Who Is Really in Charge of Business Model Innovation?

A new study shows the workforce often understands the shift in the business model better than the managers who grew big on the old one.

Ten years ago I wrote a post on this blog with a simple title: Who is in charge of business model innovation? I went through a large company department by department. The strategists, who read Gartner forecasts and predict the future by analysing the past, but who have never met a customer. Marketing, sales, R&D, finance. The business-unit heads, whose power comes from the profit-and-loss statement they defend. The CEO. My conclusion was that nobody is really in charge, because business model innovation is not an office you can assign. It is a state of mind.

I stand by that. But recently a new academic study made me realise my list had a hole in it. I had forgotten an entire group of people. And it is not a minor group. It may be the group that sees the future of the business most clearly of all.

The study is by Alexander Ziegler at the Institute for Social Science Research in Munich, published in the European Journal of Industrial Relations in 2026. Its subject is dry on the surface: how works councils and unions try to influence business model development at German automotive suppliers caught in the shift to electric and software-defined cars. Three case studies, dozens of interviews, careful coding. What it actually documents is something I have believed for a long time but rarely seen written up so cleanly: the people closest to the work often understand the coming change better than the managers above them – because those managers grew big on the competence of the past, and therefore have the most to lose.

I have a personal reason for caring about this. I studied at the Stockholm School of Economics, and in Sweden it was simply normal that employees help shape the future of a company, not only defend the present. I will come back to Sweden. First, the case that made me rethink my old question.

When your product hides your business model

Call the company Precitron – that is the codename Ziegler uses to protect it. It is a third-generation family business, around 200 people, most of them skilled workers trained in-house. For decades its main customer was the automotive industry, and over time it specialised in complex, high-precision turned parts for combustion-engine transmissions. A profitable niche. As one interviewee put it, the company could “sell not just on price, but on performance.”

Then the ground moved. Battery-electric and fuel-cell vehicles do not need complex multi-speed transmissions. The core product was not under pressure; it was disappearing. And management’s answer was the one you hear everywhere in old industry: shrink. Quietly stop training apprentices, let the workforce decline, hold on to the remaining business. Someone on the team had a name for it – a “last man standing” strategy. Cut down to 150 people and wait.

Here is where it gets interesting, and where the works council did something that most management consultants charge a lot of money for and still get wrong. They did not argue about headcount. They asked a different question – and it is the most important question any company can ask about itself.

The value proposition question: what does the customer really buy?

One participant described the analysis phase like this: it took them a very, very long time to get to the heart of what the company’s product actually is. And the answer they arrived at was not “gearbox components.” It was: highly complex turned precision parts, produced in the widest variety of batch sizes, with the highest accuracy, zero defects, and difficult materials.

Read those two answers again, because the entire post is in the gap between them.

There is a distinction here that sounds obvious and almost nobody applies under pressure: the difference between the job your customer needs done, the benefit they get, and the product, which is only the means. Customers hire a product to get a job done – that is the whole idea behind jobs-to-be-done. A Rolex does not sell you the time – you can read the time far more cheaply. It sells you the fact that everyone can see you are wealthy. Starbucks does not sell coffee; the coffee is the rent you pay for a living room away from home. The product is never the point. The job it does for the customer is.

“Gearbox part” is a product. It is an artefact, and an artefact points backwards – to the combustion engine, to the market that is dying. “Precision manufacturing of difficult parts at zero defect” is a benefit, a capability, and a capability points forward. This is the whole point of seeing that the product is not the value proposition. The moment Precitron’s team stopped defending the artefact and named the real benefit, a whole landscape they could not see before came into view. Thermal management components, battery-system parts, parking locks for electric drivetrains, valves and compressors for fuel cells – all of them need exactly that capability. The gearbox was a dead end. The capability underneath it was not.

Understanding must come before dreaming bigger. You cannot design a bigger future on top of a wrong definition of your own business. The works council did the understand step properly, and only then did the dream bigger step become possible. They ran workshops with players from e-mobility and hydrogen, tested where the real demand was, and by the end the company had landed its first major order from a new customer in the e-mobility sector.

