Understanding Business Model Creation and Associated Dysfunctions

Jeff is the CIO for a Fortune 500 company with offices in over 50 markets in the United States. Due to the nature of their business, each office operates independently even though they are all part of the same company.  There is little requirement for the offices to collaborate across the markets because their products and services, sales and marketing are delivered “locally” to local customers. For those customers who are national in scope, they have a national sales and marketing team that manages those named accounts.

As a result, overhead cost redundancies are numerous. For example, each office has its’ own HR, accounting, IT, sales and marketing teams. Each office uses a local law office for most legal work – except when specific legal or accounting practices and reports are mandated by the CEO out of the corporate office. Each market has its’ own “President” who is empowered to make most decisions regarding the operations of her office.  The CEO likes it this way, believing that empowering the local offices to create their own structure and culture leads to better and more consistent profits.

Some functions are centralized in the corporate office, such as payroll, information security (via Active Directory) and leadership development. If an individual is being groomed to lead a market, they are vetted for several years in the corporate market, learning how to run an entire “office” in the local market of the corporate office.

The CIO of this corporation has much responsibility, but little decision-making authority.  The CEO believes the core role of IT is to support the needs of the corporate and local offices.  As a result, the Presidents of each office have the power to tell the CIO what they need and it is his job to deliver. When the CIO wants to standardize functions, processes, hardware or deliverables across all the offices, he must go through the CEO to get a “top down” mandate.  Given that the CEO is a visionary and doesn’t like getting his hands dirty with details and conflicts, the CEO seldom mandates the CIO’s recommendations.

You might be surprised to learn the company is consistently profitable. Shareholders are happy with the company’s performance. The nature of their business gives predictable profits and repeat business that once won, is relatively easy to maintain – as long as the customer is serviced and their relationship is maintained.

When the local IT teams started to install a new software package without consulting the corporate IT team, the CIO saw a train wreck coming.  He understood their lack of process for information management and their lack of sharing common documents across these silos was creating millions in opportunity costs.  He also learned that the offices were making redundant purchases for third-party products and moving forward with little planning or forethought.

The CIO and his corporate IT team were forced to support unnecessary and often redundant customizations that were implemented from different consulting firms.  These firms led the Presidents to believe that if they could “just get the right customizations”, they would realize the promise their IT teams had made on behalf of this new software package. Little did they realize that a good software deployment requires alignment across people, process, legal, technology, infrastructure and so forth. When people started using this new software package, they actually lost more documents than they had lost using the previous software package. So everyone blamed the software and defined the problem as a technical problem rather than a setup of cultural and process dysfunctions. And Jeff heard all about it. Repeatedly.  Eventually, Jeff’s company fell into dissilutionment, which meant that each person managed their owne information in a ‘this is how I’m going to do it” attitude that had a “too bad if it hurts you” feel to it.

Jeff responded by working with the CEO to re-frame the complaints as being inevitable because they are the result of an absent information management process and over-hyped software expectations.  Because similar teams across the various offices acted independently of each other, they developed dissimilar processes to achieve similar results.  This required similar information being managed in dissimilar ways.  When corporate was invited into the deployments of the local offices to “pick up” office information that was starting to be required due to new Federal regulations, those in the corporate office swiftly realized they had a large, but hidden problem on their hands.  They realized that the software had surfaced systemic, long-term problems with how the various offices were managing information, that much operational information was redundant and that there were hidden costs in their business model that, if eviscerated, would jettison their profitability and stock price.

But the CEO seemed disinterested in all these details.  He didn’t think it was a good use of significant resources that was, essentially, a technical problem.  Besides, he had spent millions on this software package and he was going to be damn sure he got his return on that investment.  Their company would keep using this package, he mandated, and the Presidents will “just have to figure it out”.  This left Jeff, a smart and energetic CIO, out in the cold.  What little authority he did have was eroded.  Jeff felt ignored and devalued.  Jeff hung around another couple of years, punching the clock and building his resume with real, but small (compared to what he could have done) wins.  He eventually moved on and found a better CIO position where the CEO was more interested in his thoughts and ideas to use IT to support the goals and strategies of the organization.

