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Climate services offered by various providers such as SMHI, Wegener Center, and Climate Service Center Germany. It covers consultancy services, expertise, equipment, laboratories, advisory services, risk assessments, decision support tools, modeling, and data management. Providers include SMHI, Wegener Center, and Climate Service Center Germany, with partners like CIENS, FRAM Centre, Helmholtz-Zentrum Geesthacht, and BASF SE.
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MARCO Research and Innovation Action (RIA) This project has received funding from the European Union's Horizon 2020 research and innovation programme under grant agreement No 730272. Start date : 2016-11-01 Duration : 24 Months
Authors : Mr. Harald JENULL (UTUM) Patrizia Pawelek (UTUM)
MARCO - D3.3 - Issued on 2017-12-20 09:21:03 by UTUM
MARCO - D3.3 - Issued on 2017-12-20 09:21:03 by UTUM
MARCO - Contract Number: 730272 MArket Research for a Climate Services Observatory
Document title Mapping of typical business models and identification of best practices for business modeldesign Author(s) Mr. Harald JENULL Patrizia Pawelek (UTUM) Number of pages 58 Document type Deliverable Work Package WP Document number D3. Issued by UTUM Date of completion 2017-12-20 09:21: Dissemination level Public
Summary
Validation of Business Models: Climate Services Supplier
Approval
Date By 2017-12-20 13:41:11 Mrs. Suzi TART (LGI) 2018-01-14 19:51:17 Dr. Thanh-Tam LE (CKIC)
MARCO - D3.3 - Issued on 2017-12-20 09:21:03 by UTUM
MARCO, which stands for ‘MArket Research for a Climate services Observatory’ analyses Europe´s climate services market. This deliverable is focused on the business and economic perspective, which was available on the perspective websites. It has to be mentioned that the focus in this report will be on qualitative and structural elements of a business model than on the quantitative information (which mainly was not available).
The business analysis D3.3 Mapping of typical business models and identification of best practices for business model design, is grounded in innovation and business model theories on how service markets with public and private features can develop, and how innovations may succeed.
In the workpackage (WP) description the following is defined for the study: Because of the lack of knowledge on specific users needs in the climate sector, lack of visibility of climate services, and low awareness of key potential customers for using essential information and the associated economic benefits, the need for developing a global market for climate services exists. Climate related tools, products, data and services may greatly contribute to climate change mitigation and adaptation.
The report´s key objectives are to: analyse the EU market of climate services; validate and enrich the market assessment; and validate existing structures and assess market growth until 2030. To achieve this, the report will build on a phased approach with feedback loops between several methodologies (The Business Model Canvas) to ensure validation of findings. This will start with defining the framework for business model characterisation, followed by a deep business model analysis of specific climate services suppliers clustered by type. Validation of this analysis and outcomes, reviewed by experts of the field, will confirm the results. Finally, best practises and business model recommendations for the climate services market will be recommended.
The purpose of this report is to conduct an evaluation of typical business models in today’s markets and toidentify best practices (based on results from WP 3.1) in the form of a collection of typical business model designs. Best practices are identified via the methodology known as the Business Model Canvas. (http://www.businessmodelgeneration.com/canvas/bmc). Of course it will be not possible to identify one best example of a business model, because of the different portfolios, customers addressed by the business ect. The Business Model Canvas approach is a widely used strategic tool for facilitating business model innovation for start-ups and corporate companies; it is
also used for analysing and visualizing existing business models. The work will be realised by a small group of expert partners in business modelling, and will conclude with stakeholder validation via a dedicated session during the MARCO Stakeholder Workshop.
The Content of this report is based on the analysis about the Commercial and open source products of suppliers (see Task 3.1). They are analysed regarding specific business models used. The goal is to produce a comprehensive picture of the different business models applied in the market. Subsequently, the analysed business models are clustered and evaluated by applying the following dimensions (combining the different building blocks of the Business Model Canvas):
Asset dimension (key activities, key resources, key partners) Customer dimension (value propositions, customers segments, channels, customer relationships) Financial dimension (cost structure, revenue streams on a qualitative and structural base)
Other factors will need to be taken into account, including the commercial or open source nature of the service models, quality assurance, and legal character. Based on that, best practices and typical business model designs were identified. Clustered business models are evaluated in terms of structure of the revenue stream (as far as available), coverage among stakeholders (scope), and market potential (potential to scale the business). Finally there is a validation of best practices and typical business models obtained by running a dedicated validation session during the Stakeholder Workshop, as well as with the Advisory Expert Committee. This leads to a confirmation that proven business models meet the needs of the market and an appropriate quality assurance of the analysis can be derived.
