Journal of Modelling in Management

Developing and manipulating business models applying system dynamics approach

Nastaran Hajiheydari Behrouz Zarei
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Developing
Developing and manipulating business models
business models applying system
dynamics approach
155
Nastaran Hajiheydari and Behrouz Zarei
University of Tehran, Tehran, Iran Received 17 November 2011
Revised 14 May 2012
Abstract Accepted 23 August 2012
Purpose Considering the significant necessity of organizations conformity with environmental
changes and also the importance of predicting the result of managerial decisions, this research has
been accomplished with the purpose of designing a dynamic business model. In todays ever changing
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business environment, the simulation of different decision making scenarios is obligatory for
managers in order to create the possibility of studying the effects of decision results on business model
(BM) components, interrelation of component and total benefits in an organization. Therefore, the
purpose of this paper is to take advantage of the dynamic system approach as an operational,
quantitative and flexible approach for business model simulation.
Design/methodology/approach Based on this purpose, related literature was thoroughly
reviewed and proportionate with the level of study and research approach, Business Model Ontology
(BMO) was chosen. The model designed using the system dynamics approach and its structure was
evaluated via expert judgment. In the next step, some scenarios were developed and executed to
confirm the behavior of the model and also to evaluate the importance of applying the dynamic
approach in business model simulation.
Findings These results show that decision making for a BM change leads to complexities and
dynamic behavior of business components and also other actor reactions which are usually nonlinear
and complex. In this regard this paper suggests dynamic simulation utilization to predict and analyze
the results.
Originality/value The system dynamic approach has precedents in business studies; however,
this research makes this approach operational in BM design and analysis.
Keywords Decision making, Modelling, Business Model, Simulation
Paper type Research paper

1. Introduction
Appropriate business model (BM) for organizations would be a competitive advantage
in todays complex world and ever-changing business environment. Actually, this
model represents the way in which an organization could make a value for its
customers to pay money for its products or services (Turban et al., 2002). Although,
everyone talks about BM, but 95 percent of people has neither a clear and complete idea
nor a framework about their BM and as a result, they are not able to have appropriate
and effective relationships inside or outside of their organizations (Pateli and Giaglis,
2002). Voelpel et al. (2004) believes that it is absolutely important for organizations to
have a correct, clear and common view of their BM and its building blocks, because
this matter would be a source of competitive advantage for organizations and helps
them to rebuild themselves. Lai et al. (2006) debate that BM effects explain performance Journal of Modelling in Management
Vol. 8 No. 2, 2013
pp. 155-170
q Emerald Group Publishing Limited
This research has been supported by Education and Research Institute for ICT (ERICT. www. 1746-5664
erict.ac.ir). DOI 10.1108/JM2-11-2011-0058
 JM2 heterogeneity more than even industry effects do and it is important to concentrate on
8,2 this concept both in business and by academics. Although the BMs of firms with
comparable positions may appear similar, there are fine-grained differences both in
their activities and in their value formation and this differences make some businesses
more competitive and prosperous (Sainio et al., 2011).
Each organization has a BM that simply shows the method of running the business
156 or organization business concept (Hamel, 2000). In the more recent literature on BMs,
the concept is referred to as a design or architecture with the notion of value creation at
its core. For instance, Smith et al. (2010, p. 450) define BM as the design by which an
organization converts a given set of strategic choices into value, and uses a particular
organizational architecture in order to create and capture that value. Similarly, Teece
(2010) describes the BM as the design or architecture of value creation, delivery and
capture mechanisms. New BM creations and innovations are actually necessary for
surviving in an environment, that game rules are revolving continuously and it is
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considered as a requirement for achieving disruptive competitive advantages. In this

