Ready for 2015? Why you need to perform a business model check!

Posted November 12, 2014

In a previous “Ready for 2015?” post we recommended performing a quick management team alignment check. This post will recommend that it is important to perform a quick business model check as well.

I assume that you want to grow faster than the market in 2015?

Maybe even faster than your competitors?

I have not yet met any executives from the software industry planning to lose market shares in the future. I must admit that a surprising number of software executives do not monitor their performance relative to their market. If they perform better than last year they are happy. If they perform better than their budget they are excited. If that growth is slower than the market growth they should at least be concerned.

This post is written for executives who have ambitions of growing faster than their markets.

Performing a business model check (including the business model environment) before a major planning and budgeting exercise helps get everybody on the same page. Delivering extraordinary results requires that as many people as possible in your organization (including your key partners) understand your objectives and your strategy. That is what the alignment test and the business model check guarantees.

The Business Model Framework

Osterwalder’s business model framework

The business model framework introduced by Alexander Osterwalder in 2010 is extremely useful for taking the business model check from the blah-blah level to the specific level.

A complete business model check including the business model environment can be done through a 3-day workshop. You can invite as many from your company as you wish (the more the better). However, the workshop should not exceed 100 attendees.

The self-managed organization

The obvious benefit of having everybody on the same page (same perception of objectives, strategy and business model) is the rise in self-management. The need for bureaucracy, micro-management and control diminishes considerably when people understand their own roles in the big picture.

In the “old days”, this was accomplished through balanced scorecard frameworks. The balanced scorecard principles starts with the grand strategy, then breaks it down into divisional strategies, then into departmental strategies and finally into individual performance plans.

For most companies in software-driven industries the world is simply moving too fast for such a waterfall type framework.

Lean strategy frameworks

Software-driven companies need lean strategy frameworks that can be applied in days rather than in months. Because of the fast changes in customer preferences, competitor movements and technology opportunities software-driven companies need to make frequent assessments of the situation.

Strategy approaches are much more like design principles.

Model -> Test -> Learn -> Remodel -> Test -> Learn -> Remodel -> Test -> Learn -> Remodel -> Test -> Learn -> Remodel -> Test -> Learn -> etc. etc. -> Scale.

The business model framework introduced by Alexander Osterwalder is currently the best platform for running this type of agile business development approach. The framework is intuitive, easy to learn and well documented with templates and standard workshop agendas.

If you are a start-up company, you would want a “war-room” with customer value proposition and business model posters on the walls. You will revisit these posters on a weekly basis. If you are a company with a proven business model, but not yet dominating in your market, you will revisit the business models at least once a quarter. If you are the dominating party in your market, you will check it twice a year.

Get yourself a management consultant

Disclosure: This piece of advice is not unbiased.

However, I strongly recommend assigning an external management consultant to your executive team who can help you facilitate these review sessions. If your ambition is to grow faster than your market and maybe even faster than your competitors, then a lot is at stake.

You are driving at high speed into an area in the future no one has mapped before. Your are performing what we could call “Extreme Business.” Get someone from the outside on the team who knows how to run the review processes. Someone who hasn’t got a vested interest in your business venture.

You’ve got enough on your plate already.