To analyse the listed suppliers from WP 3.1, a cluster needs to be formed to separate different suppliers into groups. In A European Research and Innovation Roadmap for Climate Services, different types of categories have been developed to cluster climate services.
Figure 1 A European Research and Innovation Roadmap for Climate Services
Example 4 Norwegian Institute of Air Research
The Climate Data Factory Weathernet^ GEO Umweltconsulting-NET GmbH
Results
4.1.2 Summary of Business Models 4.2.2 Summary of Business Models 4.3.2 Summary of Business Models 4.4.2 Summary of Business Models 4.5.2 Summary of Business Models
Figure 2 Own Source
In WP 3.1, the `Mapping and qualification of EU-based climate services providers was analysed. It shall contribute to the assessment of the supply side of the market. In this report the following climate service related questions are examined:
Who is providing climate services and what type of climate services? What are the specific needs of the users in providing climate services? Who are the target customers and users and which market sectors are they in?
Basically a variety of different types of organisations are providing climate services. According to WP 3.1, based on the European Research and Innovation Roadmap for climate services, five types of organisations were identified (as shown in the table in 1.3). Based on this mapping, the report of task 3.2 will have a deeper look at the commercial perspective of the respective business models of the different climate services providers.
To avoid misinterpretations, it is important to clarify what exactly is meant by climate services and business model in this report.
The European Commission defines climate services “as the transformation of climate-related data – together with other relevant information – into customised products such as projections, trends, economic analysis, counselling on best practices, development and evaluation of solutions and any other service in relation to climate that may be of use for society at large” (MARCO: European Commission, 2015).
What is meant by the term “business models”, is the representation of a firm’s (and also a public services organisation´s) underlying core logic and strategic choices for creating and capturing value
within a value network. A full range of stakeholders are involved in the following business activities: clients, shareholders, suppliers, but also distributors, the civil society and coalitions. Key components can be: (1) the value proposition, (2) the creation of value, (3) the network and (4) the value detainment. The first component, the value proposition, outlines how the value of the service is created and how it responds to end-users’ needs (Shafer et al 2005).
The definition of a business model for Alexander Osterwalder & Yves Pigneur, authors of the book business model Generation is “A business model describes the rational of how an organization creates, delivers, and captures value.” The Business Model Canvas is a simple, relevant and intuitively understandable concept. This concept has been applied and tested around the world and is already used in many organizations.
In WP 1.2 of the MARCO sister project EU-MACS, ASSESSMENT OF THE EXISTING RESOURCING AND QUALITY ASSURANCE OF CURRENT CLIMATE SERVICES report, provides a general overview of standard business models and business models of climate services. This MARCO report will go one step further. It will analyse the business model of specific climate services suppliers, and compare and validate them in detail.
First there will be a deeper look on the results to make sure all important outcomes regarding climate services business model aspects in Europe are covered.
The EU-MACS report begins with the information that usually climate services were purely based on historical observations. Some climate services products are still closely related to the ‘traditional’ product, however ‘mixed’ products are also available. This means pure data analysis, but no real tailor-made services and solutions aligned to a user´s needs. Because this is possible, the climate Services market has big untapped potential that is currently being explored by only a few players.
Various climate service users may need or already use climate services products for different time scales. For a long time, the establishment of climate services mainly followed a top-down approach: a wide range of products and services were created without questioning the actual needs of those interested (Brasseur & Gallardo, 2016). However, a tailor-made business model should take the actual user and customer needs into account to find a successful approach to offer the right service or product.
In general, business models can serve two types of innovation: incremental building on existing products or services, and disruption - which creates a whole new reality (Shilling 2008). In the context of climate services, the two are helpful in supporting the growth of a highly significant market. Another aspect is the influence of climate services on the decision making process. Climate
willing to pay (and at what value)? Examples can be: asset sale, usage fee, leasing and licensing.
Figure 3 The Business Model Canvas
The Business Model Canvas covers all relevant business aspects. Certainly, more details are needed in each block for a proper business plan. The big advantages of this tool are to have the whole structure on one page, to integrate agile and flexible new ideas or alternatives into an existing business model, and to use the tool as a business model prototype to validate assumptions about the content of the building blocks with the respective experts.
In the following, different climate service providers and suppliers will be presented by a short description containing general information, such as information about the organisation, its location, fields of focus and a description of their climate offerings. Additionally, each supplier will be analysed through a Business Model Canvas. The list of examples will be structured according to the EU table presented in section 1.3.
This type of a Climate Service Provider usually benefits from a strong infrastructure in the field. A weakness, as described in the table of the European Commission above, could be that the main focus is on physical data, which contains limited social-economic aspects.
