Business Model Innovation opens up the opportunity to not only transform the value proposition, value architecture or revenue model of an organisation, it is a chance to rethink your human value systems and build businesses that customers love, employees’ value and investors are excited about. Often, particularly in turbulent times, cultural innovation is an imperative for management.
Many books have been written about why organisations should have value systems defined and how you implement values in your core business. Still not all organisation have made this effort and those who did not always manage to live up to those set standards. Surprisingly, Alex’s business model canvas does not have values as a key building block of a business model either.
Effective organizations identify and develop a clear, concise and shared meaning of values or beliefs, priorities, and direction so that every employee understands and can contribute. Those values, once defined, impact every aspect of your organization and of the whole business model. The values must be an integral part of a description of any business model.
In my leadership career I have experienced what difference it can make if you have a leader that takes on the challenge to transform an organisation through values. When I started my work at Microsoft Australia the organisation was at first view a fairly successful subsidiary, achieving its revenue targets and outperforming other subsidiaries in some areas of the business. At a closer look the organisation had issues in areas like customer and partner satisfaction as well as employee retention. The most worrying factor was that departments were fighting each other over resources and a culture of back stabbing was quite common.
Cultural Innovation as a starting point for Business Model Transformation
Microsoft had already values defined that every employee should live up to and display. In reality many of those values were not more than letters on a web site. The company appointed a new Managing Director and with his appointment a cultural transformation journey began. He hired a Consulting firm that was specialized in building “Conscious Businesses” and our organisation transformed within 2 years in an amazingly positive way. Our leadership team, which I was part of, experienced a dramatic change in how we interacted with each other and how we connected our businesses in a much more meaningful and holistic way. Our customer satisfaction increased substantially and our employee health index (a measure of subjective employee satisfaction) became world leading within the company.
The overall impact of this culture change on the business model was defined mainly in the areas of value architecture and the value proposition we delivered, due to higher empowerment of the staff and much better cooperation between departments. As a recognition of this change the subsidiary also won the “subsidiary of the year” award, 4 years after the journey began. Changing value systems in a running engine is hard work and takes leaders that impersonate the values they are keen to implement. It also means that some people in your organisation might chose to reorient themselves if they cannot identify with the new culture.
Where are the company values on the canvas?
When we embark on a business model innovation journey most frameworks today give little or no guidance on how values impact a change or a new business model. I believe this is an area that more consultants and leaders should get familiar with. Every business model innovation project creates a new path to potential success. The old rules / values might become outdated or offer opportunity to a fresh or serious start. fluidminds’ Business Model Innovation canvas from Patrick Staehler is the only one I have seen so far that puts explicit focus on that area. “What values do we pursue?” and “How do we interact with each other and the customer?” are two questions that need to be answered. Fred Kofmann has defined an organisational map, giving a lot more insight into those questions: This table is a convenient summary, but it obscures an important fact. These are neither three independent columns put side by side, nor three independent rows stacked on top of each other; they are a system. Each element relates to every other element; each one influences and is influenced by the others. The same is true for the values in the business model context. The values are not independent from the hard parts of your business model. They influence all other elements and building blocks.
So what is the best way to ensure values, beliefs and practices are supporting business model innovation? Let’s ask ourselves a couple of questions:
1. What are our current values, beliefs and practices?
Let’s say you are an old school insurance company that has an internal culture of risk avoidance, discipline, hierarchical thinking, high process orientation and task worker mentality with values like integrity, trust, respect and safety. All of those values are good and helpful if they are used in the right context for the right business model. They are most likely not a great asset if you want to build a business model that requires risk taking, little structure, little control and fast change. It will be wise to develop a new cultural framework for those kind of new business models. Incubate the new businesses in a new cultural environment and ensure that all practices, business processes, incentive systems etc are inline and supported by the new value system.
2. What values do our customers expect?
The customer should always be the centre of your thinking when it comes to values. They decide if your organization is successful or not. This is not easy, especially in international companies that operate in multiple cultural environments or have a wide variety of customers. The more important it is that those corporations give their subsidiaries freedom to add or change the corporate culture and values to address the local environment and customer thinking. Customer empathy maps are a good starting point in understanding the values that are helpful for a specific business model.
3. What values are fundamental to our business regardless of the business model?
Values are usually something that apply to an organisation as a whole and not only to parts of it. In big corporation with diverse businesses, it might be valuable to a have tiered system of values that supports the respective business models and allows the best possible culture to exist. Some values are fundamental for every business, others are business specific. Values like integrity, accountability, learning or similar ones are a good start for base values. Think about Amazon Corporation. They have two major businesses, the online retail business and the datacentre business. They defined 14 core leadership principals (http://www.amazon.jobs/principles ), in my mind far too many, that should guide all employees regardless if leader or worker within all Amazon businesses. The reality is that Amazon has continued issues with their warehouse / retail staff but seem to be doing ok with AWS staff. You might wonder what a blue collar worker in an Amazon warehouse feels when he reads those principles and thinks about how to fulfil them. Most of those principles are designed for knowledge workers and business models that have a value chain that is mostly impacted by them. One of the results of this misalignment is that many potential customers in Germany don’t buy at Amazon because they feel that the employees are not treated well.
4. What values create the culture I need for the specific business model?
Values are the fundamental building block of a working culture. They should guide what people I hire for the business and how people interact with each other as well as customer and partners. They make or break your business model! Only when we ensure that our defined values, beliefs and practices integrate throughout the system we have achieved a true values based organisation. In business model innovation projects we need to address those values, beliefs and practices as a core element and ensure that we have a good understanding of the impact they have on our planned model.
This is guest post by Norbert Haehnel.