In the discussion on business model innovation an important point is missing: the culture in which the business is conducted. A business is all about people “creating” customers.
Businesses are not a technical machine with input and output factors. Businesses are places where human beings work together for a common goal and therefore the culture in a business is a defining part of a business and therefore also for the business model.
Most definitions of what a business model is are rather technical. We talk about components, patterns, building blocks. We make a lot of fuss about how we rearrange the components as if they were just Lego bricks. We believe that having in mind a great new business model is already a business model innovation.
Where are the people?
Ups, no! That does not work. Somehow the most important “building block” of a business is missing: The human being that designs, shapes and makes the business work and the customer who has to buy into the new value proposition and pay. And here again we have the human factor. “[I]nnovation is not what innovators do but what customers adopt.” We always have to remember what Michael Schrage is saying. It is the customer acceptance that makes an innovation.
Zappos and its core values as a business model innovation
A great example to see how the culture and values can be the uniqueness and differentiation factor in its business model is Zappos . Looking from a technocratic point of view, Zappos is just an eShop for shoes with a great customer services.
But with this limited view you forget that it is not just the great customer service that makes the difference. You need people that can provide this great service. You need values in the firm that helps you to make the right decision in favor of your customers. And your values should be reflected in your controlling systems since otherwise people just do what they are measured for.
Zappos gives a great example that culture and core values is more than just having an HR department with marketing material for recruting. Check out what Zappos is saying about its culture. This culture was Amazon worth almost $1 billion when it announced it wants to by Zappos in July 2009.
Culture and values are part of the business model
I use in change project where big corporations are looking for a better business model an adapted business model canvas. The canvas uses besides the main components value proposition, value architecture and revenue model also a box for culture and values. Together with my colleague Dr. Harry Wiener who is a psychologist by training we have developed three categories that make together the culture and values of a business.
- Leadership style answers the questions: How do we lead people? How much freedom do we give them in their daily work?
- Relationship style answers the question: How do we work together with our customers? How do we work together with our peers in the firm?
- Values answer the questions: What value governs our overall behavior? What values do we pursue?
I do use the adapted version of the business model canvas not in all cases since it must fit the task.
And the more components you have the less the people really try to grasp the complexity of the business. In cases where a cultural change is not needed I sacrifices the culture for simplicity but add the culture and value dimension as soon as the new business model is designed and the implementation process is planned.
Unlearning and cultural change
From my work experience (having been a line manager for 7 years) and consulting experience the changes in the culture and values are by far more difficult than changing the business model since the traditional business model is so impeded in the heads of all people. Culture and values have to be unlearned and unlearning is the most difficult task as we see from all big American car firms or from the bankruptcy of retail conglomerate Karstadt/Quelle aka Arcandor.
[update:] Via netzwertig.com I found the following blog post of disgruntled journalist from the German media group WAZ. Unfortunately, the article is in German but it shows extremely well how people can react to changes. The journalist discuss if – as print journalist – they can be forced to take a camcorder with them when investigating a story. That sounds ridiculous for outsiders but the traditional culture of journalist is very class oriented and a print journalist is a print journalist and therefore he/she has nothing to do with pictures or even video.
Even when you have the best new business model you will fail if you cannot change the traditional values that impede change. So the culture should be included on the business model canvas if you do a business model innovation in a traditional firm. Otherwise, your business transformation will fail.