Centro Technológico del Agua Helmholtz-Zentrum für Umweltforschung Norwegian Institute for Air Research University of Graz
Asset dimension: In the Helmholtz Institute business model, the large amount of various key activities needs to be mentioned as an element of success. From data collection, modelling, and analysis, to consulting services – the main components of the meteorological service offers are covered. Customers can get everything they require from a single source, which makes cooperation more effective and comfortable. Many different partners from universities, industries, trusted advisors or experts from the sector ect. lead to a wider perspective from which target customers can benefit. To have a wide and diverse key partner network in general is also an element of success. Key partners in the NILU network cover both regional and national strategic aspects.
Public climate services centres, which in this case are separated from meteorological services, employ multidisciplinary field setups that allow for “as needed” data capture that can be utilized for a multitude of purposes. However, lack of business orientation can be a major weakness.
Climate Service Center Germany (GERICS) Copernicus Climate Change Service (C3S) SMHI (Swedish Meteorological and Hydrological Institute)
Asset dimension: The Climate Service Center Germany is part of a big network of researchers. Employees are mainly researches and the key activities are research-based. Additionally, the Climate Service Center Germany offers risk assessment services, decision support tools, trainings, and support on how to implement climate data into the decision making process. The SMHI (Swedish Meteorological and Hydrological Institute) a department of the Swedish government, is also conducting data collection and analysis combined with socio-economic data, risk assessment and advisory services.
Customer dimension: Because of the additional decision making tools based on research data, a wider breadth of customer segment groups can be addressed with the increased offerings. That is why public decision makers, politicians, consultancies, and corporations are already utilizing the benefits provided by the Climate Service Center Germany.
The SMHI (Swedish Meteorological and Hydrological Institute), , is addressing greater human needs in their value proposition, such as security and a sustainable way of life. All sectors related to environment and energy are a part of their target market.
Financial dimension: Both, the Climate Service Center Germany and the Swedish Meteorological and Hydrological Institute primarily obtain capital from third party funded projects and research funds. In summary, having many different offerings makes the business model more attractive to potential customers. Clients can discuss their individual needs with the supplier and find the perfect solution together. By incorporating abstract, daily human needs like safety, a healthier life (in addition to standard climate service tools and data) into its value proposition, SMHI succeeds in creating information and services that are more accessible for non-experts. This
leads to a wider acceptance of spending public money for projects as well as support in raising awareness.
This sector is very business oriented and benefits from deep user knowledge. The primary weakness is the dependence on external climate information.
Hydrologic Kjeller Vindteknikk MeteoServis Weathernet
Asset dimension: Kjeller Vindteknikk and MeteoServis are offering hardware, so they require partnerships with factories and service suppliers, and they need to stay up to date with technology trends. Dealing with sensors to collect specific data leads to the challenge to handle the strict regulatory standards and certifications. WeatherNet offers forecasting services to companies, so they have validated business insights to address the right needs on the customer side.
Customer dimension: HydroLogic addresses researchers as customers to support them in finding solutions for their focus topic of reducing the water warming process. In general the value proposition for researchers has to be clearly defined. But politicians and public decision makers are also part of their customer field. WeatherNets focuses their offering on forecasting; legal, construction and insurance agencies are some of the top target groups. But forecasting is important for other industries and market segments as well, so the business model is scalable. Kjeller Vindteknikk offers hardware solutions and takes care of the construction, installation and implementation of meteorological masts. In addition, an analysis of collected data is offered as a service. MeteoServis also offers hardware. The sensors and automated climate services technology developed can be used in almost every industry. In this case, the potential customer segments are not focused on what can be an advantage because it’s possible to attempt to enter many different markets as soon as they can convince decision makers about the need for climate topics.
Financial dimension: Kjeller Vindteknikk creates some revenue by selling the hardware, but mainly through their offered services. The main advantage here is offering solutions on a project-to-project basis. For example, Weathernet increases revenue form small and medium
enterprises as well as from industry projects. But the government can also implement their offerings into urban planning processes.
As a summary, private businesses in the field of climate services partly have the same customer target groups, such as public suppliers. Cooperation here could lead to better synergies in reaching climate goals together. The example of Kjeller Vindteknikk shows how a hardware and service business model can be successful. Maintenance and services should be offered in addition to hardware. This makes the value proposition for the customer more attractive. With tailor-made solutions it is possible to build long-term relationships with customers. Moreover, cooperating with research institutes to analyse best practise examples or writing case studies together with the energy industry can lead to even more credibility on the market.
