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  • Occasional Working Paper No. 5, July 2012

    A multi-purpose hierarchical business model framework

    Susan C. Lambert

    University of South Australia

    School of Commerce

    Centre for Accounting, Governance and Sustainability

    University of South Australia

    City West Campus

    GPO Box 2471

    Adelaide, South Australia 5001

    ISSN 1838-0409 (Print) 1838-0468 (online)

  • Centre for Accounting, Governance and Sustainability Occasional Working Papers No. 5, July 2012

    2

    Aims and Scope

    The Centre for Accounting, Governance and Sustainability is pleased to present Occasional Working Papers

    written by members prior to their publication in refereed journals. The papers represent the varied current

    research interests of members. Feedback is welcomed through direct context with the author. Occasional

    Working Papers assist individual scholars by allowing for publication, dissemination, and discussion of new

    research in a fast-track mode, prior to later publication in journals or books. Dissemination of the Occasional

    Working Papers is primarily through the Centre for Accounting, Governance and Sustainability website,

    downloadable free of charge (see http://www.unisa.edu.au/cags/publications.asp).

    2012 Centre for Accounting, Governance and Sustainability, University of South Australia

    This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be

    reproduced by any process without prior written permission from the Director of the Centre for Accounting,

    Governance and Sustainability. Requests and enquiries concerning reproduction and rights should be

    addressed to Professor Roger L. Burritt, Director, Centre for Accounting, Governance and Sustainability,

    School of Commerce, University of South Australia, GPO Box 2471, Adelaide, South Australia, 5001 or

    emailed to roger.burritt@unisa.edu.au. The intellectual property of each paper remains vested in the authors as

    listed on the paper.

    Published by the Centre for Accounting, Governance and Sustainability, School of Commerce, University of

    South Australia, GPO Box 2471, Adelaide, South Australia, 5001, Director: Professor Roger Burritt

    Designer: Amanda Carter

    ISSN No: 1838-0409 (print) 1838-0468 (online)

    Submissions to Research Administrator, Centre for Accounting, Governance and Sustainability, via email

    cags@unisa.edu.au

    Citation

    The following Occasional Working Paper should be cited as:

    Lambert, S.C. (2012), A multi-purpose hierarchical business model framework, Centre for Accounting,

    Governance and Sustainability Occasional Working Papers, No. 5, July, University of South Australia,

    Adelaide.

    http://www.unisa.edu.au/cags/publications.aspmailto:roger.burritt@unisa.edu.aumailto:cags@unisa.edu.au

  • A multi-purpose hierarchical business model framework

    1

    A multi-purpose hierarchical business model framework

    Susan C. Lambert

    Abstract

    The aim of this paper is to explain the benefits of a hierarchically structured

    business model framework and then to propose such a framework. Existing

    literature is used to justify the need for a hierarchically structured business

    model framework. The hierarchical business model framework developed has

    been modelled using object-oriented modelling principles that have been used

    for information systems modelling for several decades. A brief overview of the

    object-oriented modelling principles is provided prior to it being used to build

    the hierarchical business model framework. The resultant framework is able to

    accommodate a variety of perspectives at a highly abstract level and then be

    unpacked to provide the level of granularity or detail required by the user.

    The robustness of the modelling paradigm that is chosen for this task provides a

    structure by which business model data can be collected and organised in a way

    that provides the model with integrity whilst allowing the business model to be

    depicted in a variety of ways. Not only is the hierarchical business model

    framework sufficiently versatile to meet the needs of multiple users but because

    it incorporates the qualities of an inclusive hierarchy it is suitable as a basis for a

    general classification of business models.

    The hierarchical business model framework is described in a broad sense in this

    paper leaving the detailed engineering of the model for future research.

    Keywords: business model, hierarchical model, object-oriented modelling

    .

  • Centre for Accounting, Governance and Sustainability Occasional Working Papers No. 5, July 2012

    2

    A multi-purpose hierarchical business model framework

    1. The need for a multi-purpose, hierarchically-structured business

    model framework

    Business models have the potential to serve many purposes. Based on a review of the

    literature, Al-Debei and Avison (2010) identify three over-riding functions of business

    models being, a conceptual tool for aligning business processes to business strategy, a

    device for recognising the economic and strategic benefits of technological innovations and

    artefacts and, thirdly, a means by which the logic of the enterprise can be captured and

    articulated to generate knowledge capital. In addition to these three practice oriented

    functions of the business model Mkinen and Seppnen (2007, p. 739) acknowledge that

    models are fundamentally classification systems and that existing business model

    frameworks do not serve this purpose well. It is further argued that hierarchical structuring

    and a more detailed level of analysis of elements is required to enable business models to be

    described and subsequently classified (Mkinen and Seppnen 2007). Hierarchical

    structuring will permit generalisations to be made at different levels of analysis (Mkinen

    and Seppnen 2007).

    There exists a multitude of business model frameworks that provide abstract visual

    representations of the business model and low level narrative descriptions of the business

    model however these low level descriptions lack structure and therefore have limited

    usefulness. In this paper a hierarchical business model framework (HBMF) is proposed as a

    suitable structure upon which business model data can be collected and communicated for

    multiple purposes including the creation of a general classification of business models that

    will enable generalisations to be made, hypotheses to be constructed and theory developed

    (Mkinen and Seppnen 2007). In order to guide the development of the business model

    framework that can serve the identified functions of the business model, the business model

    reference model proposed by Lambert (2012) is used. This reference model prescribes the

    basic business model elements and recognises that the unit of analysis, level of analysis and

    conceptual focus of the business model dictate its form. The basic business model elements

    proposed by Lambert (2012) comprise the top, most abstract level of analysis that

    encapsulates classes and sub-classes of more specific and detailed business model elements.

    This paper proceeds as follows, an overview of the object-oriented modelling paradigm is

    provided along with reasons for its suitability in building the HBMF. The HBMF is then

    constructed.

  • A multi-purpose hierarchical business model framework

    3

    1.1 Selection of the modelling paradigm

    Just as it is necessary to decide on the materials and method with which to construct a

    physical model, before building a conceptual model, such as a business model framework, it

    is necessary to determine the unit of modularity and the rules with which the model will be

    built. This is known as a paradigm. A paradigm is a way of thinking about a problem that

    determines how to organise, and approach learning about and understanding that problem

    (Brown 2002).

    The modelling paradigm used for the HBMF is the object-oriented paradigm. The

    object-oriented paradigm mimics the way humans structure knowledge, conceptualise, and

    communicate complex problems making it useful for model building (Jacobson, Ericsson

    and Jacobson 1994, p. 72). Evidence of the suitability of objects for producing useful

    models can be found throughout the psychology literature (Smith and Medin 1981;

    Atkinson et al. 1987; Solso 1988). An object is equivalent to a proposition which is the

    smallest unit of knowledge and forms the building blocks of cognitive models that assist in

    understanding complex problems (Solso 1988). The Gestalt psychologists maintain that

    humans perceive the whole form rather than its parts; that they perceive the whole object

    rather than individual characteristics.

    A good argument for using object-orientation to model businesses is that it models the

    business in a way that is very close to the real thing. There is a minor semantic gap between

    reality and the model. Object-oriented models are therefore natural and easy to understand

    (Jacobson, Ericsson and Jacobson 1994, p. 47). In the section that follows the principles of

    the object-oriented modelling are described.

    2. Object-oriented modelling principles

    The five fundamental concepts of object-oriented modelling are objects, encapsulation,

    classes, inheritance and associations. Together

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