Designing Performance Measurement Systems Using Business Models

Abstract

Purpose – The purpose of this paper is to explore the advantages and the disadvantages of using the business models (BM) as a platform for designing a performance measurement system (PMS).

Design/methodology/approach – First, a normative approach is adopted to reflect on the process leading from BMs to performance measurement, as well as to highlight the role of BM tools (BM configurations and Business Model Canvas) in this process. Second, case study data is applied to test the applicability of the process and to explore advantages and disadvantages that may arise when using the BM as a basis for the identification of key performance indicators (KPIs).

Findings – Designing KPIs from the BM increases the relevance of the resulting PMS. Further, BM tools such as BM configurations and Business Model Canvas support the identification, coordination and prioritization of value drivers (VDs) (and the related KPIs) and this increases the likelihood that the managerial decision making will be predominantly focused on material aspects of value creation. KPIs designed from a BM can also provide useful information for use in innovating the BM and benchmarking performance against other companies that have adopted a similar BM configuration. However, the path leading from the BM to KPIs is strenuous and complex, and it requires an in-depth knowledge of BM tools.

Research limitations/implications – The proposed approach has not been implemented in practice.

Practical implications – The paper describes a practical implementation process that managers can use to map their company’s BM, identify and organize VDs, and from that design KPIs. This process has the potential to support the decision-making process, to aid in the management of the company’s performance and to help manage, innovate and benchmark the BM.

Originality/value – Differently from most previous BM research, the paper openly addresses the usefulness of clarifying BMs from a performance measurement perspective.