case, developing a framework of investigating the way in which the new business is
created would be a great challenge (Voelpel et al., 2004). Although the BM improvement
process has its own risks, organizations mostly choose to improve and develop current
strategies. However, innovation in BM is vital and also difficult; a lot of problems and
limitations are due to the change of current BM (Chesbrough, 2010). It is indispensable to
have a dynamic managerial approach to design a BM. Therefore, in designing a BM,
instead of a static approach, which is suitable for BM typology and performance,
managerial BMs alteration should be in question and dynamism has to be considered
from the design phase (Demil and Lecocq, 2010). Additionally, the BM has been referred
to as a dynamic concept, which allows trial-and-error learning, adaptation and renewal
as the external environment changes (Sosna et al., 2010; Chesbrough, 2010; Doz and
Kosonen, 2010). In accordance with environmental or internal requirements, BM change
needs quantitative, flexible and dynamic approach. This approach facilitates observing
the effects of decisions on models building blocks and their relations. The benefits
would be operating altered BM, leading to added values. Moreover, the effect of
changing one of BM building blocks on the other components and actors are disposing
tools to evaluate the effect of decisions in BM.
Accordingly, the main purpose of this research is to apply system dynamic approach
in studying and simulating a BM to predict its changes and new scenarios implementation
consequences. In fact, we aim to attract academic and practitioners attention to the
necessity of considering casual relationship between BM building blocks especially in
strategic decision making and scenario planning. System dynamic approach as an
operational tool could be used in BM design and modification by both managers and
analysts to realize casual relations more attentively. Deciding about BM change or
manipulating its building blocks by senior managers discarding the eventual effects on
other components is prevalent in real world. This approach would leads to unpredicted
effects on other related concepts of business logic that may influence on value proposition
negatively. Therefore, the principal intention of current research is to investigate if SD
approach is feasible and applicable in BM conceptualization and manipulation. In this
regard we tried to map BM building blocks based on SD development and simulation rules
besides considering the logical relationship between BM core components. The structure
of this research is as follows.
 First, the BM concept is explained with a selected BM framework; then, system Developing
dynamics implications in business study is described; in the next section a system is business models
designed in order to demonstrate the potential of this technique; finally, the research
results are discussed throughout scenario implementations.

2. Business model
Researches about BM have been developed during the time. Although, researchers have 157
not relied on other studies, a marked sequence could be seen on paper works in this area.
At the beginning, the period of time in which the phrase BM was spreading all around,
some writers represented BM definitions and categories. Then, researchers supplemented
the previous works by proposing BM components. Thereafter, BM components have
been analyzed in detailed and accurate manner and writers started to simulate these
components conceptually. These research works leaded to reference models and
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analogies. Subsequently, models were evaluated and tested thoroughly and they have
been applied in management and information system cases (Osterwalder et al., 2005).
In 2002, Margareta defined BM as a description of companys performance method while
Weill and Vitale (2001) believe BM is a description of roles and relationships among
consumers, customers, partners and suppliers of the company. In their paper, BM is
indicated as a key factor of production, information and financial flow as well as partners
benefits. Peterovic et al. (2001) and Auer and Follack (2002) expressed BM as a description
of business system logic for value creation. From Turbans viewpoint (2002) this model
represents how a company could propose a suitable value that customers propend to pay
for products and services. Osterwalder et al. (2005) consider the BM as nothing but the
value that company offers to one or several segments of customers and the architecture
of the firm and its partners network who make an attempt for creating, marketing
and delivering this value and relationship capital.
Different descriptions and explanations about BM have been represented by
researches categorized in the following hierarchy (Osterwalder, 2004):
(1) BM as an abstract and generic concept.
(2) Schema of an abstract classification of different BMs explaining businesses
with common properties.
(3) Concepts or aspects of special BM in real world.

These three categories are different in their modeling details including simple
description to list of components as a set of different building blocks. The hierarchical
relation of these categories is shown in Figure 1.
Considering the purpose and nature of this research, the first level would be
adaptable because this research is aimed at providing manipulation of BM concepts as
a generic model. In the other word, BM in this paper is an abstraction that describes a
business not at the operational level, but at the conceptual level. Among well-known
BMs, BM ontology (BMO) focuses on relationships among the components which are
necessary for dynamic modeling. BMO includes four building blocks:
(1) Product. What is the business of organization and which products and values
are offered to market?
(2) Customer interface. Who are target customers and how sustainable relationship
with them could be appointed?
 JM2
8,2

158
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Figure 1.
BM concept hierarchy
Source: Osterwalder et al. (2005)

(3) Infrastructure management. How does the organization handle its infrastructure
and procurement related activities and how does it work as a network?
(4) Financial aspects. What is the revenue model and business cost structure of
organization?

