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Self-Destructive Business Models

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by michaelemunson

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I have been witnessing the self-destruction of a famous American Business Icon. This suicidal behavior is due specifically to the 70's MBA business model currently ruling all large businesses, compounded by a failure of even the best business teachers' to recognize the proper order of priorities in creating operational business designs.
The critical defect in the 70's MBA business model, is its insistance that a business can be run just as well by someone entirely ignorant of the business itself, relying only on the processes they teach. This self-blinding belief is reinforced by the closed-loop claim that if one follows the business model precesses, and the business declines, it is not the business processes that are to blame, rather it is that the business is no longer viable in the modern market.
The defect in the operational business designers, is their failure to make the FIRST step in design be the discovery of the actual business interaction componants; they fail to teach that all operational design must flow FROM this basic interaction, and not seek to control it. Performance measurements will only be self-fullfilling illusions if they are not based EXCLUSIVELY on this core interaction.
Example:
The Service Delivery business, supporting IT hardware and/or software relies on the basic interaction of a customer who requires service/support. Providing service will require Service Reps to arrive onsite with needed parts, expertise, and support. The business model for such an interaction must start here, and ask the questions:
1. How do we get parts on time? Every time?
2. How do we get trained personnel onsite on time? Every time?

These questions will lead to sub-questions, and the business model must be designed after the fashion of Top-Down programming.

The one-time American business giant I am watching fail (along with so many large corporations), is insisting that operational business realities conform exclusively to the model created by purely Financially trained management. This is the 70's MBA "way." Because the operational model is NOT designed as with Top-Down, they attempt to force their employees to struggle to make 1970's and 80's support software work in a 21st Century world. They job-out parts delivery, because on paper, this gives them higher profits and lower costs; but since they had no real knowledge of the service business (they are MBA's, salesmen, and stock portfolio managers), they failed to link confirmed, on-time delivery to their out-sourcing contract. They failed to provide any direct, simple way to know when the vendor succeeds, and when they fail. They compounded this with business measurements that assume perfection on the part of all out-sourced elements, and judge performance of their own employees on the TOTAL final result. The natural result is that for employees to survive, they must force all measurements to show success, whether success occured or not. The logical and natural result: the business shrinks slowly, upper management is convinced they are doing everything right, and that the business is shrinking only because it is "no longer viable." They sell the business, and award themselves bonuses for their bravery.

Sound familiar?

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by tony hopkinson

The switch to completely financial orientation as a measure of success is a problem. Mainly because those who fall into the this trap are very short term thinkers.

I'm worth a ?100,000 they say. My response is how much is a ?100,000 worth ? What can you buy with it ? If you go away and turn it in to ?200,000 can you buy twice as much as you could before?

Anyone been through devaluation ? Wake up one morning you have 1000 times more money than you did yesterday, still can't afford a loaf of bread though.

That's where we are now, the measure of the exchange of goods and services is greater than the the value of those goods and services, apparently !.

In a barter economy, people who think like this would be starving. They would be trying to sell turnips to turnip farmers because turnips were worth something. They all seem to have forgot money was imnvented to get round precisely this problem.

by sullyman69

Great post

Funny we were having this exact conversation at work the other day, and it ties in nicely to a whitepaper I am writing for the company I work for. The issues surrounding 70?s and 80?s MBA management styles is that if focuses solely on competency based management (not leadership) placing the employee into ?survival mode? as opposed to focusing on skills and knowledge. The majority of senior managers currently focus on the issue as a whole and not the defining factors.

Traditional management styles are based on managing competencies of the people that work for you, this theory applies in all industries and has worked in one form or another since the modern age. Think about that comment, think abut what it means. We have become a society that works, leads, manages, and makes decisions based on the why and not on the how.

The perfect example of this lies in our perception of what it means to lead. We focus solely on the competencies of our jobs, without understanding what goes into the why does it work. Imagine, the early settlers of any civilization sitting around the fire passing on the knowledge that the elders have gained throughout their lives like this.
The fire glowing in the dark of the night and the elder looks across the fire and says ? To live you must build a shelter? and then simply points at the axe leaning against a tree. Or better yet ? to eat you must hunt ? and mumbling ?use that stick over there to kill a bird?. Then a question comes from the crowd gathered around the fire ? elder how did we make this fire? ? the elder replies ? simply?use those two rocks over there ? and walks away.

Sounds quite far fetched doesn?t it? If our elders had shown leadership skills like this some of us might not be here today. Of course our ancestors survival skills would have gone into overdrive if in fact this was how the leadership of the time educated their successors. But, we know from history that in fact survival skills were taught by breaking down the action into smaller steps called knowledge. In fact some Native American tribes had knowledge training that would rival some of the most in depth military training around.

So how come our elders managed to figure this out on their own, and as a society we still lead by discussing the ? go out and hunt ? as opposed to how to make the stick into a spear, how to accurately use the spear, and what type of game to catch?

The answer is simple; we have fallen into a management style dictated by time, and this is how most of us manage our knowledgebased workforce. For most our workforce survival instincts have kicked in, and when people are only surviving retention becomes challenging.

by maxwell edison

By reading such an essay on what makes a successful business model and what dooms a business to fail, can I surmise that you've successfully started and run one or more business that might qualify as an "American business giant" or a "famous American Business Icon"?

Are you an expert on American Business who's done it, or are you an expert on American Business who's never done it? And if you've never done it, perhaps you've studied it and have your own business degree, perhaps even an MBA, and/or teach it in American business schools?

Edited Addition Below:

The reason I ask is that we're inundated with lower-level or middle-level employees, who are usually disgruntled for some reason, who go on and on about how CEOs, and other such corporate officers, are so stupid and incompetent, that they can't do anything right. If you listen to people around here, you would think that there's not a single CEO in the whole country who's worth a damn.

Is this just another one of those messages? Or are you really an expert?

And what company are you talking about when you say that we are "witnessing the self-destruction of a famous American Business Icon"?

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