On September 13, 1970, the New York Times published, arguably, one of the most economically destructive articles in history. Milton Friedman's The Social Responsibility of Business is to Increase its Profits, spelled out the Friedman Doctrine, which defined the responsibility of the corporate executive.
“A corporate executive is an employee of the owners of the business. He has direct responsibility for his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible …”.
In this quest for profit over everything, the corporate culture is fundamentally altered. Gone is a corporate vision (helping customers generate value), and soon thereafter, the corporate culture takes its toll on employees. Quickly, employees learned not to take the initiative, or put forward new ideas and loyalty and pride in working for the company, disappears.
In a Friedman ecosystem each partner looks out for itself first, so companies that provide services must create environments of Complexity, Obfuscation & Reliance to insure its staff stay billing as long as possible; because, the clients alternative (rip and replace) is prohibitively expensive (both politically and economically). Service Partner executives are rewarded for revenue vs client value creation.
Software Vendors Prioritise Software (license) Sales over Services, resulting in situations where they choose or are required to use a 3rd party to implement the software they know best. Business Executives expound on the business impact of new technologically based solutions at conferences, even if they fail to move the needle, because to do otherwise would be to admit to mistakes made, money wasted, opportunities lost …. etc?
According to KPMG, 74% of CEOs are afraid of new entrants disrupting their business model; however, calls to action still zoom in on improving/exploiting the existing (kaizen) vs. innovating/exploring for the future (blue ocean).
Could this be due to a lack of time and commitment spent exploring and generating new ideas, and creating innovative business models.
Friedman concludes that “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits.”
A problem with the Friedman doctrine is that modern corporations are part of an ecosystem, and if or when each party in the ecosystem (or silos within a corporation) only looks out for its itself (Business Unit, Shareholders...), it cannot result in a Win Win, and thus results are short-term (Tactical).
But that seems to be where we are today! To build or design a sustainable business three key pillars need to be addressed:
Today, short term business plans measured against siloed KPIs, that are extracted from crunching past numbers, have replaced the art of Strategic Business Modelling (the reason the business exists and the capabilities required to be best positioned to achieve its long term goals); furthermore, many in the executive team do not understand how their assigned KPIs support the overarching business strategy, much less the employees.
The gap between business strategy and technological execution. Senior executives tend not to understand technological execution, viewing it tactically (one project at a time) and myopically. While technology executors view business strategy as high level, academic, political and without guidance for expected outcomes.
Despite professing otherwise, the operational organisation tends not to welcome innovative or creative initiatives, seeing them as unwelcome interference from “high above”. Think about it, how often have you heard operations respond to innovative ideas with “Interesting, but we need to be practical”? The operation’s short term KPIs and thus focus is almost 100% on execution. This creates conflict during innovative transformation whether that is trying to innovate new products and service or, and probably more challenging, trying to design innovative new business models. Bringing in consultants with traditional approaches and methods will not solve this conflict either, as in general breaking away from business models, best practices and/or review schemes (your industry's or their own) seems especially culturally challenging. These challenges need to be addressed which require leadership resource together with contribution from staff throughout the organisation in order to build trust and encourage participation.
As a Result: Few, if any understand the WHY, resulting in; “Doing the same, with new technology”!
Our Business Change Framework introduces a lifecycle approach to addressing and turning around the conflicting areas, providing approaches, methodologies and tools to facilitate and focus on common denominators.
New times need new approaches and methodologies. Progress and the need for change are constant and businesses need to adapt to the ever changing conditions forced by new:
Some forces are disruptive and drive the need for fundamental change. Other forces are more subtle and drive the need for improvement:
Exploration requires a different set of capabilities (human and intrinsic) to exploitation. Exploration requires leaders who accept failure as a necessary strep in innovation (fundamental change). Exploitation is managed to avoid failure as it upsets the results that operations are measured against (today) and thus focus is on optimisation (incremental change).
To support both exploration and exploitation we have defined a lifecycle based business change framework identifying business areas that should be explored or exploited to discover and decide strategic business objectives and the key business capabilities needed to reach the objectives.
The Circles, Blue, Green and yellow represent:
The Inner Diagram is made up of vertical and horizontal axises. This axis systems splits the business in to 2 sides with 2 quadrants on each side:
The Strategic side needs Leadership and the Operational side needs to be Managed but both have a controlling role over their side.
The axis system also identifies the business and the technical levels. At the business level, the element that needs to be explored is:
At the technical level, the element that needs to be explored is:
Business capability areas will be an outcome of the business model design. Ideation is used to gather and prioritise ideas, reaching a view for your future business. Leaders need to be assigned and be provided guidance on moving the future business forward. The above will form the basis for designing a digital architecture that will form the platform for your company to extend your business in to Digital Ecosystems.
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