Consulting services need a very good knowledge of user´s needs. This is why working together with consultancies can be a benefit. Consultancies combine different information such as ones business orientation, marketing abilities, economy and cost orientation. Limited knowledge about climate is a weakness in this sector.
Climate Analytics GmbH Climonomics EcoClimaSol GEO-NET Umweltconsutling GmbH
Asset dimension: Climate Analytics GmbH has several offices worldwide, and a big and diverse international network of key partners, making it quite interesting for their customers to cooperate with them because of the wide knowledge and diverse scope of topics.
Customer dimension: Next to specific services the knowledge exchange is an additional offer from Climate Analytics GmbH. Climonomics is a very small regional consultancy with a smaller offering of services. This is why the customers also have a small and regional focus, or even come out of the same regional context. The focus of Climonomics seems to be primarily public customers. The services of EcoClimaSol are focused on the content. One main service is to support the decision-making process against financial risks.
For all dimensions, the potential scope is an important element. Is it possible to scale the business? This can be done by scaling the portfolio. For example, suppliers can offer a product or service on its own, but they also can think about possibilities to integrate it into already existing products of a potential partner. This can open doors for new customers and markets. Research-based businesses, for example, can think about possibilities to implement their deep knowledge into the development of hardware or software solutions. In the filed of climate services a supplier of climate data can add analysis services, consultancy based on the provided data or maintenance additionally to the main product.
The scope of potential market sectors , where it is possible to find new customers, also needs to be taken into account. Is the business addressing only the water sector out of the climate services market or is there an option to also find transferable elements to provide added value for other sectors? Another way to extend the scope of the business is a regional one. If the business is now focused on a national base, think about opening up new networks to international partners to try to enter other markets and find new potential customers. In fact climate challenges often are local ones more the way how to solve climate challenges can be transferred than the service itself. That means for different areas the framework can be used but needs to be adjusted to the regional needs.
Network is another element which needs to be examined. A wide network of stakeholders, key partners, supporters, investors, mentors, etc., is useful in staying up-to-date with everything that can influence the market, and on the other hand gives a wider platform to spread the word about the product or service. Here, networking events give the opportunity to meet as many different stakeholders involved in the market as possible. To have the power of a wide network also makes it easier to create and benefit from synergies. This can lead to opportunities in combining climate data with socio-economic data. By utilizing a cross-over approach in various sectors and working with an interdisciplinary mind set, it gives the business the opportunity to find new, innovative and creative solutions for new potential customers.
Concerning revenue streams , it is important to stay independent in how to earn money. A good business model should have more than one money-making pillar. By spreading the customers´ segments and creating a wide and diverse base of willing payers, it gives the business the possibility to grow independently according to the market needs.
In the following conclusion, some ideas and ways to approach the business model dimensions and elements will be mentioned.
It is impossible to give an exact formula to reach a high level of quality and success for each and every business model or business dimension. This is because it depends on the people, the innovation, the team, the customer and the market situation (and a little bit of luck). But there are several techniques that can be used in overseeing important details. One of the main reasons businesses fail is that the provider does not know the specific customer and market needs. It is a difficult journey to gain all the needed information, but it is possible and absolutely necessary for a successful business. Especially to identify climate needs in the customer environment is a challenge, because not all potential customers are aware about the influence of climate data on their business. Beginning with a human-centred approach is a good starting point. Seeing the customer as a human being and not as a paying organisation will help to identify the real pains and gains of the customer. With this information, it will be easier to name the right value add-ons and to adapt products and services right to the customer and market needs. To observe the customer in his/her context, to understand the processes he/she is dependent on, to know the influencing factors, to understand the decision-making process and so on, will again lead to more information that allows for the proper adjustments to be made. A holistic approach must also be mentioned to understand the wider context, ideas and possibly unforeseen influencing factors. All this information can be used to build prototypes to be tested by potential customers. The received feedback will be used to improve products or services over and over again, until finally the right product for the market is found. This iterative approach based on testing, measuring and building helps to not waste time and money for ideas or technologies which are not needed on the market. Finally, the already mentioned teamwork and interdisciplinary approach is important to make a business successful.
Of course the strict regulatory standards, specifications and certifications for data proving technologies needs to be taken into account when entering the climate services market. Each market segment will have its own rules and culture. Make sure to be part of this specific network to learn and adopt as fast as possible to create a successful and sustainable business in the field of climate services. In the case of implementing climate services it would make sense to have a bunch of best practise case studies to show the potential customer how change of perspective can look like, how climate data will influence his business and how the business can be made more sustainable while implementing climate data on the right place of the decision making process. After raising awareness the right business model will support to build a long-term relationship with the customer – because climate influence will need a long-term attention because of their long-term consequences.
