Friday, May 23, 2008

Business model management

Business models may be used on a routine basis and in a systematic way as part of managing and operating an organization. This means incorporating business model design and innovation as part of a continuous and integral process in the organization. This is in particular relevant for organizations that deal regularly with introducing new business models and improving established business models. What is require from organizations that may want to do this?

For identifying and formulating business model opportunities and problems, it is helpful that the organization has business model awareness. All persons in the organization should understand what business models are (and what they are not) and what they can mean for the organization. In this way the identification and formulation of business model opportunities and problems can become much more effective and efficient.

It is advisable to experiment with new business models first to test them and to try out different models and variations. Business model experimentation requires fast and flexible cycles between business model design and innovation, implementation, and monitoring and evaluation. The capability to experiment with innovative business models can be an organizational innovation in itself. Moreover, experimentation can also enables an organization to develop the capabilities required by a particular business model and, therefore, be more ready for a full scale roll-out later. One of the advocates of business model experimentation is Chesbrough in his discussion of open business models.

It is also important to take into account that organizations can have multiple business models (sequential and parallel) and need to manage the dependencies. For the business model design and innovation this means that the organization has to take into account where synergies between business models can be created and where trade-offs are required. This may imply that an organization needs an overall business model vision that can guide them with making forward-looking and consistent choices. Mitchell and Coles address in their book ‘The Ultimate Competitive Advantage’ the continuous development of business models and the need for a business model innovation vision.

Friday, May 09, 2008

Managers as designers (part 1/3)

Managers are, or should be, involved in design activities related to managerial and organizational issues. We will take a closer look at different ways in which managers are engaged in design activities.

Managers are confronted with organizational problems: mismatches between the desired and the actual situation of their organization. So problem solving is a core concern for management. Managers can approach these problems with a decision attitude or with a design attitude (Boland & Collopy, 2004). Imagine having to decide upon the introduction of a new service that can either be of low quality at low cost or of high quality at higher costs. Would you do user studies to find out what the customers prefer? Would you calculate the business case for both alternatives? Or would you try to devise an alternative with high quality and low costs? Traditionally, managers are often inclined to pursuit a decision attitude: assuming it is easy to come up with a number of alternative solutions but problematic to decide upon the right solution (Boland & Collopy, 2004). A design attitude to problem solving, in contrast, assumes it is difficult to design a good alternative, but once a truly good solution had been developed, the selection of the alternative becomes easy. For example, for the introduction of tele-health services it may be more useful to design innovative business models, such as a model inspired by the rising interest in wellness, then to calculate an expected ROI based upon current health insurance practices. While managers need both attitudes, the capabilities of managers as designers are often not addressed and also design tools for managers are relatively underdeveloped compared to the decision-making techniques.