Business Model Development for the European Project FAST: An Earth Observation-Based Platform for Coastal Flood Risk Management

2.1 Customer/user interviews

Initially, the FAST team participated in a training workshop to equip them with the necessary skills and knowledge to conduct customer interviews using the method outlined by Blank and Dorf (2005). In the domain of entrepreneurship, customer interviews serve as a foundational tool for substantiating hypotheses about the market, the problem to be addressed, and the proposed solution (Chen et al., 2015). These interviews are characterised by semi-structured conversations with potential customers or users to gain in-depth insight into their needs, problems, behaviours, and priorities before launching a product or service into the market (Blank and Dorf, 2005). Conducting interviews with potential customers before the start of business development will provide the necessary information to assess the viability of the value proposition being proposed, in the form of a product or service.

Customer interviews are conducted in the early stages of the entrepreneurial process, especially during the problem and needs discovery and validation phase (e.g., in methodologies such as Lean Startup (Silva et al., 2020) or Design Thinking (Bason and Austin, 2019)), and are termed problem interviews (Blank and Dorf, 2005). These interviews can also be conducted at different times to validate new hypotheses or adjust the value proposition, and are known as solution interviews. In essence, interviews serve as a conduit for validating and/or refuting preconceived assumptions. The logic is straightforward: when a new concept is initiated, it is presumed that the client is confronted with these issues, that the optimal solutions are known, and that there is sufficient clientele to establish a profitable business. It is anticipated that the following hypotheses will be addressed through problem interviews (Blank and Dorf, 2005).

A script was established for the interviews, allowing each FAST member to adapt according to the interviewee. The following structure was observed in the interviews:

The international FAST team successfully overcame the initial reluctance of scientists who were unfamiliar with this entrepreneurship tool and lacked knowledge of conducting interviews. The team then compiled a list of potential key users and customers to interview.

A first round of end-user interviews was performed. Every FAST partner conducted this consultation in their own countries to introduce users to the FAST project and the potential of GMES/Copernicus data products and services, assess the specifications of end-user needs, document experiences with managing foreshores and floodplains, and evaluate the value of new products and services to different user groups. Through these interviews, they gathered fascinating information, such as

Content – the tool should

Technology – a tool should

After carefully analysing the answers, they organised a list of potential services according to the demand of the different end-users, including:

All members of the FAST team conducted two rounds of end-user consultations in each partner country. The purpose of these consultations was to understand users’ real problems and shape the tool to meet their specific needs. The information gathered during these consultations was essential for the subsequent development of the tool. The list of potential services was used to select three types or levels of MISAFE services described above.

2.2 Sector and market analysis

Preliminary sector and market analysis, in conjunction with our partners’ perceptions of demand for such services, indicates the economic viability of developing relevant MISAFE services. A thorough investigation of available sector data has revealed several reports that are incomplete and/or inconsistent. To illustrate this point, the Parliament of the United Kingdom⁷ published an analysis of flood defence spending in England in 2014, which contains the relevant information:

Moreover, in February 2014, the UK government made a series of announcements about recovery and spending. The primary points of these announcements were as follows:

Similarly, in the Netherlands, the budget for the second National Flood Protection Program (HWBP-2)⁸ amounts to €3.218 million. Overall, and translating both reports, we can highlight some key points: European governments, insurance companies, engineering firms, and consultants are seeking more ecologically sustainable, cost-efficient, and accurate defence modes.

In this sector, Deltares (project coordinator) is one of the leading institutes worldwide, providing expert knowledge and scientific-level analyses. As an autonomous institute for applied research, it operates on a global scale in the domain of water, subsurface and infrastructure. Deltares is an organisation that does not seek to generate profit. A total of 46% of its revenue is supported by the Dutch government, with the remaining 54% being sourced from public and private sector clients. It employs almost 800 researchers and consultants in the fields of hydrodynamics, coastal engineering, industrial flow technology, geoengineering, water quality, ecology and social sciences. Of these, approximately 150 are classified as environmental consultants. The institute is committed to the idea that software should be widely disseminated and open source to support further scientific development. Profitability in terms of financial gain is a secondary (soft) objective. The primary issues relevant to water security identified during consultations with new clients are as follows: Deltares asserts that it has completed project work in more than 80 countries worldwide.