In this approach, BM is ultimately a blueprint or a recipe that fulfils important

functions such as enabling description and classification. It allows us to build
typologies and study the relationship between a given BM and performance. From the
managerial point of view, it gives a consistent picture of the different BM components
and how they are arranged, which can then be communicated and understood. This
stream helps to describe how an organization functions and generates revenues and
assists managers to conceptualize the different activities their company employs to
generate value and its mechanisms for value creation.
The second use of the concept represents a transformational approach, where the BM is
considered as a concept or a tool to address change and focus on innovation, either in the
organization, or in the BM itself. In this approach, a sustainable BM is rarely found
immediately, but requires progressive refinements to create internal consistency and/or
to adapt to its environment and deals with this major managerial question, and thus can
help managers reflect on how they can change their BMs (Demil and Lecocq, 2010).
In this study we aim to conceptualize the second approach using system dynamic,
so the definition of BM is as follow in this study.
A BM is a conceptual tool that contains a set of elements and their relationships and
allows expressing the business logic of a specific firm. It is a description of the value a
company offers to one or several segments of customers and of the architecture of the
firm and its network of partners for creating, marketing, and delivering this value and
relationship capital, to generate profitable and sustainable revenue streams. In fact,
based on selected framework (BMO) the main components of BM are defined in Table I.
 Developing
Pillars BM building block Description
business models
Product Value proposition Gives an overall view of a companys bundle of
products and services
Customer interface Target customer Describes the segments of customers a company
wants to offer value to
Distribution Describes the various means of the company to get 159
channel in touch with its customers
Relationship Explains the kind of links a company establishes
between itself and its different customer segments
Infrastructure Value configuration Describes the arrangement of activities and
management resources
Core competency Outlines the competencies necessary to execute the
companys BM
Partner network Portrays the network of cooperative agreements
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with other companies necessary to efficiently offer

and commercialize value
Financial aspects Cost structure Sums up the monetary consequences of the means
employed in the BM
Revenue model Describes the way a company makes money
through a variety of revenue flows
Table I.
Source: Osterwalder et al. (2005) Nine BM building blocks

3. System dynamics implications in business studies

System dynamics is a methodology for studying and managing complex feedback
systems, which one finds in business and other social systems. In fact, it has been used
to address practically every sort of feedback system.
Following advantages are mentioned for SD in business (Thurbly and Chang, 1995):
.
SD analyzes not only for companys processes, but also its policies.
.
SD applies system thinking approach to study the entire business system rather
than studying only problematic processes.
.
SD helps in establishing business control metrics and quantifying.