Dysfunction in the leadership of a business or organization will surface in one way or another.  The leader’s dysfunctions will negatively impact the organization, unless the leader can hire folks around him/her whose strengths offset his dysfunctions. Most of the time, when a leader’s dysfunctions surface in an organization, those dysfunctions are cast as a process or technical problem rather than a cultural or leadership problem. Often, the damage is done before positive change can occur based on a better definition of the problems at hand.

What dysfunctions did the CEO exhibit?  We can think of several:

  1. The CEO’s unwillingness to give Jeff a commensurate amount of authority with his position betrays an out of balance value system that is tilted toward sales and profits. Whenever we elevate profits above products passions and philanthropy, we will end up with situations like what you have just read.
  2. The CEOs unwillingness to become involved in helping Jeff define the problem as an organization-wide problem indicates that the CEO is either emotionally unwilling or unable to face his presidents had on with changes that he knows they will dislike.
  3. It could be that the CEO is not good at resolving conflict, which is nearly always a result of a personality deficiency. It is common for people to avoid conflict and to not want to get into the middle of an emotionally sticky situation. Process people would defined this problem as mutually exclusive and disconnected processes. Management people would defined the problem in management terms. But we believe that these types of unresolved conflict problems ultimately are the result of the top leadership in the organization being unwilling to face into the negative and resolve conflict directly, consistently, and swiftly.

It’s not so much that we think the CEO should be involved in these kind of details within his company. It’s that he didn’t empower the CIO to carry out reasonable plans and he didn’t trim the power structures of the Presidents in each of their silos. When power is out of balance in an organization, that always creates politics and conflict. And power can only become out of balance when the leadership of the organization becomes out of balance themselves regarding the four principles that God has for business.

For example in this case profits is out of balance with products passions and philanthropy. In other words profits is really the only major the CEO is using to define success within his organization. This is not uncommon, since most publicly traded companies are measured strictly on the return they create for the shareholders. But the commonality of elevating profits above the other three purposes doesn’t make it right or good. In this case, the CEOs focus on profits was actually creating hidden, opportunity costs. These costs were drag on his organization and a drag on the morale of some of the key personnel and his organization, including Jeff is CIO. But because the CEO was not all that interested in products and passions-in other words quality products and a great culture-the CEO missed obvious signs of trouble in his organization.

Some organizations can thrive like this because they have enough profit each year that the problems in the organization are lost inside the happiness of the profits. Those on the outside would look into the Corporation and say why should we fix something that isn’t broken? So not all problems are easily defined and not all problems receive the support that they might deserve in order to be resolved. But that too is a result of the dysfunction of the leadership in the organization

An overview of business model core elements

Some might call this discussion one that is focused on a Business Architecture – and there are different definitions of what a business architecture is and what components should be included in the model.  I like this perspective. And from a visual perspective, you can reference the following graphic in Figure 1 as we work our way through this discussion on the core elements of a business model. We will start by discussing the core ideology that any organization needs to be successful.

Core ideology[1]

Successful organizations today know that they need to focus everyone toward work that is aligned with the organization’s overall goals. Great companies such as 3M, Ford, General Electric, Citicorp, IBM, Mark and others are demonstrating that it is possible to get everyone moving in the same direction and to connect day-to-day activities with the big goals that the organization is attempting to achieve.

Figure 1: Core elements of a business model.  If you would like a free copy of this graphic in poster form, please register for the SharePoint for Business set of posters in the free content resources page at www.mindsharp.com.

These companies have a common characteristic-they have determined why they exist as a company and what is important to them. They have visualized their future as they want it to be and developed goal statements that will lead to achieving that future state. In addition, they have ensured that everyone in the organization knows and understands why the company exists, what it stands for (and won’t stand for), it’s desired future state, and what each business unit and the people within them must achieve to reach the companies’ goals and attain the future state.