Likewise, a competitor analysis has been developed. Table 1 summarises some results, showing relevant competitors and potential allies.

The FAST services are characterised by the integration of scientific findings and a development process oriented towards end-user needs. The project integrates these services into the current practices and working environments of various governmental, research, and commercial user communities active in these areas. Consequently, several potential target markets and client segments have been identified:

To explore the possibilities in greater depth, two market analyses have been developed. These analyses reviewed the original list, incorporating, excluding, or rectifying it through interviews with a list of end-users and clients. The results obtained demonstrate a balanced distribution across various potential segments.

2.3 SWOT analysis

Globally, billions of people are reliant on flood defence infrastructure for their safety. Furthermore, the financial burden of constructing, maintaining and managing flood defence infrastructure is significant. Moreover, the majority of dams and levees are designed and built from a single perspective, namely hydropower or flood defence, and often conflict with ecosystem integrity by obstructing water and sediment fluxes and by serving as barriers between water and land. To curtail expenditure and mitigate the deleterious effects on ecosystems, solutions that integrate natural systems with flood defence structures are currently being explored in several countries. In this scenario, FAST provides a detailed exposition on estimating climate robustness and the capacity of foreshores and floodplains to mitigate the effects of climate change. Consequently, the focal point of the discourse is “Environmental and Climate Change Impacts and Attribution”.

To analyse the FAST micro-environment, drawing on business strategy development, a SWOT analysis of the strengths, weaknesses, opportunities, and threats (SWOT) associated with our services was conducted. SWOT analysis is a widely used diagnostic tool in environmental management to identify key factors that influence the success or failure of a project (Hovardas, 2015; Sinha et al., 2020). According to Hovardas (2015), the project’s capacity to achieve its objectives is evaluated in terms of two distinct categories of factors: inner (i.e., those intrinsic to the project itself ) and outer (i.e., external to the project). The mobilisation of these factors is instrumental in achieving the project’s objectives. The inner aspects are called ‘strengths’, while the outer elements are called ‘opportunities’. Similarly, project barriers (termed ‘weaknesses’) and environmental barriers (termed ‘threats’) can be identified. The result of the SWOT analysis offers insights concerning the trajectory of the project, categorised as follows: ‘strengths’ that should be supported (i.e., inner potential), ‘opportunities’ that have to be sought (i.e., environmental prospects), ‘weaknesses’ that must be overcome (i.e., inner barriers), and ‘threats’ that ought to be alleviated (i.e., environmental hindrances).

In summary, as illustrated in Figure 1, a positive outlook is indicated for future steps. Further rigorous effort is necessary to translate these strengths and opportunities into reality. It is key that they devise conversion strategies to transform weaknesses or threats into strengths or opportunities, or at the very least, mitigate their impact. As previously mentioned, an example of a conversion strategy is the development of new, customised services and functionalities involving third parties.

Figure 1. Draft SWOT analysis.

Legend: Matrix detailing the Strengths and Weaknesses (internal factors), as well as the Opportunities and Threats (external factors) identified for the development of the MI-SAFE business model.

2.4 Marketing/sales strategy

As previously mentioned, Deltares is involved in developing innovative solutions, innovations, and applications that benefit people, the environment, and society. The institute collaborates with governments, businesses and research institutes in Europe and abroad. It was mutually agreed upon by the partners involved in the FAST project that Deltares would assume responsibility for the commercialisation, development and maintenance of the software’s operational status throughout the project period. Furthermore, it was agreed that Deltares would continue to host this software on public servers following the project’s finalisation.

Deltares Systems is the brand under which the organisation offers all software services and ready-to-use software products. These products are available via the institute’s webshop. It contains a selection of the most popular software products and services from over 150 Deltares software products, which cover the entire spectrum of their expertise, including coastal waters and estuaries (Delft3D), rivers and urban water management (SOBEK), the design of diaphragm wall structures (D-Sheet Piling) and the stability of flood defences (D-Geo Stability). In the global market, Deltares employs a regional and national approach. The selection of regions and countries is based on strategic, market, and operational criteria. Its excellent knowledge distinguishes Deltares, as well as strategic cooperation agreements and a focus on investment scenarios.