Systems become increasingly more complex and this makes it more difficult to
conceptually design their behavioral model. Therefore, the concept of using Microworld
is developed to analyze some of pre-defined variables in order to understand
system behavior. Creation, modification and manipulation of Microworld increase
our knowledge about the systems we live in, work or stop working with (Woodside, 2006).
SD approach has been previously used in similar business studies. It has been applied
in order to study the effect of business reengineering in a research. This article begins
with introducing business reengineering concepts and continues with the description of
SD application, modeling and studying the result of simulated sample in a business
reengineering project (Burgess, 1998). In another research, SD is used to analyze the
process of strategy development in organizations. In this investigation, system thinking
and simulation has been applied as a tool to manage the complex and dynamic process of
formulation, evaluation and implementation of strategies (Fowler, 2003). SD is also used
to evaluate the organizations values during investment financing and dividend policies
 JM2 change (Qureshi, 2007). It is also used in order to simulate the environmental changes
8,2 and their effect on business (Bleda and Shackley, 2008). In another research, a dynamic
product development model is developed to reduce product development cycle times,
slippages and costs as well as improvement of perceived product quality (Pesonen et al.,
2008). Other scholars have applied SD in balanced scorecard (BSC) to foresee the time
lag dimension of different types of indicators and their combined dynamic effects
160 (Nielsen and Nielsen, 2008). Purnomo and his colleges (2009) used system dynamics to
mimic the value chain of teak from forest to final furniture market using phases of
conceptual design to model uses. In another case, a system dynamic model is presented,
which considers the feedback between supply and demand and oil revenue of
the existing system in Iran considering different sectors of the economy
(Kiani and Pourfakhraeib, 2010).
Consequently, applying this approach for business modeling would be appropriate
and may help managers to find out the result of different decisions.
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4. System development
In order fulfill the research purpose; we developed dynamic BM based on BMO in Magfa
(www.magfa.com). This case has been studied for acquisition information in the current
state and also prediction of critical variables behavior under the influence of changes and
modifications of some of other model variables. Magfa is a technology based company
which provides different products and services in ICT sector. One of their services is
e-learning that propose electronic content and infrastructure particularly for organizations.
It offers a chance to achieve a new online teaching method by providing an electronic
learning management system (LMS). In fact, offering electronic courses to schools and
providing them with technical support is the basic mission of e-learning unit. The products
and services of this unit are as follows:
.
Providing training centers with supporting services in special, practical and
advance courses in digital format.
.
Preparing modular, practical and advanced courses for universities on internet.
.
Providing a LMS to offer courses on internet.
.
Offering technical support, during the courses which includes daily seminars
and training for the teachers, trainers and learners in order to use the
electronic LMS:
Board of directors has to decide about application of mobile platform in service providing in
order to provide tools for higher productivity and efficiency in Magfa. In fact, mobile technologies
have been successfully applied in forerunner organizations. In many cases, mobile applications
not only lead to positive aspects such as better performance, improvement in consumption
pattern, effectiveness in sales department and modifications in customer service, but also
accelerate accessing data and facilitate decision making (Liang and Wei, 2004).
In order to simulate the current BM of Magfa, the business logic which is mainly based on
preparation and offering of electronics courses, was identified. Also, the main products
and general capabilities regarding designing and preparation of electronic courses as well
as regular updating of these courses have been investigated. An examination was made
of the production method, offering and selling the services, the method of dealing with
customers and presenting the products through training centers and universities.
 Ultimately, the revenue models and the main expenses were studied. According to the Developing
fact that the increasing development of wireless technologies is diminishing all the business models
limitations of time and distance in the presentation and transferring of information, there
would be an opportunity of applying mobile technology for educating people at any
time and place. Since the revenue model in electronics course looks at absorbing more and
more trainees and more use of electronics courses, and regarding the fact that in todays
business world many people have to commute to do their daily work, by removing the 161
distance limitation for using the courses, more operators can make use of Magfa services
and consequently the companys revenue model would take more variety and the revenues
would rise up. Based on this assumption the simulation process of Magfa BM has been
started to survey if managers expectation about income rise by using mobile technology
would be proved.
So, the main managerial question is if applying mobile technology in e-learning
department of Magfa lead to higher value to customers? In following sections,
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we describe system development process and model verification.

4.1 System development process

There is no unique instruction to follow making sure that designed model is successful.
Indeed, modeling is basically an innovative process and there are different methods
and approaches to design a dynamic model (Sterman, 2000). In this research, following
logical steps have been applied in modeling.
The purpose of modeling would be representing the BM based on BMO foundation
and BM simulation in an organization considering the changes and complexities in
environment; necessary and challenging as well. In this research, the period of modeling
is considered to be 60 months (five years). This period is appropriate for business
planning and also variables fluctuation depiction over time. It should be also mentioned
that because of BMO rich theoretical background, the relationship between the model
key variables has conformity with BMOs structure.
It is also necessary to define an assumption to be studied by the dynamics model.
The theory considered in this research is:
Applying SD approach in BM simulation has an important role to take advantage of
quantitative and flexible tool that could be used for evaluating managerial decisions.
Then cause and effects and stock and flow diagrams are designed. Vensimw is deployed
in simulation and running the simulated model and scenarios owing to software
capability in dynamic model simulation, structure definition, and behavioral model
representation in different possible situations. In Figure 2 the relationship among
BMO variables is shown.

4.2 System structure and behavior verification

Relied on BMO components and structure, the designed model consists of some
important sections:
.
Enterprise customers moving between the organization and its competitor. This
section, actually, includes all potential customers that could be the organization
customers or its competitors.
.
Organization capabilities to produce and propose values for its customers including
the ability to supply customers with products based on production capability,
 JM2 <Current
Costumers1>
value of
opportunity
1.
8,2 Competitor<f1> <Current
<f1> Costumers2>
<supply1>
total benefit1
enterance Potential enterance
total benefit2 <benefit per
/exit1 Costumers /exit2
<normal value <normal value unit2>
difference> difference>
<benefit per <supply2>
unit1>