It’s human nature to want a purpose to fulfill. In order for people to be committed to the organization and to contribute to the organization’s success, the employee’s must have a core focus. They need a statement of purpose that they can believe in, a direction that they’re willing to move toward, and a belief that their activities will lead to achievement of something meaningful. They need a transcendent purpose beyond mere profits. And unless there are unifying mechanisms to bring focus and alignment across the individuals within the organization-regardless of their role or station-the organization will remain mediocre at best.

It is the company’s executive management, along with the Board of Directors, that provides this focus and ensures alignment across the enterprise. It is the company’s management that must clearly articulate the company’s purpose, values and vision. Alignment is provided by ensuring consistency of goals across all levels of the organization and ensuring that the goals castigating up and down the organizational structure are aligned with the company’s purpose, vision and mission. It is imperative that every person in the organization understand how their work supports and furthers the organizations purpose, vision and mission if the organization is to achieve its’ full potential.

This is why our discussion of business models will start with the concept of a core ideology. While all other aspects of the business, such as its mission, vision, goals, processes and policies will change and adapt to changing business conditions, the company’s core ideology is transcendent and timeless. The core ideology is composed of the company’s purpose statement and a set of core values. The purpose statement is the company’s reason for existing beyond making money. The company’s purpose statement provides a transcendent meaning for why the organization is engaged in the activities in which is engaged.

Purpose Statement

The purpose statement provides transcendent focus for the organization. It serves as the foundation for strategic planning and is often a guide for the allocation of limited resources. But most importantly, the purpose statement gives meaning to employees’ daily activities.  Employees who fully understand and support the purpose statement of the organization know why they go to work each day.

Here are some purpose statements that will help us understand what we’re referring to:

  • 3M is a diversified technology company with a worldwide presence in the following markets: consumer and office; display and graphics; electro and communications; health care; industrial and transportation; and safety, security and protection services.
  • GE people worldwide are dedicated to turning imaginative ideas into leading products and services that help solve some of the world’s toughest problems.

Notice how Google’s purpose broadened as the company and industry technology matured:

  • Google Inc. was founded to make it easier to find high-quality information on the web. (1998, archive.org copy of google.com)
  • Google is a privately held and profitable company focused on search services. (2001, archive.org copy of google.com)
  • Google’s mission is to organize the world’s information and make it universally accessible and useful (2006, http://www.google.com/).

What you can see in these examples are the elements of purpose, direction and scope. In the absence of a clear purpose statement, one could see how Google, for example, could get sidetracked into being a software development company or 3M could get sidetracked into being a technology company for the legal industry.  The purpose statement provides broad yet definable reason for existing.  Without a purpose statement, a company will pursue opportunities that will randomize their talent, time and resources with little comprehension they are being tossed to and fro by the whim of the moment.

Core Values

Core values set a company apart from the competition, represents the visceral part of its identity and serves as a rallying point for the employees. Organizational values describe what people believe in and consider important within the organization. Core values are translated into behavioral statements and such, identify expectations for individual behavior as well as communicating how the organization and the individuals within it want to be perceived by others inside and outside the organization. Business priorities may be decided on the basis of the organization’s core values when one value reveals one goal is more important than another.  If a conflict arises within an organization as to a question of priority, vision should drive the choice.  But if a conflict involves what’s right or wrong, then values provide insight for decision-making and action. Clearly stated core values allow an organization to ensure that their hiring process finds individuals who can align with those values.  Overtime, an organization hires and grows people who are in alignment with the core values and provides significant intertia toward success.

When organization has a clear set of core values as well as a clearly articulated purpose statement the organization is said to have a core ideology. The purpose and the core values become the context and sometimes the basis upon which decisions are made. In addition, purpose and core values are naturally discriminating and set expectations for unwanted behavior and types of decisions within an organization.

