Business Model Renewal in Eastern Europe and Beyond

Too many managers think best practices provide a one-size-fits-all solution. They eventually learn the downsides.

Innovate beyond

Defy Best Practices

With the turmoil in Ukraine and Russia, it’s hard to remember the optimism after the fall of the Berlin Wall. This world sector is in a state of constant transition. Uncovering my ancestry made me aware of my own connections there. Both of my grandfathers had their roots in Galicia, a region divided into Ukraine and Poland after World War I. It was information I didn’t have when I taught in Eastern Europe after the fall of the Berlin Wall. Maybe it wouldn’t have mattered. Or maybe it would have.

In the early 1990s, USAID hired me to teach Eastern European managers about transforming into a market economy. I took my tool of “best practices.” I addressed the principles of business acumen, segmentation, and planning. The managers in Poland and Hungary comprised a broad cross-section of industries. Yet, the approach to strategy fit and benchmarking against world-class competitors was appropriate. The entrepreneurial drive of the audience—to start their own businesses—impressed me.

Several years later, I taught a series of workshops in Shanghai and Beijing. The managers, with degrees from Australia and Europe, were from multinational corporations. They were interested in developing and applying skills based on Western business practices of large corporations.

Different, yet all were seeking the magic bullet.

A lot has happened over the past decades. Technological, transnational, demographic, and other upheavals have prompted a rethinking of business-as-usual. This doesn’t mean that we discard everything from the past. Rather, we implement 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 a prescribed set of protocols. Some practices indeed link to superior performance. Others are historical cause-and-effect assumptions.

There are arguably examples of proven tactics or processes. But can we apply the term to strategies and business models? That’s challenging since there are so many interrelated puzzle pieces.

Businesses operate within ecosystems that influence (although not predetermine) success or failure. The outcomes of a firm’s strategy or 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.” Executives increase success probabilities when they become contextual leaders. That means they make and implement decisions based on the context of the situation.

Traditional approaches to strategy assume a stable and predictable world. This is unrealistic. Market leadership no longer guarantees profitability. Or even sustainability. Companies need an adaptive corporate culture, along with experimentation, to have a competitive advantage. And since experimentation 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 view them as panaceas. They demand processes and practices to “plug in” to a firm and guarantee success.

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 gold standards will be those that turn conventional wisdom upside down.

For 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.