April 2018 | Lukas Michel, Agility Insights
Conversations among executives on business models and their design are sexy. We like value propositions and business model design. We seem not to get enough of them. When it comes to management, then silence prevails. It’s unsexy. Or, worse, «we know». And, to all our surprise, there is little research available that is dedicated to aligning business and management models. It is time to revert that trend.
Businesses need both, a business model and a management model. While business models describe the value they bring to customers, management models determine how work gets done. In successful organisations, business and management models fit.
© Raymond Hofmann, www.managementmodeldesign.net
Business models are articulated as intended on paper. Management is doing it by facing reality. Fact is, when business models fail, ‘poor implementation’ is a frequent cause. Implementation is a discipline that clearly resides with management. A carefully designed management model will be able to reap the benefits of the hard work involved in inventing a great business model. But, the even harder work of the daily management job is to make business models work. With no (or a badly designed) management model, organisations will never be able to deliver upon their promises.
"When it comes to management, then silence prevails."
A frequent cause of implementation failure is the misfit between the business and management models. For example, control-focused management models do not support exploration type business models. Exploitation type business models require rigor and discipline in management. Exploration type business models demand that employees can apply their full creativity with a high degree of self-organisation. Like with exploitation and exploration type business models, management models that favour control or engagement are opposites and as such require a dedicated choice.
Most organisations describe their business model, but not their management model. A frequent mismatch or cause of friction comes from 4 sources:
- No deliberate and explicit design of the management model
- Management is not seen as a competitive advantage – it’s best practice
- Its underlying assumptions are false, unclear or unchallenged
- It is not documented – not shared by the organisation
How do you establish fit? Here are some questions that get you started:
- What predominant theories guide your management practices?
- How does your management help make your organisation function?
- How does your management model support your business context?
- How do you implement your business model?
- How do you balance execution with innovation?
- How do you create an environment where people apply their full talent?
To match your business and management models, simply initiate this conversation with your management team, your supervisory body, and employees. The future belongs to those that share how management contributes to value creation and high performance. Don’t be surprised about the passionate answers you get by asking these questions.
I hope for the entire academic community to intensify the work on the fit of management with business models.