Vision

Once an organization has articulated its’ core ideology, it’s time for that organization to define where it wants to go in the future.  Generally, the future is divided into two arbitrary segments short-term and long-term. The vision is the long-term orientation and is often looking forward 10 years into the future. However, in some vertical industries, such as computer technology, a five-year vision may be as far out as any organization can realistically plan given the swiftness with which industry and market change occurs.

In order to make the vision of the organization measurable, key metrics are developed and then utilized to measure progress toward long-term goals. Once organizations can measure current progress on key metrics, such as return on assets, price/earnings ratio, revenue per employee and/or other financial measurements, they can adjust their short-term mission statement and operational plans to solve problems and pursue new opportunities. Non-financial metrics also need to be baked into the operations plan.  Often, the financial measures will indicate there is a problem or success in the business, but an in-depth understand of why there was failure or success will be elusive without non-financial metrics that dive into the ebb and flow of the activities of the business.

In a sense, the development of a vision is an ongoing process due to the measurements that need to be adjusted as short-term goals are either achieved or not achieved. The vision statement process and the plans that support that vision statement are under regular, but not constant development.  The vision of the organization should be something that is achievable but is also something the organization isn’t doing today. There is a necessary tension that is created between the future desired state and the present state when effective visions are realistic, credible and attractive and yet require the organization to stretch and grow over time.

Mission

The mission of the organization expresses the organization’s short-term goals and is pulled directly from the plans that support the vision of the organization. Ideally, if you have a vision plan for 10 years with metrics and milestones for each of those ten years, then year one in your vision plan becomes your short-term mission plan. In a very real sense, the vision of the organization is expressed in a set of concrete plans that represent a series of mission statements for current and future years[2].

The mission statement should be expressed in two basic formats: A) opportunities to pursue, and B) problems to resolve. In most organizations, in order to pursue their long-term plans, they have to solve problems in the short term that will remove the hurdles or give them the resources they need to pursue desired opportunities. In a real sense, solving problems and pursuing opportunities are two sides of the same coin. If an organization can pursue opportunities, that means it has likely solved one or more significant problems. This is why you’ll find some business speakers will talk about the most successful organizations being those who can identify and clearly articulate their most common problems and then figure out how to solve them. I know of one engaging business speaker, Gerry Faust[3], who postulates that most organizations go through the entire business lifecycle, from cradle to grave, having never solved their core problems. If what Mr. Faust says is true, then most organizations have (painfully) watched significant opportunities slip through their fingers that they could not pursue because they were unable to solve their core problems.

The mission statement and the supporting operational plans need to be scorecard it into individual plans within the organization. It is inherent within human nature that people want to know they are succeeding. If they are not succeeding, they want to understand what they need to do and need to change in order to become successful. In the absence of individualized scorecards and performance plans, it is difficult for individuals to know if their work is directly affecting and furthering the mission, vision, and the purpose of the organization.

When it comes to software deployments, the mission statement (operational plans) provide the soil from which the business requirements are derived for the tools necessary to achieve success.  Every plan will involve the use of information, so understanding what the organization needs from an information standpoint is crucial to selecting the correct software platform.  I am not of the opinion that SharePoint is right for every circumstance (or even most circumstances) or every organization.  Instead, I prefer to see the organization go through the process of building the business requirements that emit from the mission plan (and sometimes, the vision plan – depending on the longevity of the project) and then ensuring that the software platforms support and fully meet the needs of the business requirements. This is not an inconsequential effort.  Disconnects between what the business hopes to accomplish and how the supporting information will be managed is crucial to the success of the organization.

The business requirements will then form the framework for the Enterprise Content Management (ECM) architecture, which is the compilation of one or more software platforms that will support the major “chunks” of information needed for the company to be successful in their mission and vision.  Within the ECM architecture, we’ll have one or more platforms – presumably SharePoint will be one of those platforms. Deciding which platform will support which requirements, functions, processes and/or projects will ensure that the organization will manage their information in the most advantageous manner possible to help them be successful. Mapping software functionalities to business requirements will also quell turf issues within IT and mitigate confusion at the desktop on where various types of information should reside, how that information should be managed while setting expectations on where to find particular pieces of information.

