Business Models: Generation and Implementation

Anca Metiu
ESSEC Business School

Bucharest, November 2011

Overview

Definition of business models Generation of business models Implementation

Strategy issues Three perspectives: strategic, political, cultural Organizational structures Motivation and relationships Group processes Management and leadership roles

Copyright: Osterwalder & Pigneur

key activities

value proposition

customer relationships

key partners

customer segments

cost structure key resources channels

revenue streams

Copyright: Osterwalder & Pigneur

images by JAM

Sources of information (including presentations) on business model generation

http://alexosterwalder.com/ http://www.businessmodelgeneration.com/

A Model of Organizational Behaviour

(Nadler and Tushman)

Inputs

Informal Organization

Output

Environment Resources History

Strategy Task

Formal organization arrangements

Organizational Group Individual

Individual

Feedback

5 Forces Framework

For analyzing strategy Devised by prof. Michael Porter The 5 forces are:

Perspectives on organizations
Mediate between the manager (detective) and organizations

They determine what data you see (hear, feel) in the organization and how we interpret the data What questions you ask and where your attention lies What meanings you attach Over time you may begin to identify with a perspective No single perspective is adequate It is easy to get locked into a single perspective, but difficult then to deal with complexity

Three Perspectives
Strategic Design
Organizations are machines
An organization is a mechanical system crafted to achieve a defined goal. Parts must fit well together and match the demands of the environment.

Political
Organizations are contests
An organization is a social system encompassing diverse, and sometimes contradictory, interests and goals. Competition for resources is expected.

Action comes through planning.

Action comes through power.

Cultural
Organizations are cultures
An organization is a symbolic system of meanings, artifacts, values, and routines. Informal norms and traditions exert a strong influence on behavior.

Action comes through habit.

9

Strategic perspective

Organization Structures
Functional Division of Labor Coordination By Inputs Hierarchical supervision. Plans and procedures Divisional By Outputs Division General Manager & Corporate Staff Separation of Strategy & execution Matrix By Inputs and Outputs Dual reporting relationships

Decision Rights

Highly centralized

Shared

Importance of Informal Structure

Considerable

Modest

Low

Politics

Inter-functional

Corporate Division & Inter-Divisional

General management Responsibility & resources

Along matrix & resources

Basis of Authority

Positional & functional expertise

Negotiating & resources

Pros and Cons

Functional Resource Efficiency Technical Excellence CustomerResponsive Coordination/Time Efficiency Accountability Ideal Environment
Strong

Divisional
Weak

Hybrid/Matrix
Moderate

Strong

Weak/Moderate

Moderate

Weak/Moderate

Strong

Strong

Weak

Strong

Moderate

Strong

Very Strong

Moderate

Stable

Heterogeneous

Heterogeneous but requiring integration

Caution: Matrix structures look appealing because they avoid the glaring weaknesses of the other forms (shaded areas), but they are difficult to implement, requiring a lot of natural collaboration.

Ref: Nohria, Note on Org. Structure HBS9-491-083

Formal Structures: Lessons

Structure is a powerful tool to influence behavior to achieve organizational goals

Formal structures clarify roles, relationships, and authority within the organization

Design solutions imply trade-offs

Organize along the dimensions that are competitively most important But understand any solution has drawbacks

Management is important in filling the gaps

Motivation

Three Approaches to Understanding Human Motivation

Needs Hierarchy Theory (Maslow) Goal-setting Theory (Locke & Latham) Equity Theory

Needs Hierarchy Theory

(Maslow)

Five levels of needs; the order in which they demand to be satisfied is from: - Physiological needs to - Safety needs to - Social needs to - Esteem needs to - Self-actualization needs

Implications of Needs

Promote a healthy workforce Provide financial security Provide opportunities to socialize Recognize employees accomplishments

Goal-setting Theory
(Locke and Latham)

Intentions to work toward a goal are a major source of work motivation What type of goals?

