The Viable Business Model

The Viable Business Model

The Viable Business Model needed not only to sustain the business into the future but also to allow it to compete effectively with competitive advantage

Introduction

In my earlier blogs, I questioned the viability of the design consultancy industry and their ability to sustain themselves into the future.

I looked at why strategic focus was a bigger challenge in the design consultancy industry and asked what was needed to deal with the challenge.

In this blog, I will attempt to discuss the viable systems/business model needed not only to sustain the business into the future but also to allow it to compete effectively.

A viable business must be strategic in its outlook, encompassing in its reach, comprehensive in its depth and holistic in its approach. A viable business must be designed from the outset with viability in mind to ensure sustained competitive advantage and business growth. All its business components must work together in tandem with strategic outlook, be able to encompass the needs/dependencies of one another, strive for comprehensive, insightful excellence and be driven by a holistic business ideology.

So what does a viable business really look like?

Can you tell if a business is viable by looking at its organization chart? Is the organization chart the right place to start building a viable business?

Commencing with the organization chart is in my view a recipe for walking in the dark leading to inefficiencies, complacency and possible ultimate demise of the business.

What is needed is a clear understanding of the business model, it’s structure and the implementation of five key management functions namely policy, intelligence, control, coordination and operations. Let’s dwell in this in a bit more detail taking the following business scenario as an example:

Business Scenario

Let’s consider a global engineering firm that provides design engineering services to a number of sectors. Typically in such a model, the business will be located in different regions, countries and offices.

How do you design a viable business?

If we take one step backwards and ask some fundamental business questions, then the answers should give us a clue of the kind of business structure we will need to adopt.

Step 1 – Begin by defining the business key success factors?

  1. Design/Engineering success factors – clear scope/requirements identification, efficient/effective technical delivery, quality/consistency, standardization (minimal duplication) ownership and responsibility
  2. Organizational success factors – learning, competitive, entrepreneurial, incentivized performance etc
  3. Financial transparency and accuracy – forecast costs, fees, revenues, multipliers, gross margins, WIP, utilization levels, resource demand profiles, cost variances, schedule variances etc all need to accurately represent underlying performance of projects. These KPI’s provide transparency and early warnings on the project’s health at any given time.
  4. Project management success factors – consistency in how we manage projects, report/manage projects underlying performance, early warning, risks, issues, changes etc. manage cost variances, schedule variances, estimates at completions
  5. Business Development – reputation, integrity, quality of service, client relationship, marketing, bidding, competitive pricing and work winning strategies etc.

A closer examination of the business critical success factors would actually aid in conceptualizing/validating the overall business model needed to achieve these success factors

Figure 1- The Viable Business Structure

Step 2 – Design a winning/relevant business structure that can help achieve the required critical success factors

As the key critical success factors are centered around organizational factors, technical delivery/quality, project management and business development, I have designed my global business structure with these four driving elements in mind.

Basically what I am stipulating here is that if you succeed in each of these elements then you will achieve all of the defined critical success factors. And if you fail in anyone of these elements then the success of the other elements can also become affected.

All of these four elements, organization, technical delivery/quality, project management and business development are interlinked/interrelated in some way or form i.e.: bad project management can lead to technical delivery/quality issues which can in turn result in client relationship problems that can affect future business development.

So the focus is to continuously strive towards achieving excellence on each of the four drivers highlighted in this business scenario. Achieving excellence means meeting all evolving (existing and future) business critical success factors and this in turn should lead to a viable and sustainable business.

Business Structure for Critical Success Factor 1 – Technical Delivery and Quality

The business structure I have designed in figure 1, looks not only at the vertical structures from each of the different levels i.e. global, regional and country level but also attempts to define the horizontal interfaces/links between each of these levels. So technical delivery as a main strategic success factor involves the creation of:

(a) A global technical (and not business sector) lead for each of the business sectors – example, infrastructure, properties, utilities sector etc.

(b) A global technical discipline leads for each discipline within each of the sectors – i.e. highways. Traffic, clean water, geotechnical etc.

(c) A regional technical (and not business sector) sector lead for each of the business sectors

(d) A regional technical discipline lead for each of the disciplines within each of the sectors – i.e. highways, traffic, clean water, geotechnical etc.

(e) Country technical discipline engineers

Reporting Levels & Responsibilities

(a) Country technical discipline engineers report to their related regional technical discipline leads

(b) Regional technical discipline leads report to the regional technical sector leads and global technical discipline leads. Regional technical sector leads ensure proper integration of disciplinary design processes (purely technical role). The global technical discipline leads capture lessons learned, ensure design consistency and develop standardization wherever possible.

(c) Regional technical sector leads report to global technical sector leads – global technical sector leads responsible for driving efficient and effective global integrated design processes (purely technical role)

(d) Global technical discipline leads report to global technical sector leads – global technical sector leads responsible for driving efficient and effective global integrated design processes (purely technical role)

Business Structure for Critical Success Factor 2 – Project Management

The following is required:

(a) Global project management lead – responsible for Global P&L of live projects and in driving project management consistency and financial transparency (highly skilled project manager with emphasis on project management system/solutions development)

(b) Regional Project Management Lead – responsible for Regional P&L of live projects and in driving project management consistency and financial transparency (same skill level as the global project management lead) – reports to Global project management lead.

(c) Regional sector project management lead – responsible for the P&L of each of their designated sectors. They report to the regional project management lead

(d) Country project managers – these project managers report to the regional sector project management lead and are responsible for their projects P&L.

Business Structure for Critical Success Factor 3 – Business Development

Here, business development is responsible for converting corporate policies/strategies on revenues into tangible results at a global, regional, country and sector levels. The structure should be designed to include:

(a) Global business development lead for each of the sectors and

(b) Regional business development leads for each of the sectors

Step 3 – Design The Management Functions

Now that we have conceptualized the business structure required to achieve the business critical success factors, we are now in a position to turn this structure into a viable business proposition.

Figure 2 – Viable Business Model – Global Level

Viability in this context means (a) looking at the business structure from a management functions perspective and (b) designing/continuously optimizing each of these functions to achieve excellence in the business overall time, cost and quality parameters

Figure 2 illustrates the business viable model from a global level perspective, it must be emphasized however that for the business to be viable, the business at a global level cannot be considered in isolation of the regional business level (figure 3) which in turn needs to be viewed in conjunction with the country level business model (figure 4).

Figure 3&4 Viable Business Models – Regional and Country Levels

The management functions referred to in this model refers to operations, coordination, control, intelligence and policy.

(1) Operations function– these are the processes associated with for example (a) the global lead railways, rail structures and signaling (b)regional lead – traffic and (c) traffic disciplines at a country level

These operations and their processes link both vertically within each of the business levels and horizontally across all the three levels ie global, regional and country.

(2) Coordination function– this function is required to (a) remind of the important role managers have i.e. traffic discipline manager has of not only managing his processes to achieve excellence in time, cost and quality but also of the interfaces with other managers responsible for some of the other disciplines and (b) coordinate resources requirements across all the various divisions etc

(3) Control function – this function is required to ensure (a) that all business defined/approved processes are actually adhered to and (b) control any conflict

(4) Intelligence function – needed to report on the threats and opportunities and dealing with these via the control function.

(5) Policy – is used to turn vision and strategies into tangible policies that can be picked up by the intelligent and control functions and implemented all the way down and across the various business levels.

All management functions need to be in touch with the environment for any threats or opportunities.

In my next blog I will zoom in on the viable business model’s project management function.

Meanwhile, would love to hear from anyone out there with any comments.

© 2014, Majed Bushnaq

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