Core processes

In every organization there are four core processes[4]:

  • value creation
  • strategy
  • people
  • operations

Every project and effort within the company should be tied to one or more of these four core processes. Lack of understanding and adherence to these core processes often is due to the individuals within the company being unable to muster up the interpersonal fortitude to face into the negatives with a view to solving, resolving or eliminating the problems.  Processes combine people and tasks.  Getting these processes right is a key to an organization’s success.

Value Creation

The value creation process expresses what the organization must do in order to create value for its customers and profits for the company. To the extent that there is unnecessary or unneeded activity within the value creation process that does not add value in the customer experience, the organization is said to be “fat” or “distracted”. These types of organizations often lack alignment between the company purpose and the activities that are required to fulfill that company purpose. By defining a value creation process, an organization can down step its’ operational plan into a process that can connect each individual’s activities to the value creation process and in turn, to the organization’s mission, vision and purpose.

Strategy

The strategy process that has been previously described above under the vision section is an ongoing process that takes into account changes in markets, customers, economic conditions, regulatory changes and abilities within the organization. A robust strategy is not a compilation of numbers or what amounts to an astrological forecast, instead its’ substance in detail must come from the minds of the people who are closest to the action and understand their markets, their resources and their strengths and weaknesses.

In a sense, the operational plan that we have discussed previously is somewhat of a strategy plan at the business unit level. It’s important to understand the distinction between strategy at the corporate level and strategy at the business unit level. Corporate level strategy is the vehicle for allocating resources among all of the business units. But the corporate strategy should not simply be the sum of those parts. The corporate strategy must also continuously express the company’s core ideology and have strict faithfulness to that ideology.

A good strategic plan addresses the critical issues that are facing the business. Every business has a number of critical issues that it is facing at any given time. A critical issue is any issue that can badly hurt or present the organization from pursuing opportunities that exist or resolving problems that also exist. Addressing these critical issues requires research, thought and personal fortitude.  Delineating the critical issues in the strategic plan helps focus the preparation and the dialogue it comes time to review the strategy.

People

In my estimation the people process is more important than the strategy, operations, or value creation process. After all it’s the people of an organization to make judgments about how markets are changing great strategies based on the judgments and translate the strategies and operational realities. Put simply, if you don’t get the people process right you will never fulfill the potential of your organization.

The people process evaluates individuals accurately and in-depth. It provides a framework for identifying and developing leadership talent at all levels and of all kinds. The organization will need to execute its’ strategies down the road and it fills the leadership pipeline to ensure success. That’s the basis of any strong succession plan. Unfortunately, most companies do not accomplish these objectives. One of the largest shortcomings of a traditional people process is that it is backward looking, focused on evaluating the jobs people are doing today. Far more important, frankly, is whether the individuals can handle the jobs of tomorrow.

When an individual has performed superbly and is offered a promotion, too often companies wait until the financial results are in before making corrections to help that individual improve his or her performance. By then, the damage is done. The results are lagging indicator; they record the past, and with a time delay to boot. Identifying high potential and promotable people avoid two dangers. One is organizational inertia which is keeping people in the same jobs for too long. The other is moving people up too quickly, such as giving twenty-somethings senior management positions.

Because every bit of information within an organization is tied to a process whether that process is well articulated or minimally understood, people need to know how to interact with information in a way that is advantageous to the organization as well as to themselves. A portion of the people process should look at education and training on technical tools, as well as professional development, as essential to the organization’s success.

Operations

In most organizations, once a budget is developed, management concludes that they have an operational plan. Nothing could be further from the truth. Most budgeting processes spell out the results that you’re supposed to achieve such as revenues, cash flow and earnings, and the resources your allotted to achieve them. But the process doesn’t deal with how, or even whether you can get the desired results.  The operational plan is disconnected from reality. What is needed is an operating plan that links strategy and people to clearly measured results.