normal value
f1 difference

162 Current
Costumers1
Current
Costumers2
costumer movement

difference in values
3. capacitylife2
capacity life1 Price1 Price2
value1 value2
cap price change1 price change2
depreciation
1 2. cap depreciation2
supply1
quality
1 supply2
quality2
Production normal
Capacity1 benefit <normal Production
<f2>
f2 supply> Capacity2
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target
supply1 normal benefit target supply2
cap building1 benefit <normal
supply pe runit1 other components other components
capacity per unit2 benefit>
of cost1 of cost2 cap building2
gap1
capacity gap10
unit cost1 unit cost2

time to build
capacity1
4.
demand for factor demand for
factor
production factors1 price1 production factors2
price2 time to build
normal unit cost capacity2
chng in
unit chng in
cost1 unit
production f3 production cost2
factors
Figure 2. supply1
factors
supply2

Stock and flow diagram

representing BM normal supply of
production factors

target supply, current supply and the gap between these two indicators. It also
represents price changes pattern based on changes in demand and supply.
.
Value proposition to customers which is based on the significant factors of
quality and price.
.
Organization suppliers which supply the necessary components for production.
Based on the demand level of components, the supplier bargaining situation
would be determined.

This model was designed without emphasis on competitor section, but evaluation of
model in real world and based on business expert opinion; in this study the competitor
section is added to the model. Although the competitor behavior is not considered in
BMO, it has been added to model in order to adapt it with real world concept.
In order to fulfill the evaluation process in this research, we arranged interviews
with two different groups. The first group, including seven experts, has been chosen
for validation of designed model and its conformity with the SD foundation. The
second group has been selected to test the performance of proposed model in action and
to evaluate simulated behavior of important variables of BM. For operational
evaluation, Magfa Company (Information Technology development Center) has been
chosen as a case to test the model in action. The main reasons for this selection are:
. access to information for model evaluation;
.
having a technology basis; and
.
appropriate knowledge of managers about BM.
 As validity of the results in a model-based study is crucially dependent on the validity Developing
of the model (Barlas, 1996), extreme-condition test has been used on the main variables business models
of model to validate the model. In fact, three levels of validation have been conducted
based on Forrester and Senge (1980).

5. Findings
To test the model in action and to study the behavior of different variables, the simulated 163
model was implemented in a case that encountered a decision making situation. In fact,
emerging new technology in telecommunication and data transfer, bring an opportunity
to companies to reduce the cost of operation or provide better services to customers.
Following scenarios are designed with the purpose of representing complexities related
to decision making about BM change.
Suppose that the organization attempts to improve its value proposition element by
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changing in two influential factors: price and quality to increase its market share. In this
case, we presumed that Magfa is planning to apply emerging technology in distance
learning in order to facilitate user access to content of courses. In this regard, managers
need to apply analytical tools to examine the results of different scenarios. Simulation of
BM based on SD is used to investigate managerial decisions result in different scenarios;
accordingly, below mentioned scenarios have been designed and implemented in
foregoing context.

First scenario improving quality in organization[1] providing more easily access for
customer applying mobile infrastructure
In this scenario, it is assumed that Magfa is the first mover in applying emerging
technology in distance learning in comparison to its competitors. Therefore, it is possible
to propose higher values for customers based on providing superior quality of services.
In such situation, suppose that the competitor is unable to emulate this strategy to
preserve its market share, so it would apply cost leadership strategy and propose lower
prices to customers. The results of running the model based on key parameters of two
competitors are as follows.
Magfa can improve quality; the competitor is decreasing its profit margin in order to
propose the same value for customer and to keep its market share. By increasing quality
in this case, providing the facility for customers to be able to receive, review and read the
content of courses on mobile phones or other devices. The result of this scenario is shown
in Figure 3. It is observed that the quality shock in the first organization leads to an
increase in the number of its customers. But, due to the competitor reaction in decreasing
the price, the number of customers would fluctuate around a particular amount. On the
other hand, the competitor reaction leads to the same average number of customers after
a sudden decrease as a result of the quality shock in Magfa. To avoid more complexities
in modeling, the amount of potential customers has been considered constant; therefore
Figure 3 shows the behavior of customers attending to Magfa based on being the first
mover providing more facilities in using learning course but due to increasing
development in mobile application, competitor will be prepared to deliver the same
services. Obtaining the same capabilities in service delivery by Magfa and its competitor
leads to customer attention fluctuation between these two rivals.
First organization encounters an unforeseen situation due to the competitor
reaction. Magfa does not achieve the planned profit after investments in quality;
 JM2 Current Costumers1
4,000
8,2

