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Business Model Renewal after the Fall of the Berlin Wall
When I was contracted to go to Eastern Europe to teach managers after the fall of the Berlin Wall, I took with me my toolbox of best practices. I addressed the principles of business acumen, segmentation, and planning. The classes in Poland and Hungary consisted of individuals from various management levels in a broad cross-section of industries, yet the approach to strategy fit, and benchmarking against world-class competitors was appropriate. I was impressed by the entrepreneurial drive of the audience –it was not from a high-tech innovative perspective, but from a desire to start their own businesses.
Several years later I taught a series of classes in Shanghai and Beijing. The managers in the audience were from multinational corporations, and many had received their degrees from Australia and Europe. They were interested in developing more skills based on Western business practices to apply in very large organizations.
While these situations were different in many ways, the common element was the thirst for best practices. And the capacity to learn and grow from them was incontrovertible. Yet, a lot has happened over the last two decades – significant technological metamorphosis, transnational fluctuations, demographic shifts and other upheavals – that has prompted a rethinking of business-as-usual. This doesn’t mean that everything from the past must be thrown out, but it does imply a more nuanced approach to the basics.
I’d like to share a bit of what I’ve learned over the years.
Download the PDF of the presentation I used for teaching Business Models in the Business Acumen class at UW-Madison’s Center for Professional and Executive Development.
Download the PDF of a presentation on foresight for strategy.
Prologue from Business Model Renewal
Download the prologue from my Business Model Renewal book to obtain relevant definitions and concepts for business model renewal, strategy and implementation.
“Too many managers seem to believe there is a magic bullet in the form of world-class processes and best practices that you can simply “plug in” to your firm and guarantee success.”
Innovate beyond
Defy Best Practices
When I was contracted to go to Eastern Europe to teach managers after the fall of the Berlin Wall, I took with me my toolbox of best practices. I addressed the principles of business acumen, segmentation, and planning. The classes in Poland and Hungary consisted of individuals from various management levels in a broad cross-section of industries, yet the approach to strategy fit, and benchmarking against world-class competitors was appropriate. I was impressed by the entrepreneurial drive of the audience –it was not from a high-tech innovative perspective, but from a desire to start their own businesses.
Several years later I taught a series of classes in Shanghai and Beijing. The managers in the audience were from multinational corporations, and many had received their degrees from Australia and Europe. They were interested in developing more skills based on Western business practices to apply in very large organizations.
These situations were different in many ways, yet the common element was the thirst for best practices. And the capacity to learn and grow from them was incontrovertible. Yet, a lot has happened over the last two decades – significant technological metamorphosis, transnational fluctuations, demographic shifts and other upheavals – that has prompted a rethinking of business-as-usual. This doesn’t mean that everything from the past must be thrown out, but it does imply a more nuanced approach to the basics.
Best practice is an elusive term. Some people use it to define actions (often taken by exemplar firms) that are presumed to be the reasons for a firm’s success. Others use the term to justify following a prescribed set of protocols they believe improve performance. In some cases these best practices are indeed linked to superior performance, and in other cases they are based on historical interpretations or assumptions of cause-and-effect.
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While there are arguably examples of best-practice tactics or best-practice processes, can the term be applied to strategies and business models? That becomes more challenging since there so many interrelated pieces to the puzzle. Businesses operate within ecosystems that influence (although not necessarily predetermine) success or failure. The outcomes of a firm’s strategy or a business model are not independent of its environment. Yet many executives and managers examine key success factors (perceived best practices) in excruciating detail without really exploring the interrelationships among the factors or between the factors and the environment. Peter Drucker once pointed out that “eventually every theory of the business becomes obsolete and then invalid.” So, success chances are increased when executives become contextual leaders – making and implementing decisions based on the context of the situation.
Traditional approaches to strategy assumed a fairly stable and predictable world. This is no longer the case. And market leadership no longer guarantees profitability. Companies increasingly need an adaptive corporate culture, along with an acceptance and appreciation of experimentation, to have a competitive advantage. And since experimentation necessarily produces failures (along with wins), there must be a tolerance of failure.
A best practice, as defined by Wikipedia, is a technique, method, process, activity, incentive or reward that is believed to be more effective at delivering a particular outcome than any other technique, method, process, etc. Wow, that’s a broad statement. But many managers seem to believe that there is a magic bullet in the form of world-class processes and best practices that you can simply “plug in” to your firm and guarantee success. Unfortunately, it’s not that easy. Business success requires hard work, resources, and often plain luck. I read on a blog somewhere that best practices come from practicing your best consistently. That’s not a bad idea. And perhaps future best practices will be those that turn conventional wisdom upside down.
We can find several examples of what happens with the overuse of best practices. Long before Google became noted for allowing its engineers to pursue pet projects, 3M encouraged researchers to spend unscripted time exploring potential new products. Between 2001 and 2005, when former GE executive James McNerney was CEO of 3M, emphasis shifted to operational efficiency and the application of Six Sigma techniques. While waste was curbed and margins improved in the short-term, it took a toll on the 3M business model of innovation. Six Sigma is still important in 3M’s factories, but it’s not in the labs.
When it comes to business model renewal, it is often best to learn from — and then defy — best practices. Go beyond the status quo to establish a unique presence in the market. And never stop adapting.
Successful Solutions
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