Regarding MI-SAFE, Deltares is held in high esteem on both the national and international stages. The organisation is specialised in the development of enhanced forecasting systems, designed to meet the mounting demand. This presents opportunities to integrate data and existing models with MI-SAFE.

A matter of increasing concern is the affordability of software maintenance. In this regard, Deltares’ international operations are increasingly characterised by the adoption of open-source software. This approach facilitates the utilisation of external expertise to enhance the MI-SAFE software, models and information systems. The increased availability of data enables the configuration of models to support policy development and decision-making within real-time warning systems.

In line with our previous analysis, our available resources, our capabilities and our values, the following conclusion can be drawn about our marketing strategy:

The software development process is based on the strategy and infrastructure of creating open-source software products. This signifies that FAST assimilates into extant open-source communities and can utilise open-source software modules developed in other research programmes. The FAST initiative is closely connected to the global community of practitioners in open-source software development. This affiliation is facilitated by the pre-existing software products that have been developed and are currently in use.

Furthermore, it is acknowledged that the development and utilisation of MI-SAFE software has the potential to yield a multitude of additional services for end users, thereby augmenting the value for professional users:

2.5 Operations

Existing open-source methods and tools are utilised as a context for the services provided. The initial version of MI-SAFE was developed as an online web viewer to provide users with a comfortable environment for accessing the available FAST web services. The web viewer is composed of a map viewer with dockable elements that possess specific functionality for data integration, map visualisation and visual analytics. MI-SAFE can be accessed from any location with internet connectivity. For instance, it can be utilised by consultants or public officials to evaluate the condition of the foreshore. The viewer incorporates an evaluation tool to facilitate the collection of user feedback. The Deltares Open-Source Community infrastructure serves as a platform for documenting and streamlining the process above. The design of the tool consists of seven main components ( Figure 2):

Figure 2. MI-SAFE value chain.

Legend: Schematic representation of the seven main components of the tool's design, illustrating the flow from the extraction of data from Earth Observation (EO) and local sources to the production of information using calibrated algorithms and the delivery of services to the end user through the web viewer.

The MI-SAFE tool uses four distinct data sources:

In the context of the MI-SAFE software, it is essential to note that the core processes are executed in an automated, reproducible manner. When feasible, Web Processing Services (WPS) or alternative database protocols are used to view, query, download, and process FAST products. In the cases where functionality is deemed sufficient, the WPS functions are available for utilisation in alternative user interfaces or as a downloadable script. The core processes encompass data delineation, correction, and collation. The integration of calibrated field algorithms and run model predictions is achieved through separate core processes. Moreover, a methodology is required to extract hydraulic information from an online source. The intervention component must incorporate mechanisms that facilitate the editing of boundary conditions, cartography, and the reiteration of other fundamental processes. It is acknowledged that all FAST maps may be published as NETCDF and GeoTiff files, with the subsequent capacity to feed WPS modules. It is noteworthy that both the FAST software and its associated databases are open-source. It is important to note that certain functionalities about service offerings may not be accessible to all users.

2.6 Financial projections

The MI-SAFE tool is integrated within Deltares systems as a comprehensive component, representing the most effective method for viability assessment. As previously indicated, Deltares is a globally renowned organisation. However, MI-SAFE is nonetheless viable in principle. As previously referenced, MI-SAFE, as an open-source program, is founded on the principles of communities of practice, thereby serving as an additional viability assessment. Furthermore, MI-SAFE derives revenue from two primary sources: advanced consultancy services (which are remunerated for the development of a customised system or additional modules) and a maintenance and support contract (which is optional for the client and which offers different levels of service depending on the urgency of the type of service, etc.).

The Fast team produced a financial forecast, incorporating anticipated revenues, expected profits and cash flows, for a standard scenario (i.e., the more likely one) of the MI-SAFE services. The financial projections for best- and worst-case scenarios were also included, along with the standard case. The scenario method is a process that enables the analysis of potential future events by considering alternative outcomes when the precise nature of the future is not yet apparent (Avagyan et al., 2022). A panel of experts was convened to produce a series of illustrative scenarios. A consultation was undertaken with customers, end-users and potential allies. The FAST partners are responsible for indicating what amounts are reasonable and assumable by their own customers, end-users, contacts and organisations. Therefore, the estimated potential revenue was calculated using the more moderate scenario for the initial five-year period, based on average prices (derived from Deltares’ systems portfolio).