3,000

164 2,000

1,000

0
0 6 12 18 24 30 36 42 48 54 60
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Time (Month)

Current Costumers1: one side shock

Current Costumers1: base run

Current Costumers2
4,000

3,000

2,000

1,000

Figure 3. 0
Comparison of customers 0 6 12 18 24 30 36 42 48 54 60
in two companies Time (Month)
providing quality
improvement in first Current Costumers2: one side shock
organization
Current Costumers2: base run

therefore, managers may invest more on quality and provide more facilities for customers
to reach higher profits. In this situation, as it could be seen in Figure 4, all potential
customers convert to actual customers of either first organization or its competitor, due to
higher values proposed by these two companies. In this case, unawareness about target
customers, the number of customers or inattention to the reaction of customers to different
scenarios would lead to wrong and inexact decision in an organization.
As mentioned before, in this situation, the organization expects to have a
substantially increased benefit due to preeminence in quality and higher prices, but
regarding to its competitors reaction, this would not happen. Hereon organization
may decide to invest more amounts of money on infrastructure and quality, which is
 Potential Costumers Developing
2,000
business models

1,500

1,000
165

500

0
0 6 12 18 24 30 36 42 48 54 60
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Time (Month)
Figure 4.
Potential Costumers: one side shock Potential customers
in market
Potential Costumers: base run

obviously an incompetent decision. This decision plays not only a role in making
profits, but also causes huge amounts of investment costs that could not be returned
regarding lack of potential customers. As demonstrated in this scenario and its results,
being inattentive to cause and effect relations in business environment and concentrate
only on the direct influence of managerial decisions may redound to unanticipated
outcome in business results. Applying SD approach even in simplified manner could
be effective in predicting decision consequences.

Second scenario decreasing production cost in organization: applying mobile

technology in production process
In this scenario, it is supposed that organization abates the cost of production with the
purpose of profit gain. In such situation, assuming constant product price in market,
the profit is anticipated to increase. Organization demand for production factors
increases because of sudden growth of organization production. In fact, as the case
study has the power of decreasing production cost through using modern technology,
the proposed price to customer decreases. This change eventuates to increase customer
demand and fulfill the customer needs, so the organization has to scale its entry up. In
this case, the providers who are categorized as content provider of courses, request
more money to provide the increasing demand. To be more explicit, if the suppliers
have more bargaining power, they make a great portion of profit due to increasing
demand in organization. Lack of comprehensive understanding of suppliers, their
behavior and reactions, may cause absorbing profit margin by suppliers after
detracting production costs.
In this case study, Magfa lowers the production cost, using tele-working strategy
and consequently it scales down the price of courses. To be more expressed, mobile
technology in the second scenario could be used as a production infrastructure which
let employee work in any place any time and consequently the production cost
decreased. Magfa could provide its services by lower price for customers and under the
influence of this change, the demand would rise and the company would be able to
 JM2 provide new courses proportionally. This flow increases the demand for content of
8,2 courses as production factors. Along with an increase in intermediate variable named
target supply in this model, the supplier would raise the price. Considering this case,
despite scrounging in production costs, prime cost and consequently benefit would not
change substantially due to components increased cost. Simply stated, a noticeable
portion of benefit could be transferred to supplier. Figure 5 shows the changes after
166 implementing mentioned scenario, especially in benefit per unit and total benefit.
As shown in Figure 5 the unit profit amount would rise after a shock on production
in first step, but because of suppliers bargaining power and increasing cost of
production factors, unit benefit decreases. Organization may expect to gain remarkable

benefit per unit1

8
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0
0 6 12 18 24 30 36 42 48 54 60
Time (Month)