The operating plan is not a budget for doing better than last year. Instead an operating plan includes the programs your business is going to achieve within one year or your business cycle to reach the desired levels of such objectives as earnings, sales, margins and cash flow, along with a marketing and sales plan that takes advantage of market opportunities. At Mindsharp our operations plan is expressed through four core categories:

  • Learn: what do we need to learn in order to achieve success in the operations plan
  • Do: what do we need to do to achieve success in the operations plan
  • Deliver: what are the deliverables of the individuals within the operations plan
  • Resources: what resources are needed to support the plan.

It is in the operations support area that software, technical systems, networks and information management come into play.  If the upper-layer components in a business model are maturely developed, well understood and communicated, then the operational plan will be meaningful and achievable.  However, the opposite is true.  If the upper-layer components are not mature or well understood, then the operational plan will lack focus and alignment.

Business Development and Customer Service

In many respects, this “block” in the graphic should be tied to the value creation process.  But I put it where it is because it is tied to both short-term operations and long-term vision activities.  Business development can be thought of as long-term relationship building with potential customers upon which marketing and sales can build their success in the shorter term.

Business development and customer service have as their core activity of listening to the customer.  In a sense, all parts of the organization listens to the customer, but this is especially true in the business development and customer service areas.We need to hear from the customer to understand what products and services they need and for which they are willing to pay.  We need customer service to ensure long-term satisfaction with our products and services and to listen to what we can do better.  Without long-term business development, our organizations will die slow, painful deaths.

Governance, Risk and Compliance (GRC)

If you refer back to figure 1, you’ll see that governance, risk and compliance are modeled in the upper layers of the business model. This is because any derived governance at the operational level must be tied to the upper layer governance models. Every organization has threats to its success and existence. These threats, or risks, form the foundation for implementing compliance and governance within the organization. But risks not only exist at the global layers of core ideology and vision, but in fact they exist at every level of the business model, but are expressed differently at the various layers.

For example, upper management may identify a strategic threat to a product line because of new technology that has been inundated at a competitor company or in an industry vertical that is adjacent to the company’s core vertical. This risk might be identified as a strategic risk to the organization. As action plans are implemented to combat this strategic thread, other related, but unforeseen threats at the operational level will surface, often involving change in process, lack of training, or conflicting agendas within teams, departments or divisions.

In addition, information will be needed to combat the strategic threat. If the organization lacks a strong ethic in how information is managed, critical information can be lost inside of SharePoint, even if the search feature is turned on and working properly. When information is not properly organized, information can easily be lost or re-created resulting in both inefficient processes and redundant costs of producing the same information multiple times, not to mention the costs in hosting redundant data and then the costs to find redundant data and expunge unneeded copies. There is an opportunity cost risk when information is not properly managed. The opportunity cost is realized when employees spend inordinate amounts of time trying to find information that they know exists and or re-creating that information that they know exists because it’s faster to re-created than it is to find it.

The real risk of not being able to find information – one example of the several risks inherent in a SharePoint implementation

The inability to find information is a very real risk to most organizations, the most senior leadership does not recognize the risk. Because the cost is a passive opportunity cost and inefficiencies often do not appear on the balance sheet the cash flow statement or the profit and loss income statement is difficult to quantify in monetary terms the risks that organizations faced when they embrace a poor enterprise content management architecture and system.

There really is no metric that we can use that helps us quantify a good decision from a bad decision. For over 10 years now there has been consistent research on how knowledge workers find and utilize information as well as understanding how quality information can reduce costs.[5] the results of these findings are troubling, to say the least.

