role in guiding a firm’s principles and leading to the execution of decisions that are made at the foundation and proprietary levels.