A business model is a system, not a cost line

Now look at what the works council said to management about the “shrink to 150” plan, because this is the second tool at work. They did not say “cutting jobs is unfair.” They made a business argument. Their point, roughly: the 150-person strategy will not lead to 150 people. It will lead to zero. Because the good people – the ones who can easily find work elsewhere – leave first. And when they go, the capability goes with them. The company’s efficiency collapses exactly when you need it most, and the firm races down to nothing. Management, one participant noted, “showed respect in the face of this scenario.”

This is the interdependence at the heart of every business model, and it is why a business model is a system, not a list of boxes to fill in. You cannot optimise one element in isolation. Cutting cost looks like tightening one screw. But the capability – the skilled people who are the zero-defect precision – sits in a different element, the human spirit of the firm (Unternehmensgeist). Pull the cost screw hard enough and you strip the capability screw at the same time. The most efficient version of the old business is often the one standing closest to the cliff. It is Christensen’s innovator’s dilemma in miniature: the perfect horse-drawn carriage lost to the first ugly automobile. Efficiency measures how well you do something. It never asks whether it is still the right thing to do – the same efficiency trap that leaves the most optimised diesel plant stranded in an electric world.

And notice: the works council reached all of this without a Business Model Canvas, without a strategy framework, without a consultant. They rediscovered the logic under pressure, because they knew the actual work. This is the difference between concept knowledge and tool knowledge. A fool with a tool is still a fool. These were not fools with a tool. They were people who understood the business well enough to reconstruct the concept from scratch.

When good analysis meets bad strategy

I do not want to leave you with the impression that this always works. Ziegler’s second case is the sobering one. Call it Touchonix, a Tier-1 supplier of car interior electronics, around 7,000 people, owned by an Asian group. Management saw the firm as a “transformation winner.”

“Transformation winner” is a phrase, not a diagnosis. Richard Rumelt calls this bad strategy: fluff and buzzwords standing in for the hard work of naming the real bottleneck and acting on it. When the e-mobility ramp-up went badly and hundreds of jobs were on the line, the works council did everything a good management team should do. They built fact-based proposals. They networked with research institutes and companies in new fields. They even facilitated a feasibility study on whether the plant could move into serial production of small satellites – and the engineers concluded it had almost all the skills and technology to do so. Management gave it “due consideration” and did nothing. By the end of the study period there had been no response at all.

The lesson is uncomfortable but honest: good thinking does not enforce itself. In a genuinely complex situation – where the answers cannot be known in advance and have to be discovered – the people at the top have to be willing to let that discovery happen. If they cling to a buzzword instead of a diagnosis, the best analysis in the building dies in a drawer.

Structure over hierarchy: the united view of the business

The third case, a large supplier Ziegler calls Combustra, shows the opposite: what happens when you build a structure that lets distributed knowledge flow. Here the works council used a relatively new instrument, a “future collective agreement,” to force management into a company-wide project on securing the German sites. The formal outcomes matter less than one small, telling side effect. Through the new cross-site meetings the agreement created, one plant heard that another could not successfully produce a certain product, stepped in, ran the numbers, and won a two-year contract for it. As one interviewee said, without the agreement and the contacts it created, “it would never have happened.”

That is exactly the “united view of the business” the 2016 post was reaching for. Not one person in charge – a process in which each part of the business finally becomes visible to the others. The honest limit remains: the agreement created an arena, not a decision right. The final call on investment still sat with the employer. But an arena is not nothing. It is a seat at the table, and information the works council said it had never had before, “not even through the economic committee.”

The Swedish mirror: the same actor, a different mechanism

Which brings me back to Stockholm. My instinct, watching the German cases, was to ask why employees have to fight for a seat at all. In Sweden the answer looks different – and the difference is instructive.

