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September 17, 2003

Business Model Warfare

If your business model is obsolete, your company may be destined for failure. Such is the premise of this white paper, which examines competitive change in the marketplace, outlines the underlying patterns of success and failure, and offers a framework for strategic reflection and decision making. In a market where only one quarter of today's S&P 500 companies are expected to be part of the index by 2020, trends must be better understood. By examining the broader patterns of change across entire industries and the whole of the economy, the authors demonstrate that Business Model innovation is essential if a company is to survive. To read the white paper by Langdon Morris, click on link Business Model Warfare.

Posted by ACASA on September 17, 2003 at 12:40 PM in White Paper | Permalink


I shared this thought provoking article with our Group Manager of Sales and Marketing at a planning session that he was conducting with the Sales and Engineering folks at our site. He in turn made it part of the preparation materials to be read by all participants in a two-day group-wide Strategic Planning Session about a month later. He told the group that it was one of the best articles he had come across and thanked me for bringing it forward.
Thanks for making me look good!

Posted by: Dave Bond at Jun 7, 2004 3:27:44 PM

I agree that the idea of business model warfare isn't a complete system of thought. Business is far too complex to suggest that a 25 page white paper - or even a great text - can describe it fully. And even then we know that there's no substitute for experience. But it is intended to be a useful framework that helps managers think about the competitive marketplace and develop sound responses to very complex situations.

And I agree that the warfare metaphor can be problematic. But it does seem to be war, with many of war excesses, and also with some of the self-restraint that warring nations have often shown even in the heat of conflict.

Posted by: Langdon Morris at Mar 11, 2004 6:02:22 PM

In training managers to utilize warfare as a framework for competition, does this not just beget more warfare?

It might be that this framework, well developed and genned in, becomes just another box to think out of.

A recent college text, Snow and Drew's "From Lexington to Desert Storm and Beyond, War and Politics in the American Experience," constantly refers to Von Clausewitz's "On War" as the central authority on waging war. However, in Sun Tzu's "The Art of War" (who was arguably a far more successful general than Clausewitz), he points out that "achieving success in every battle is not absolute perfection: neutralizing an adversary's forces without battle is absolute perfection" (Book 3).

Mergers and buy-outs without direct conflict in the marketplace would seem to be a more ideal approach to the "warfare" of company management. The constant "battle" for success using marketing and PR, as well as cutting production costs of delivery (as was done in WWII) would be expensive, just as it is in war.

As the recent Iraq war and the Spanish American war approach better "perfection" as wars (few lives lost in battle, over quickly, broad public support), both the American Civil War and World War I show how warfare can go badly.

Poor takeovers, such as the recent Oracle/Peoplesoft mess, the Disney/Comcast drama, and the HP/Compaq merger leave their casualties on both sides and cost both in terms of production. Vivendi's rise to power as an empire is worth more interesting study in this light, as is Microsoft's (vs. Apple, et al.)

War is not the end-all to politics or a nation's economy. Were today's managers trained on only certain aspects of this framework, they would fail to the degree they had only an incomplete model, such as Clausewicz without Sun Tzu as compliment and contrast. A caveat.

Probably the best use of this model would be as a comparative to other systems of thought on the subject. While it does have its parallels, it isn't a completely workable system in and of itself.

Posted by: Robert C. Worstell at Mar 2, 2004 9:38:31 PM

I have shared this paper with my fellow students in the Fast Track program at the FW Olin School of Business at Babson College. It certainly has created some fantasic debate. Especailly at a school known mainly for entrepreneurship. Essentially Business Model Warfare has connected the dots with regard to our program.

The Fast Track program is made up of professionals with an average of 13 years of experience. As a result, we tend to be fairly myopic. Due to time contraints of work and school not to mention the professional areas we feel confortable in, members of our program have a tendency to focus intently on assignments and empirial knowledge strictly related to a give ncase study or industry we are looking at. Our entire program revolves around cases.

