A Leadership’s Must for Accelerating Business Model Renewal, to Prosper, and to achieve the Sustainability of the Business.
Strategic discontinuities and disruptions usually call for changes in business models. But, over time, efficient organizations naturally evolve business models of increasing stability and therefore rigidity.
A common question in leaders’ minds and in their leadership teams is how can they radically accelerate the evolution of their business models? This is a critical question: Many companies fail, not because they do something wrong or mediocre, but because they keep doing what used to be the right thing for too long and fall victim to the rigidity of their business model. In the face of discontinuities and disruptions, convergence and intense global competition, companies now need to transform their business models more rapidly, more frequently and more far-reaching than in the past.
Business models can be defined both objectively and subjectively. Objectively they are sets of structured and interdependent operational relationships between a company and its customers, suppliers, complementors, partners and other stakeholders, and among its internal units and departments (functions, staff, operating units, etc.). These “actual” relationships are often articulated in procedures or contracts and embedded in tacit action routines. But, for the company’s management, business models also function as a subjective representation of these mechanisms, delineating how it believes the firm relates to its environment. So, business models stand as cognitive structures providing a theory of how to set boundaries to the company, of how to create value, and how to organize its internal structure and governance. Both as objective relationships, based on contracts and organizing routines, and as their collective cognitive representation, business models tend also to be naturally stable, and hard to change.
Their stability is further increased by the search for efficiency and predictability, particularly in periods of rapid growth, where the reliable and efficient scaling up of operations becomes critical. Such stability is required for efficiency: In traditional management practice, success is based on routine repetition of tasks by semi-skilled workers, and the phenomenon of convergence-to-fit – i.e., the growing adaptation to a particular situation, contributes to increase their stability. But such stability is also likely to result in growing rigidity, which inevitably limits a company’s strategic agility and thus its ability to renew and reform itself.
To develop our prescription for business model renewal, it is necessary a strategic agility framework that considers three main capabilities:
- Strategic sensitivity: The sharpness of perception of, and the intensity of awareness and attention to, strategic developments.
- Leadership unity: The ability of the top team to make bold, fast decisions, without being bogged down in top-level “win-lose” politics or bureaucracy.
- Resource fluidity: The internal capability to reconfigure capabilities and redeploy resources rapidly.
Successful business model renewal and transformation is one of the main outcomes of strategic agility. First, heightened strategic sensitivity allows firms to identify opportunities for new business models and also to be sensitive to the timely need for the renewal and transformation of their existing business models. Second, business model changes often involve gut wrenching decisions for executives, calling for difficult and risky personal adjustments and collective commitments. New adaptive leadership work and leadership team unity are essential to enable shifts in business models. Thirdly, resource fluidity is about allowing organizations to redeploy and reallocate their resources, particularly people who have to adapt to new opportunities or activities in a transformed activity system.
Transforming the business model of a successful company is never easy, as inertia from various sources defends the status quo. Strategic agility is most obviously a keystone to having the ability to transform and renew business models. In very stylized terms, anticipating, experimenting, distancing, abstracting, and reframing can sharpen strategic sensitivity, making the company both more precise and accurate in the perceptions its executives have both of its (external) ecosystem and of its (internal) activity system. They also contribute to making executives more aware and alert about their environment. To build leadership unity, dialogue, disclosure and communication of motives, integration of roles, alignment of aspirations and interests, caring, and how the pieces move are all determinants of a leadership team’s ability to reach collective commitments and obtain a true commitment towards them, among their members and from other members. of the organization. To implement agreed changes, switching between business models, decoupling activities, modularizing business processes and decoupling resources from a rigid operating system, as well as switching between parallel models and embedding capabilities and platforms to deliver catalytic transformation are all critical components of a business model successful renewal.
Is your company increasing strategic sensitivity? Does it execute the steps of:
- Anticipate: Try to prevent future impacts.
- Experimentation: Obtain and analyze information and visualize different scenarios.
- Distancing: Visualize these scenarios from an outside-in perspective.
- Abstraction: Gain generality by defining what is most aligned with the company’s objectives.
- Reframing: Imagining new business models based on the result of the previous steps.
Is your company fostering unity of leadership? Does it execute the steps of:
- Dialogue: Go out into the field and interact with customers and employees to share assumptions and understand different contexts.
- Revelation: Make explicit the motives or personal opinions that can impact the different scenarios.
- Integration: Identify and build interdependencies.
- Alignment: Grouping around a common interest.
- Pay attention: Provide empathy and support for empowerment.
Is your company making resources more fluid? Does it execute the steps of:
- Decoupling: Inject flexibility for the use of resources.
- Modularization: Disassemble and reassemble work systems to optimize performance.
- Dissociation: Separate the use of resources from the functional area to which they belong.
- Switching: Using multiple models and monitoring their behavior.
- Insert: Acquire resources and/or abilities to transform.