Swedish unions are not famous for striking their way to the future. The opposite: strike rates are among the lowest in Europe, and union-management cooperation is largely non-confrontational. What Swedish unions do is help restructure companies to stay competitive, and push hard on skills. IF Metall (Industrifacket Metall), the largest industrial trade union in Sweden, stresses the collaborative nature of its bargaining – an approach that at Volvo’s Torslanda plant helped create 1,300 new jobs. Its leadership puts upskilling and reskilling at the top of the agenda, on the logic that new technology is what keeps jobs, wages and production in the country. A local union leader in the steel industry, watching the shift to fossil-free steel, put it in a single sentence: “We cannot do the same production that we do today. We must change.”

So the same actor – the workforce – shows up on both sides of the Baltic as a driver of business model change. In Germany it is often fought for, case by case, through pressure and clever use of narrow openings. In Sweden it is more built in, through board representation, high collective-agreement coverage, and skills rights written into law. Two mechanisms, one pattern. And the pattern is the point: employees driving business model innovation is not a quirk of German co-determination. It is a general truth about where the understanding of change actually sits.

Horizon 1 or Horizon 2: defend the old model or build the next?

Here is my real wish, and it cuts against the cliché of what a works council is for.

The old reflex is to defend existing jobs with existing competences. Protect the gearbox line. Save this many positions doing this exact work. That is Horizon 1 thinking – the complicated, plannable world where you optimise what already exists. And it is a trap, because the more efficiently you defend the dying product, the faster you arrive at the cliff. Defending the artefact is defending the thing that is going away.

What Precitron’s people did instead was demand something harder and better: future-proof jobs, not preserved ones. They pushed management to develop the underlying capability into new fields rather than defend the old application until it vanished. That is the difference between guarding a competence and growing one. It is the difference between Horizon 1 and Horizon 2. And it is, I think, the most important thing employees can ask of their managers today – not “keep my job as it is” but “build me a job that still exists in ten years.”

Why does this so often have to come from below? Because of who the managers are. They grew big on the competence of the past. Their authority, their status, their whole career is built on the very business model that now has to be replaced. They have the most to lose from admitting it. The people on the shop floor have far less invested in yesterday’s answer – and they can see, sometimes years earlier, that the customer benefit has quietly moved somewhere else. Employees are rarely as slow as managers assume. In my experience they understand the change more deeply, precisely because they were not the ones made powerful by the past.

Lessons for everyone, not just car-parts firms

You do not need a works council or a German legal framework to take these lessons. They apply to any organisation facing a change it did not choose.

• Start with your business model, not your product. In times of transformation you do not have a product problem – you almost certainly have a business model problem. And you cannot solve a business model problem by defending, improving, or optimising the product. Understand the model first; most companies skip this and reach for the product instead.
• Your product is never your product. Ask what benefit the customer actually buys. The artefact points backwards to the market you have; the benefit points forward to the markets you could serve. Precitron did not make gearbox parts. It made precision.
• Shrinking is not a strategy. A business model is a system of interdependencies, not a list of boxes. Cut cost hard enough and you strip the capability that carried the whole thing. The most efficient version of an old business is often the one closest to the edge.
• A buzzword is not a diagnosis. “Transformation winner” is a slogan, not a plan. Bad strategy names an ambition and skips the bottleneck. Good strategy names the real constraint and acts on it.
• The human spirit is the engine, not the afterthought. The people closest to the work often understand the change first, because they have the least to lose from the past. The fourth element of a business model is not soft decoration. It is where the next business model is usually discovered.
• The best thinking still needs someone willing to act on it. Understanding does not enforce itself. Whether the insight comes from the shop floor or the boardroom, it dies in a drawer unless the people with the decision right let discovery happen.

So, ten years later, here is my updated answer to my own question. Nobody is in charge of business model innovation, and looking for the single responsible office is still the wrong search. But if I were writing that 2016 list again, I would not forget the people who stand closest to how value is actually created. They are not there to defend the last version of the job. They may be the ones who see the next one first. The job for the rest of us – managers especially – is to let them.