Business Model Warfare created a bit more awareness of how these silos of knowledge we are looking at fit together and react to/with each other. I guess the look at markets over time caused our group to take a look beyond the 3-5 year plan and start thinking about re-innovation as well as initial innovation.

Posted by: Chris Whalen at Jan 26, 2004 4:43:12 PM

Mr. Worstell makes some interesting points. I completely agree with his comment about the problem of business education and business not taught as a system. The degree of fragmentation is excessive and clearly leads to dysfunction. As an interesting side note, consider the MBA itself. Sure, it's great to know how to adminstrate, but an adminstrator is not necessarily a manager or a leader or a strategist. Sure, it's a bit nit-picky and possibly a symantic distinction, but nevertheless it is a chronic problem that MBAs don't see companies or markets or industries holistically.

I don't think I agree with the comments about business not being warfare. I think the example that Mr. Worstell cites about competition between Wal-mart and K-Mart makes my points pretty well. Wal-Mart is now the biggest company in the world and K-mart is floundering in chapter 11, and these companies do (or did) compete head to head. What else could you call it but war?

This is not to say that the war metaphor is perfect. Certainly there are connotations that are unpleasant and even inappropriate, but from a managerial perspective it's clear that customers will spend their dollars in my store or in my competitor's store. That's direct competition, there are winners and losers, and mistakes. The consequences can also be severe. How many clerks have become wealthy working at Wal-Mart and getting a few shares of stock compared with the number of clerks whose K-mart stock is now worthless?

The article does not attempt to explore issues related to marketing and sales, nor to consider the role of information in decision making. All are wothwhile topics, and perhaps we'll get to them in future research.

Posted by: Langdon Morris at Jan 15, 2004 1:45:31 PM

While a very good overview, a point is missed - namely, that Business Economics as is taught is mainly a mass of various studies, having no underlying system. Even Supply and Demand are poorly understood. Adam Smith is given lip service and interpreted rather than studied, for example.

Another point mistakenly entered into modern business is the point of competition as warfare. Wal-Mart's example with K-Mart is one - while the author covers this obliquely, the underlying facts is that Wal-Mart grew in areas which no other department store system was in. Sears, Montgomery Ward and Penney's were in the rural small towns before Sam Walton ever got out of college, yet closed these stores down as they started getting more revenue flow from the larger metropolitan/suburban malls. Walton came in from his experience with a small Arkansas chain (and having been trained in Penney's as an associate.) He came in with a better idea. K-Mart was entrenched in the suburbs (not necessarily urban) and mistakenly saw Wal-Mart as competition, then tried to underprice them without knowing how they could keep their prices so low and make a profit. K-Mart could have increased its quality of service in suburban areas and kept Wal-Mart out of these areas easily, but took a very wrong turn. Each had their own publics and the competition was mainly in the minds of the K-Mart execs - K-Mart had different product lines and clientele than Wal-Mart, so they were factually not in direct competition for customers.

From the above, and the article, one can see that in addition to Supply and Demand, there is another factor in Economics: Service - quality of product and delivery. Missing also from this article is the relationship of marketing and sales, plus internal briefing and coordination of production to the business plan. This is a fourth factor in Economics: Information. These four factors are interrelated - much as Buckminster Fuller's tetrahedron builds a very stable dome - and can be applied to practical business survival. If you increase one point of this system, then the others increase as well. Improve information flow internal and external (via PR/Marketing) and demand improves, which forces more supply and also service/delivery.

Similary, detract one of these and the other three suffer. If Dell didn't have an excellent on-ground service department, or cut all of its ads and went back to selling computers door to door, demand would suffer - to say the least. (Other examples, such as not supplying real demand - as McDonald's has found several times recently - will diminish service as well as demand, which no amount of PR will improve.)

There is an underlying system to Economics, but it isn't commonly known, so a layer of complexity develops over it - which by law only improves the chances of failure. Any feedback on the above system would be appreciated.

Posted by: Robert C. Worstell at Dec 30, 2003 10:43:26 PM

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