Business Model Representation Incorporating Real Options: An Extension of e3-Value

Abstract

Business models are not typically doomed to remain as they are, rather, they may contain a variety of options to be changed or extended. Nevertheless, current approaches for business model representation cannot handle such options, because no appropriate modeling constructs are available. This substantially inhibits the qualitative consideration of options in business model design. Also, it inhibits the integration of options into subsequent quantitative analysis. Our contributions in this context are twofold: at a 'macro-level', we combine business model representations with real options theory from finance. At a 'micro-level', we extend one widely established and applied business model representation, namely e3-value, for handling real options. We develop the graphical notation necessary for option modeling and a corresponding extension of the formal e3-value ontology. Finally, we illustrate in a case study how the proposed extensions can support options reasoning and also serve as a basis for the correct financial analysis of a business model.