Five
elements for a sustainable business model
1.
Diversity:
The firm needs a diverse set of resources, people and investments to be
resilient. While diverse investments are seen to draw on resources and absorb
managerial attention, a single line of business, single sources of revenues, or
people with similar mindsets can expose the firm to greater risks. Firms can no
longer simply ‘stick to the knitting.’
2.
Modularity:
Matrixed organizations are often seen as facilitating knowledge flows. However,
such organizations are not only resource intensive, they expose the whole
organization to shocks as they reverberate through the organization.
Organizations need to be less interdependent, and focus on modularity (keeping
functions separate), so they can be insulated from shocks.
3.
Openness:
Resilient firms must know what’s going on outside their boundaries. These firms
can sense issues on the horizon. They are constantly monitoring the external
environment, and drawing scenarios of possible futures. They expect not only to
react to those potential futures, but also help to shape them. The link between
the organization and the external business and natural environment is vital,
permeable, and malleable.
4.
Slack
resources: In an era of just-in-time production, slack or spare
resources are often seen as costly and wasteful. However, innovation and
adaptation requires both financial and creative investments, and the space to
change direction. Firms that can ride storms must allow for a little more time
to accommodate new ideas, scenarios, and shifts in thinking. Slack resources,
both assets and capabilities, are always considered as very important to shape
a sustainable business model.
5.
Matching
cycles: Firms often think about optimizing performance and
getting more from less. But, this thinking puts firms on a treadmill, doing the
same thing faster every day—and, it has them bumping up against resource
constraints. Resilient businesses think, not about constant growth, but rather
about cyclical processes: cycles of growth and contraction, cycles of
production, and cycles of consumer purchase patterns. Understanding the rhythms
of business and the environment will allow the firm to synchronize with them
meaningfully, and not overreact to what is likely just a cycle.
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