For example, these studies have found that:

  • knowledge workers spend from 15% to 35% of their time looking for information
  • roughly 50% of web searches are abandoned
  • 40% of users report that they cannot find the information that they need to do their job on their intranet

In addition, this research shows that knowledge workers spend more time re-creating existing information than they do creating new information. In addition, the studies have found that:

  • the time spent looking for information but not being able to find it cost the average organization $6 million per year
  • the cost of reworking information that is unfindable cost about the average organization an average of $12 million a year. This is over and above the $6 million year mentioned in the previous bullet point
  • the inability to locate information that is needed contains an opportunity cost of $15 million per year for the average organization

But cost isn’t the only risk that an organization faces when they don’t have a good way of organizing their information a lack of good information made available to the right people at the right time in a secure fashion, presents additional risk to the company. For example, poor decisions are made based on poor information. Secondly duplicate your efforts within the organization. They exist in developing information or working on projects because the teams were the divisions are not communicating well and don’t have the information available to them to know what the other teams or departments are doing. Thirdly, sales are lost on e-commerce sites because customers can’t find the products they are looking for or the depth of information they need to make an informed purchasing decision. Finally, lost productivity because employees can’t find information and so they resort to asking colleagues where to find information represents an unquantified but substantial opportunity cost.

When information is poorly managed, whether inside or outside of SharePoint, the organization will experience significant opportunity costs and drains on their profits that are difficult to quantify. This risk is every bit as real to an organization as the risk of a competitor developing a better mousetrap but is often less noticed or understood. Simply installing and implementing SharePoint without forethought to how information is going to be managed is an indication that the organization does not take the risk of poor information management seriously.

The basic, core elements of any business model include a core ideology that expresses the organizations purpose and reason for existing as well as the organization’s core values. The vision statement expresses where the organization hopes to be in the long-term and the measurements that they are using to assess their progress in achieving their vision. Their mission statement is really an operational plan that is expressed in two core elements opportunities to achieve and problems to resolve.

Across all of these elements there are four core processes that the organization must utilize: strategy, value creation, people and operations. When dysfunction exists within these processes or within the business model itself and SharePoint is being implemented, it is highly likely that SharePoint will surface this dysfunction. The  ability to execute successfully on these four core processes can be a means of diagnosing why you might be experiencing a disappointing SharePoint implementation.

Diagnosing dysfunction within an organization

Perhaps I’m biased but little bit toward the medical model because I used to work in the medical field in a previous career. But it seems to me that asking ourselves the question, “what would dysfunction look like at this level?”, is a good question to ask when trying to assess potential dysfunctions that might exist within the business model.  In this section we will review the business model that we have already discussed with a view to surfacing some of the dysfunctions that might exist in the various parts of the business model.

Core ideology

What happens when organization lacks a core ideology? Well, the results are likely to be disastrous. If a company doesn’t have a clearly articulated purpose with a corresponding set of core values, then that company is likely to experience these problems (this is not an exhaustive list):

  • Diminished sharedholder value
  • Incoherent or randomized direction
  • Excusing poor behavior
  • Conflict over future plans
  • Conflict over behavioral expectations
  • Tendency to value profits over people, stakeholders or community
  • Lack of attention to market trends
  • Lack of board involvement in GRC

For example, let’s assume that the organization does not have a clearly articulated purpose or reason for existing. This can easily happen when a business is started by an entrepreneur who didn’t intend to start the business in the first place. Perhaps the entrepreneur had a skill or a product that had significant market demand with little competition and so the business grew swiftly and without structure. Once competition entered the market and customers started asking for a maturing set of products and services, the entrepreneur is faced with the question: “why are we doing what we’re doing?”  This can be especially true of the business is in a fast-changing environment, such as software technology.

If the entrepreneur cannot answer this question clearly, then employees within his or her organization are left to answer it themselves. It is a fact of human nature that when we need information that we cannot find, we “fill in the gaps” from available sources we have, even if it is only pure speculation based on untested assumptions. Hence, employees will work within a purpose and set of values, the only question is if the organization is going to clearly articulate the purpose and set of values or if the employee is left to their own speculations. If the latter occurs, the disparity between the various assumptions across individuals or employee groups will have disastrous consequences. The organization will be fraught with internal conflicts that involve well-meaning people who otherwise would normally not be involved in significant conflict. Instead of defining the problem as a lack of core purpose, employees will engage in conflicts around roles, budget, direction, process, turf and so forth.

