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Business Model……. UNPLUGGED! 9 out of 10 CEOs today will admit their business model is more complicated than it needs to be. In a recent Fortune magazine interview the interim CEO of Gateway Computers said they had made their business more complicated than it needed to be. Call it understatement of the year! Recently the CEO of Nike was fired because he felt the need to complicate Nike’s business model. There are hundreds more such public examples and thousands more that will go undocumented because for some reason a simple business model is not cool. Wrong! A simple business model is what legends like Dell, GE and Apple (once Steve Jobs came back and made it simple) are built on.
Its time to simplify….unplug….the business model. There are not many unsuccessful unplugged music albums; it’s because they are simple, basic, yet deliver high quality music that is all passion. Businesses and leaders need to do the same.
Key indicators that your business model is unnecessarily complicated and over-wired:
- Your organization claims to have a unique businesses process to support basic functional work streams like supply chain, finance, operations, etc.
- You have a matrix organizational structure to drive efficiencies but your bottom line is bleeding cash.
- Not everyone in your organization can list 3 key business initiatives and 3 key business drivers on a single POST-IT note.
- You have jumped on the lean, process optimization, six sigma etc. band wagon.
- You organizational Human Operating System has not been upgraded in years.
- Not many people in your organization can answer the question “how do we make money around here?”
- You are betting your organization’s future on implementing an enterprise system.
- You claim to be global but operate with tunnel vision syndrome.
- You have 2 strategic planning offsite sessions each year where the food is great but the outcome is a total waste of time.
- Customer profitability means different things to different leaders in your organization and cannot be measured down to dollars and cents.
Why have business models gotten overly complicated but not delivered results?
Five basic reasons:
- Introduction of complex concepts into basic business operations.
- Lack of an integrated view and performance dashboard for all business functions.
- Lack of technology leverage.
- Fancy theoretical models that don’t drive accountability.
- Complicated compensation models.
How do you unplug your business model? Go back to the basics.
Ask your leadership team the following questions:
- What will you screw up as a business leader over the next 12-18 months? This is an extremely hard question to answer and often leaders cannot come up with anything. If GM executives had answered this question it wouldn’t be facing bankruptcy!
- What can you introduce in the market place to disrupt the competitive landscape in a significant way? Most companies spend time competing and not disrupting. Dell disrupted the marketplace and won.
- How does the company make money and can this sustain long term? The answer cannot be more than 3-4 sentences long. Institutionalize the answer and plaster it on every wall.
- Are you willing to be fired if you did not meet your yearly performance objectives? The ones that say yes are your stars, the rest are extra load you are pulling along for no good reason.
- Who is the real customer and do the sales and delivery teams agree? Answer to this question separates the winning companies from the losing ones.
- What are you doing on a daily basis to upgrade the Human Operating System? Most companies go down the traditional HR path which is honestly becoming pass? fast. Organizations are like computers with operating systems that have to be upgraded periodically in order to sustain their growth otherwise become stale.
An unplugged business model can be and should be articulated on a single sheet of paper.
It’s a combination of answers to the six questions above because these basic questions should drive all facets of the organization on a daily basis. If not, there is wasted activity in your organization. Lastly, execution is critical to success once you unplug your business model. Think less about strategic planning; think more about what are the execution elements that get the organization to a strategic advantage. This is very hard to do but must be done in this competitive landscape we operate in.
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