As stated in one of the previous posts: coping with a crisis is no sexy business. Traditional approaches to stay financially in shape concentrate around cost cutting, very often leading to reducing headcount by layoffs. Many major companies such as IBM (5000 people), Bombardier (10% of work force), GM, and many others saw themselves forced to let people go. In fear of layoffs at a French Caterpilar site four bosses were even helt hostage for several hours.
There is an other way to cope with market decline and even crisis while building stronger businesses: Business Model Convergence.
Most companies run a portfolio of products and brands, active in various markets, across the globe. In terms of business models they have numerous.
In itself this is not really a problem… as long as markets are growing. When growth seizes to a halt this can become a problem. The organization that needs to deliver all these business models is by all means not the most focused one. Maintaining all the business models is extremely challenging.
When converging business models it becomes apparent that a company basically has a few generic ones that apply to most businesses. Focusing on the implementation and how to run these effectively enables a company to distinguish between the activities that seem important and the ones that are.
Elaborating capabilities around the activities that are truly important grows a organization that understands the most important aspects within the core business models and that is able to implement them flawless.
Companies that aim to simplify their businesses first need to create an overview of all of its’ (most important) business models. From there an assessment needs to be made to highlight the main commonalities and discrepancies and captured into core business models.
Next is to translate the generic business models into implications they brings to functions and functional domains within the organization all the way till the level of concrete actions. Implement those and you will have an organization that is better able at delivering its’ core business models.
Side effect is that the business models that are more distant from the core ones are recognized based upon their true merits which enables them to choose and pursue their own business model without being forced into a core one that will not do the job.
Business Model Convergence is a way to strengthen business by simplification of the portfolio of business models aiming to build stronger businesses based upon outperforming, excellent organizations by focusing, freeing up potential to spur new business growth.
For the last couple of months no news program or website is talking about hardly anything else the the global economic crisis and the effects it has on every kind of business within all sectors. Surviving for many companies suddenly became key rather then expanding portfolios.
Traditionally companies need to grow value in order to keep Mr. Shareholder happy. Growth means higher demand for shares and therefore higher rates. Mr. Shareholder sees his total share value growing.
Most companies have basically two ways to achieve value growth:
- Increase market size and share, by innovation or acquisition
- Reduce costs
The last way is normally not that popular during economic upturn, but is immediately on top of mind during economic downturn. Cost reduction programs tends to be rather spreadsheet driven hunting for the large cost chunks rather than assessing cost versus value.
Together with Daan Giesen I have come to an approach which enables growth by setting a stronger brand experience based on reduction of number of current business models. Organizational functions and capabilities can bebuild around these strong business models, showing opportunities to reduce cost without weakening the organizational capabilities.
Within the coming months more on the Business Model Convergence approach will be shared with you. However, if you cannot wait feel free to use the contact form.