In addition, despite pertinent documentation indicating an annual growth rate of 3%, this was not considered, given the cautious outlook. This forecast enabled the prediction of the net income statement, facilitating the evaluation of net income across various scenarios. Indeed, the majority of costs were calculated as a percentage of Deltares’ systems costs, thereby enhancing their results and engendering economies of scale. The remaining projected statements were redundant, as MI-SAFE is inherently incorporated into the Deltares systems. The financial projections have met with the approval of the fast consortia partners, thereby ensuring the sustainability of MI-SAFE services over time.

2.7 Business Model Canvas development

The business strategy was developed using the Business Model Canvas tool. According to Osterwalder and Pigneur (2010), the Business Model Canvas is a shared language for describing, visualising, assessing and changing business models. Each of the nine components of the Business Model Canvas is described in both pictorial and narrative detail. The further use of the canvas aims to translate business plans into customer-centric business processes.

As previously stated, the responsibility for the commercialisation, development and maintenance of the software’s operational status during the project period lies with the Deltares Institute. Following the project’s conclusion, Deltares will continue to host the software on public servers. Deltares collaborates with governments, businesses, and research institutes worldwide. Nevertheless, the FAST consortium has developed its own business model, which is outlined in the following canvas ( Figure 3).

Figure 3. Business Model Canvas for the FAST project (first draft).

Legend: The Initial version of the business model canvas focused on a traditional linear product approach.

As illustrated in Figure 3, the customer segments are extensive and encompass the engineering community, governmental organisations, research institutes, international governmental branches, non-governmental organisations (NGOs), and the general public. Therefore, the end-users/clients were divided into six archetypes: non-governmental organisations (NGOs), research institutions, environmental organisations, public administrations, supranational agencies, private companies, insurance companies, and interested people and communities. As previously outlined, MI-SAFE has delineated a pioneering and singular operational service capability, providing intelligence on the condition of coastlines and floodplains, as well as the attendant repercussions on security infrastructure concerning prevailing and prospective physical forces and administration, for diverse target markets and customer and end-user demographics. The creation and activation of the community above facilitates the establishment of customer relationships. At the same time, the distribution channel is configured as mixed, either through Deltares’ direct means or through authorised intermediaries. The primary revenue streams are derived from advanced services, which are frequently characterised by annual agreements and customised development, as well as ancillary services such as new site calibration, consultancy, training, and support. A proportion of the revenue from these services is reinvested in the open-source infrastructure, thereby funding the hosting of the educational and expert modes. MI-SAFE’s unique value proposition lies in its ability to go beyond simply providing existing information and offering tools for local analysis and estimation of vegetation effects on wave attenuation, setting it apart from competitors. Its usefulness in environments with limited data is particularly valuable. The business model has been developed to address the challenges of the sector by seeking diverse sources of funding (including private and co-funding). The strategy of viability, achieved by subsidising fundamental and expert levels (freemium) through revenues generated by advanced and additional services, is a viable business model for open-source initiatives based on public research. While the knowledge generated by public funds is in the public domain, the added value in advanced services (customised analysis, consultancy, expert support) justifies the pricing structure. It allows for the maintenance and continuous improvement of the platform.

In the operational blocks of the Business Model Canvas, key activities comprise scientific development, the development of the MI-SAFE tool, interaction with users, data collection and processing, model calibration, the provision of services (educational, expert, advanced and additional), the building of a community of practice and the maintenance and development of the software. Key project resources include OT data (Sentinel), field data, algorithms developed for RS data analysis, models for predicting flood protection (such as XBeach), the OpenEarth platform, Deltares infrastructure and expertise, and the combined expertise of the FAST consortium. Key allies in developing the whole model include NGOs, public administrations, private companies, the European Space Agency, and the open-source software community. Ultimately, the long-term cost structure encompasses the maintenance of the IT infrastructure, personnel, customer service and marketing/promotion, among other elements.

