Business Models Inc.

Strategic planning or corporate pinball management?

November 04, 2011 | Camilla van den Boom

Strategic planning looks more like corporate pinball management

Nowadays, the market is changing rapidly and organizations need to respond more quickly to external changes than ever before. The turbulent business environment demands a great flexibility for organizations in strategic areas. It can be seen as a crucial asset for continued success of the organization. An organization cannot any longer rely on a rigid strategy or static revenue model to ensure success. Strategic decisions are needed throughout the year as they have an ever-increasing impact on the success of the organization as a whole. Accordingly, the decision-making process will be granted less lead-time. The fast dynamics of the market is a major pitfall of corporate organizations. One cannot keep up with the dynamic market and ever-changing environment. Managers may be tempted to instinctively perform “pinball management.” There is little time for development of thoughtful tactics to cope with the challenges of the market.

A different approach to strategic planning

The current market dynamics requires a different approach to business planning within organizations than previously used. In most markets, it has become virtually impossible for organizations to keep up with everything themselves. It would be wise to strike up a co-operation with employees, customers and strategic partners to jointly create the strategic plan. The management style needs to shift from wait and react to continuously anticipate and create. The key question for corporate organizations is whether the organization is able to involve its employees, customers and the right external stakeholders in the development of new organizational strategies.

Translating the collective insights into the plan

Most often there is not even enough time to translate the strategy to the levels of departments, teams and individual employees. It is too often left to teams and individual employees themselves to interpret and apply the strategy in their own activities. The current market dynamics also requires organizations to build new knowledge quickly, because knowledge itself ages faster and sooner becomes obsolete. Obsolete knowledge is redundant knowledge. All the more reason for the organization to co-operate with a multitude of employees, customers and external partners who will, in their turn, contribute their own specific knowledge, experience and expertise to the strategic plan.

A productive tool for strategic planning

The business model canvas is a strategic management tool for business model innovation. Osterwalder introduced the business model canvas earlier in his dissertation Business Model Ontology. The strength of the business model canvas is its simplicity. Any organization can easily by means of the business model canvas describe its present business model, generate alternatives, and make employees aware of how the organization creates value. Often this will be achieved by letting employees design the business model themselves.

A tool to anticipate on market developments

Thinking about business models is not new. Business modeling goes back to the old strategic issues but presents them in a refreshing way. Thinking about business models is more important than ever, as the options for any company or organization have increased enormously in the last few years. The financial crisis, changes in consumer behavior, the rapid growth of the Internet, and free access to information and knowledge have fundamentally changed the rules of doing business. Only twenty years ago, most industries were dominated by one single business model. Nowadays, we see different business models mixed together. Examples such as Apple, Google, and Skype illustrate the scale and pace with which innovative business models constantly change and broaden the industrial landscape. Organizations must constantly generate new business models and keep anticipating market developments and competitor movements to stay flexible.

Strategic planning as a collaborative experience

For this reason, an internal discussion about the business model is of great importance. When colleagues from different departments meet together to discuss customer needs and value propositions, they will create a common language to discuss their business. The business model canvas facilitates the internal discussion on the direction of the company as it states the important elements of a business in a very clear way. Everyone involved can understand it and all employees depart from the same point. The canvas presents a holistic view of business that everyone can understand and participate in. Strategic management will no longer be an exclusive task of the management team. Thanks to the business model canvas, employees are able to describe and apply strategic concepts and options easily, using the same terms and speaking the same language. At a single glance, everyone can see how the work of the department, the team, or the individual employee contributes to the greater whole. Now everyone is able to join the strategic discussion about the future of the company.

Managers taking a seat in the cockpit

Strategic discussions within organizations often are out of touch with the common interest. Too often, many executives consider everything from their own discipline and function. When someone from the marketing department talks with a colleague from the finance department, they seem to speak two different languages. The business model canvas helps managers to canvas the big picture of the company and to see, understand and generate ideas for improvement and innovation. The model serves as a means to raise a discussion about the nine building blocks and also the relationship between them. This discussion facilitates the development of value propositions for the different customer segments, which lead to business models that form the basis for success in the market, thereby making the company sustainable.

“If your employees do not know why, then you are really loosing out”

Those who focus sharply on the business model, and assess the market in terms of this order will remain flexible and agile. One expert entrepreneur said once whilst confronted with the: “Well, are you not afraid that your competitors are going to get this information and get an advantage?” The expert entrepreneur replied: “It is much riskier to not have your employees know what you need to do than it is to run the risk of competitors finding out. They will find out somehow anyway. But if one of your employees does not know why they are doing their job, then you are really losing out.”