Thinking in business models helps you in change projects, particularly in the unlearning of unwanted tacit assumptions and knowledge of the past. Forgetting what made you successful in the past is the key challenge in any change project, learning new things actually the easy part.
I am currently involved in a large change project. The company involved was living in a cozy environment. Demand was stable, predictable; project cycles were measured in years to decades and due to high entry barriers the firm was sure to “win” all business from its customers. Quality was so defined that the products lasted for eternity, most of the time longer than they had to last. Due to the heavy duty nature of its customers’ business everything was engineered to customers standards and very little of the components were bought off the shelf. Cost was not a major issue as long it was in budget.
And now the world has changed. Their customers had to change due to pressure from their clients. So the world of my firm will never be the same but since the change is coming slowly, there is time to adapt. The question is now: How can the firm change? How can it forget the habits that made it successful in the past but impede the future?
I teamed up with a coach that has a background in social psychology and constructivism. We had long discussion together but also with the customer’s management that was new on board. The question was where to start the change process.
Should we just have McKinsey, BCG or any other top consultancy fly in to have them develop a new market oriented strategy and then implement it? Our question was: Can you just implement a strategy into the heads of people that were not involved in the process? I think you can in certain cultures but not in nordic cultures. The danger is that you lose the strength any company has and particularly lose the commitment of the employees that make up the difference between a mediocre and a good to great company. You just lose the soul of the business and get mercenaries as employees. So that was not an option.
The other approach often used in change management is soft, typical HR driven. Management does some seminars on change, culture and innovation; and, what a miricale, people then will understand the need for change and then they will change. Unfortunately this is an illusion but big business for trainers and coaches. The problem here is that it sounds so right but people will consume not engage.
The problem and also the chance for our client was that they still have cash and time to change. Some units are in trouble others still earn money with the traditional way of doing business. So there is little sense of urgency (bad) but also time for a deeper change (good).
Understand your business model as a start, Understand what business are you in
Our approach was simple. We wanted to put a mirror in front of management. We wanted management to see the current situation through different glasses.
Management should understand more of what business they are in at the moment and what made them successful in the past and what might impede them in the future. They should reflect on their current business model and culture. They should get all their tacit and unspoken assumptions of their business model, culture and values on the table.
And by bringing the unspoken on the table the idea was that they can then change their business model, build up a new culture, live new values and thereby adapt to changing customer needs. To do so we have amended the business model canvas I had developed some years ago with a fourth dimension of culture and values. You can download the canvas also as a pdf.
What business are you in? Difficult question
The exercise was eye opening. They found the business model canvas simple to use but when they started to describe their current business the process stalled.
First, they figured out that their business units reflected their internal needs and not the needs of their customers. So the first part of the workshop was all about defining what businesses they are really in.
Second, when starting to describe their value proposition they knew exactly what their offering was (that is by the way not part of the value proposition) but they had difficulties to describe what job they were solving for the customer and what need they really fulfilled beyond selling their products. They discussed at length what their offer really did for their customer.
Engagement through confusion
The good part was that they found themselves very comfortable to use terms like value proposition, jobs-to-be-done, but they found it difficult to describe even the current business with these words. That confused them. But confusion is good in a change process. From our perspective as consultants we could really feel how they got engaged in understanding better their current business model. And that is the third learning.
Business model innovation; not always needed
Today we hear a lot of consultants including me that promote business model innovation as a great way to differentiate yourself from your competitors. Business model innovations are great but they just happen not too often in an industry. Actually, disruptive business model innovation happens once or twice in a generation in an industry. There is no IKEA around the corner every year. But thinking in business models helps you also with sustaining and ameliorating your current business.
To understand better your current business model helps you a lot. You just get better by understanding from a customer perspective what you do and what value proposition you offer. Just by writing your business model down helps you to
- get more focus,
- get better customer solutions,
- get the resources better aligned with your strategy and
- get a sharper profile with your customers.
Unlearning starts with understanding your hidden assumptions
But coming back to my client, just improving and focusing their current business model is not an option. But the first exercise to write down their current business model and then compare it to the changing needs of their customers helped to spark a discussion how to align the business model to the changing circumstances.
Particularly interesting was the changing mindset. Some managers that were so proud of today’s core capabilities saw that exactly what made them strong in the past is an impediment for the future. That unlearning process was fantastic, even when it is the start of a long journey.
Unlearning is by far more difficult than learning.
The biggest challenge to incumbents is the unlearning, forget. The best business model innovation will fail since managers and employees will use their tacit dominant logic of the past to implement the future. And that will not work!
So, if you have any ideas, experiments or cases how to start the unlearning process, I would love to hear from you!