Specific Hard On which you get feedback (self-generated is better)

The goals-performance relationship depends on:

Goal commitment (the internalized desire to reach the goal) Self-efficacy beliefs (you think you can do it)

Implications of goals

Assign specific goals (people perform at higher levels when asked to meet specific high-performance goals than when asked to do your best) Assign difficult but acceptable performance goals Provide feedback concerning goal attainment

Fairness Approaches

When people compare themselves to relevant others, they can experience fairness or lack of fairness Two types of concerns:

Distributive justice (the perceived fairness of the amount and allocation of rewards) Procedural justice (the perceived fairness of the process used to determine the distribution of rewards)

The Folly: Rewarding for A and Hoping for B (Kerr)

Examples

Wanting teamwork, but rewarding individuals Employee involvement and empowerment but controlling resources

Why?

Over-emphasis on objective simple, quantifiable measures Over-emphasis on highly visible behaviors Other values more important than efficiency

Future

Need more holistic measures of performance factors Learn what people value, dont assume

The Job Characteristics Model (Hackman and Oldham)

Skill variety the degree to which the job requires a variety of different activities Task identity the degree to which the job requires completion of a whole and identifiable piece of work Significance - the degree to which the job has a substantial impact on the lives or work of other people Autonomy the degree to which the job provides substantial freedom and discretion to the individual in scheduling the work and in determining the procedures to be used in carrying it out Feedback - the degree to which carrying out the job provides the person with clear and direct information about the effectiveness of her/his performance

Motivation through Teamwork

A self-directed work team is a formally recognized group of employees who are responsible for the entire work progress of segment that delivers a product or service. Each team member learns a broad range of skills and switches job assignments frequently.

TEAMS

What makes teams successful?

Clear leadership Respect for all roles Conflict and collaboration and cohesion but not necessarily compromise are good Recognize and work through differences with one goal in mind The informality of formal groups: other needs being met (friendship, having fun)

From Working Group to Real Team

Real Team: A small number of people with complementary skills who are equally committed to a common purpose, goals, performance level, and working approach for which they hold themselves mutually accountable. Real teams are a basic unit of performance. The possible performance impact for the real team is significantly higher than the working group.

Real Teams outperform other like groups, and when led exceptionally well, outperform all performance expectations

Individual vs. Team Decision Making

Individual

Team
Reflects variety of perspectives Can combine skills, abilities, information and ideas Generates more alternatives Increases understanding Eases implementation Greater acceptance and support of the decision Solutions are better than individuals on average

Problem is clear and wellstructured Group acceptance is not necessary for implementation Less time Fewer resources Greater individual accountability

Less groupthink
Expert opinion is often better than teams

Assuming Roles in Teams

Belbins 9 Roles for Effective Teams 1. Plant unorthodox, creative 2. Shaper thrives on pressure, overcomes obstacles 3. Implementer disciplined, reliable, efficient 4. Resource investigator extravert, enthusiastic 5. Monitor/Evaluator strategic, thinker 6. Completer conscientious, deliverer 7. Coordinator mature, chairperson 8. Teamworker cooperative, diplomatic 9. Specialist narrow but deep in skills

A Managers Job
(Mintzberg, 1996)

The Manager

Conceiving (a framework, a perspective for the job) Scheduling (how is the work going to be carried out)

Managing by information

Communicating (talking and listening) Controlling (designing structures, directing)

Managing through people

Leading (being an energy center) Linking (building networks)

Managing action

Doing (solving specific issues)

Leadership Defined
The process by which one individual influences other group members toward the attainment of defined group or organizational goals (Greenberg).

Managers

and

Leaders

Establish plans Manage execution Drive for results Show commitment Manage profitability Commit to quality Coach and develop others Recognize good performance

Provide direction Set priorities Create and communicate a vision Empower and motivate others Think strategically Leverage networks Lead courageously Champion change

DOING THINGS RIGHT

DOING THE RIGHT THINGS

Becoming a Leader

Know yourself: theories, values, style Authenticity be true to yourself Dont underestimate the ability to develop and improve your leadership skills through practice and experience Similarly, develop your latent charisma:

Find your vision, seek to inspire and empower

Make use of your emotional intelligence But, be mindful of risks of leadership abuse

"Never underestimate the power of a small group of committed people to change the world. In fact, it is the only thing that ever has."
(Margaret Mead)

Multumesc!

metiu@essec.edu