All this wrangling will result in employee energy misdirected into unnecessary conflict instead of spending their time and attention on innovation, customer service and so forth.  Often, top talent will tire of the internal politics and leave for greener pastures resulting a “brain drain”.  If word gets around, the organization will have difficulty attracting new talent.

Note: Once employees understand the purpose of the organization, they will adjust their behavior, and most circumstances, to act in accordance with those values and the stated purpose. If they don’t, more often than not, they will self-select out and find other work.

Purpose is important. But so are core values. When an organization has not articulated or does not enforce its core values, those values get lost in the day-to-day activities of employees. Similar to “filling in the gaps” on purpose, employees will substitute their own values for corporate values. others or processes within the organization.

Vision

When an organization is overly focused on achieving success in their short-term plans, they lose sight of the long-term goals they are trying to achieve and the short-term plans tend to meander in focus and randomize in scope. When there is a lack of focus for project scopes and short-term plans, it is just a matter of time before these various projects and plans begin to work against each other and conflicts will arise concerning resources, schedules, roles, and personnel decisions.  Nearly always, conflicts are expensive, pulling people from productive work to unproductive fights.  Projects and timelines are likely to be delayed or customers are likely to be missed or even ignored.  The soft costs I’m describing here are enormous, but seldom understood.

Mission

At the mission layer, were working with our operational plans which are usually the first part of the strategic plan. The dysfunction of an owner or an organization leader at this stage is usually indirect in the sense that the randomization or the hyperfocus of purpose values and strategies will play havoc with the short-term mission plans.

Core Processes

In dysfunctional organizations, core processes are either seen as an anathema to be avoided or as an and within themselves. I have been in organizations where processes were always thought to be a deterrent to creativity, productivity and agility. I have also been in organizations where processes slowed down the decision-making of leaders to the point where they were engaging in paralysis through analysis. Their processes had literally stalled their ability to function as an organization.

Good processes that have reasonable velocity always depend on a good management team that can balance process was agility and balance functional silos with cross functional processes. In order to achieve that kind of health, the leadership will necessarily need to engage in conflict resolution as well as understanding how they, as a team, create health within the organization. This requires self-awareness on the part of the management team members as well as trust in each other while they strive to achieve common goals within the organization.

 

 

[1] This introductory text on core ideology is a summary of a portion of the course materials from Villanova University on strategic organizational leadership.  For more information, please visit http://www.villanovau.com/online-courses/strategic-leadership.aspx.  Some of the concepts presented in the Villanova class were derived from Jim Collin’s book, Good to Great.  However, Figure 1 is a compilation of the Villanova course, general experience and notes takes from Execution: The discipline of getting things done, by Larry Bossidy and Ram Charan.  It should be noted that the elements listed in the operations section of the graphic are not intended to be an exhaustive representation of all the elements that could or should exist in an operations plan.

[2] The mission statement need not be tied to a calendar year, or a fiscal year. It might be best to express an organization’s mission statement based on the common business cycle in which that organization engages. For example, I know of one software development company in the SharePoint partner network whose normal business cycle is between 18 to 24 months. Given that most of their sales occur over an 18 to 24 months and since their revenue is booked and then distributed over similar time frames, it would make sense their mission statements would be 18 to 24 months in length.

[3] For more information on Gerry Faust, please visit his web site, Faust Management Corporation. http://www.faustmanagement.com/. The core problems which are rarely solved arise from predictable issues that every organization faces in a typical lifecycle.  Those problems, when classified, sometimes result from business model dysfunction in one form or another.

[4] In Execution: The Discipline of Getting Things Done (Larry Bossidy and Ram Charan), they assert that every organization has three core processes. I have added a fourth process, the value creation process, because I believe that this process is a core process that is independent of and yet dependent on the three core processes of strategy, people, and operations.  Much of this section is taken from their thought-provoking book.

[5] http://www.kmworld.com/articles/readarticle.aspx?articleid=9534

image_pdf

Leave a Reply

Your email address will not be published. Required fields are marked *