benefit per unit1: shock in costs_low elasticity

benefit per unit1: base run

total benefit1
20,000

15,000

10,000

5,000

0
0 6 12 18 24 30 36 42 48 54 60
Figure 5.
Benefit per unit in cost Time (Month)
reduction scenario with
high bargaining power total benefit1: shock in costs_low elasticity
supplier
total benefit1: base run
 profit, but the obtained profit based on cost reduction would be transferred to the Developing
supplier. Total average profit increases due to its higher value for customers and business models
attracting more customers. To declare more, implementing this strategy for applying
mobile technology, managers may expect lower cost of production, price reduction and
as a logical consequence customer request summation. As an expected result, this
behavior demonstrated in simulated model but the cause and effect relation between
Magfas sale increase and its request for course material from suppliers, accumulate 167
target supply that provokes higher cost from content providers. Hence, despite of
Magfa sale and profit margin increase, after a period of time, the cost of supply
augmenting absorbs considerable profit unit portion.
Results of above mentioned investigations and findings of model simulation show
that decision making about BM changes is not a simple process and its results could
not be simply predicted. Accordingly, the organization may invest more amounts of
capital on infrastructure improvement with the purpose of business key indicators
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enhancement, but lack of understanding and cognition about business environment,

suppliers bargaining power, customers bargaining power and competitors reaction,
may lead to loss in organization due to investments in infrastructure without any
utilization. Applying quantitative methods such as dynamic system approach can help
managers and business analysts to design or modify their BMs. Especially system
dynamic approach with a capability of testing various strategies, simulate different
situations and represent the key variables behavior in a system which can help
managers to gain prescience before decision making and proceed with conviction and
consciousness.

6. Conclusions
The dramatic increase in the number of publications referring to the BM since the late
1990s and early 2000s illustrates the rise in the interest in the concept (Zott et al., 2011).
The relevance of the BM, however, is not only limited to the academic debate. Recently,
also practitioners have shown interest in the concept and have discovered the BM as
relevant locus of innovation that goes beyond traditional product and process innovations.
Considering the increasingly importance of this concept, in this study, a generic BM is
developed dynamically. Then two different scenarios are designed to change and
manipulate the model in order to investigate value and profit changes and fluctuations.
The result of different scenarios simulation in this case study is represented. These results
show that decision making for a BM change leads to complexities and dynamic behavior
of business components and also other actor reactions which are usually nonlinear and
complex. Developing BM concept with a simulation tools such as system dynamic may
seems complicated in the first examination, but it is worthy for creating and changing
BM and especially to evaluate the impact of specific changes to a firms value proposition.
In our ever changing business environment, practitioners have to make decisions to
improve attraction for their customers, obey market rule change and also implement new
and emerging technologies. In the other hand, this survey clearly proves that making
policy about business foundation may lead to unknown impact on other related
components. This cause and effect loops could be represented by system dynamic
method and then managers could be enabled to investigate different policies and decision
making scenarios absolutely. Results of running the scenarios show that lack of
knowledge about BM components and suppliers, customers and competitors behaviors
 JM2 and capabilities could lead to unexpected results. Simulating scenarios indicate that
8,2 reduction in costs or improvement in quality may cause value creation in business
system, but value distribution method in business chain is relevant to many factors.
As a result, business current state identification is necessary in the process of BM change.
The approach applied in this research would be operational for organizations intending
to change their BM or analyze their decision results in future. System dynamics approach
168 with the susceptibility to simulation of system and representing behavior of different
variables could be helpful for designing BM in an organization and examining different
strategies. The ability of SD approach in scenario examination obviously is attractive for
managers to see, manipulate and examine different situation results before acting in real
world. Hence, the confusing process of developing the model to portray the business logic
of firm is valuable enough for decision making situations particularly in BM level which
affect on strategic level of business management. For further researches, the model
represented in this research could be implemented and tested in different contexts.
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Furthermore, providing BM simulation through other reference models can be helpful

for practitioners.

Note
1. Red color in diagrams represents the situation before the scenario and blue color shows
changes after that. First organization is that one the scenario is taking place and second
organization is the competitor.

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About the authors

170 Nastaran Hajiheydari is an Assistant Professor of Business Management at University of
Tehran, Iran. She received her MSc and PhD in Information Technology and System
Management from University of Tehran and pursues her research in information systems and
business modeling. Nastaran Hajiheydari is the corresponding author and can be contacted at:
nhheidari@ut.ac.ir
Behrouz Zarei is an Associate Professor of Management Science in the Entrepreneurship
Faculty of Tehran University. He holds a PhD in Management Science from the Management
School of Lancaster University. He has served as the systems and software manager for the
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project of development of Iranian Governments Electronic Administration System. His main

research interests include e-government development and implementation, system simulation,
business process reengineering (BPR), and decision-making science.

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