Nevertheless, this business model is forsaken, and a significant transformation ensues, precipitated by introspection and discourse among the FAST project’s constituents. Consequently, a business model based on a platform-as-a-service is developed, as delineated below.

2.8 Platform Business Model development

The business model evolved into a ‘Platform as a Service’ model, in which the portfolio of services is distributed through a web platform. Business model thinking has evolved away from the traditional value chain approach to a new logic based on open networks and platforms (Fehrer et al., 2018). According to Fehrer et al. (2018), this new business logic, based on open networks and platforms, challenges the notion that firms manage, influence, and control entire activity systems. Platform business models are systems that facilitate the creation, delivery and capture of value by enabling interactions between multiple user groups through digital or physical platforms. They typically leverage network effects, open networks and innovative monetisation strategies, which distinguishes them from traditional business models.

This evolution of the FAST business model towards a Platform as a Service is a strategic decision that enables and facilitates the integration of the various roles of the FAST consortium partners and the involvement of the open-source community. The platform model is generally well-suited for initiatives based on open-source and public data, as it leverages the diffusion and collaboration that are intrinsic to these communities. The rationale underpinning this evolution can be articulated as follows: The FAST project was initiated to facilitate the incorporation of nature-based solutions into flood risk management, to address the questions that had emerged from these innovative techniques. For instance, it is necessary to ascertain the mechanisms by which vegetation reduces wave energy, as well as how these processes are transferred from individual plants to large foreshores. However, the development of the business strategy has demonstrated that FAST offers a wide variety of value-added services, of which software is but a small part. This point suggests that the conventional linear value transmission model from the consortia to the customers may not be adequate for effective FAST business strategy modelling. In the course of developing its former business model, FAST has transitioned from providing value-added information to private and public organisations with an interest in coastal management to a platform that enables end-users not only to consume but also to create value, thereby multiplying it. For instance, the combination of global coastal vegetation and geographical data, previously unattainable, provided by FAST, could be helpful for several purposes. These include the original purpose of applying nature-based solutions to the development of new flood risk management strategies, as well as assisting and facilitating site selections for film producers. It is important to note that platforms do not merely create content and disseminate it. These systems empower users to generate and utilise value. From a technological standpoint, external developers can expand a platform’s functionality by leveraging application programming interfaces (APIs). From a business perspective, the platform enables a select group of users — producers — to create value for another group — consumers — who then have the opportunity to consume it.

The platform business model canvas (PBMC) provides a framework for the necessary transformation of management and the value proposition. To address this, a review of the previous FAST business model Canvas was undertaken, leading to the adoption of a new layout that enabled a more precise representation of value propositions and exchange opportunities for all stakeholders involved in the platform ( Figure 4). The PBMC is a strategic management and entrepreneurial tool used to describe, design, challenge, invent, and pivot business models. The Platform approach engenders a radical, rapid transformation in the client’s role. Consequently, end-users/clients can assume a more active role, transcending the conventional boundaries between consumption and production, contingent on the established configuration.

Figure 4. FAST platform business model canvas⁹ (first draft).

Legend: New business model design evolved towards a ‘Platform as a Service’ (PaaS). The diagram visualises the network of interaction between the four key segments: platform owners, producers (who co-create value), consumers (end users) and external partners, facilitating multidirectional value exchange.

As Kramer and Porter (2011) assert, the notion of creating shared value emphasises the interconnections between societal and economic progress. It has the capacity to catalyse the subsequent phase of global growth. The primary objective of FAST is to foster innovation and drive societal growth. The FAST Consortium provides a medium that facilitates exchanges between the FAST Consortium, producers, potential partners, and end-users in both directions. The creation of value is a key priority, and the PBMC is constructed around this principle. The novel configuration of the PBMC is predicated on the platform’s multi-peer business model. It is evident that users of the FAST platform function not only as customers but also as producers and configurators. This is attributable to the open-source basis, which enables the shaping of diverse stakeholder segments involved in the platform’s co-creation process. Consequently, this facilitates the generation of value, not only for the users but also for the platform itself. The PBMC facilitates the visualisation of the network, which is structured in the following segments: