Rule No.1: Never lose money. Rule No.2: Never forget rule No.1. ~ Warren Buffett
This may be a bold statement, but I am willing to bet that very few members of a senior executive team can fully articulate their current business model. In other words, the map that describes the key interactions and factors affecting how your organization delivers value to customers and turns effort and costs into profit.
Over the past 35 years of working with senior executive teams I have been appalled at how few fully understand their own business model. They readily understand how their individual function works, but few understand the full business model.
And why is this important? Because one of the first places to look for insights into effective strategy development and execution is the existing business model. By mapping out the process of the current business model, then stepping back and looking at it critically (seeing the forest instead of the trees) it often happens that insights pop out.
For example, with one supplier of heavy truck components, after reviewing their current business model it became obvious to everyone that the organization was not spending enough time with their customers, treating them more like a transaction than an ongoing business partner. The model also pointed out that plans for expanding into developing markets was hampered by lack of market intelligence.
Often we find that current business models have not kept up with either the changing global economy, shifts in technology, or customer evolution. This insight is critical for the senior team to understand and debate. I am not suggesting that mapping out the current business model will lead to a radical change in how a company goes to market, but will certainly point out areas of weakness in the current operations that an improved strategy and more effective strategy execution can overcome.
You don’t have a real strategy if it doesn’t pass these two tests: that what you’re planning to do really matters to your existing and potential customers; and second, it differentiates you from your competition. ~ Gary Hamel
Tight Lines . . .
John R Childress