4 Barriers to Business Model Success
In Kate's article she identifies how the organization's Business Model is core to achieving desired Mission Impact, ensuring Financial Sustainability and reaching a Vision. And she defines the Business Model as the way your organization operates to fulfill your mission, the "how" in service to the "what and why". But the right Business Model alone won't guarantee success. In our work we have identified and encountered these 4 barriers to creating and/or implementing an effective Business Model.
- Leadership Dysfunction Impacts Development and Implementation of Business Models: If your organization is a car, and your Business Model is its (fuel efficient) engine, then the Staff and Board Leadership are the drivers. If you have a bad or simply untrained driver then the best-designed, most fuel efficient car in the world will not get you where you are going. In the wrong hands the car can be driven over a cliff.
In fact without strong leadership chances of developing and agreeing on an effective Business Model shrink considerably. Thus we pose that Strategic Vision + BUSINESS MODEL x Leadership Capacity = Mission Impact and a Stronger Nonprofit.
Leadership can also impact a Business Model when there is a transition either in the CEO or a significant percent of the Board. New Leaders often come in and want to rebuild the engine to make it their own or they simply don’t know how to work the existing Business Model and abandon it in favor of something they do understand. Of course, if your current Business Model is not working then having new leadership rebuild it is a good thing.
- Culture Eats Strategy (and Business Models) for Lunch: We’ve written before on how a culture that is not agile, or one where fear, inertia, distrust, or poor accountability is rampant, will be incapable of executing a strategy. The same holds true for implementing a new aspect of a Business Model. If your newly designed business model requires more focus on outcomes, or the use of a new technology system (i.e. Electronic Health Records), or more streamlined handoffs between departments, and your staff is resisting or seems incapable, you may be experiencing a Cultural Challenge. One way to prevent this type of barrier is to ensure that you involve staff during the creation of the “new” way of doing business, so they have a sense of ownership around successful implementation of the new process, program, or strategy.
- A Risk Averse Board or Staff Leads to Inertia: We recently worked with an organization that was very innovative in thinking through new parts of a business model which included a potential acquisition and a new programming area. As with most such activities there was a degree of risk associated, but the potential rewards in the form of serving the community and customer needs were great. In this case the Board of the organization was very conservative in its tolerance for risk and quickly shut down the new initiatives with little discussion. Sometimes we find that the inability to tolerate risk, even thoughtful and calculated risk, comes from staff leadership who kill the idea before it is brought to the Board’s attention. Like with all innovations, leadership must find the right balance between high risk and no risk.
- Failure to Adapt: You’ve heard it before, “It’s not the strongest or fastest that survive, but the one most adaptable to change.” Organizations who are clinging to a Business Model that served them well in the past and not adapting to a changing environment, face almost certain sustainability issues. Like Strategy, examining and adapting a Business Model is an ongoing process. It requires a constant vigilance to changes in the environment including the funding environment and needs of the community served.