HOW BUSINESS MODELS SHAPE CORPORATE SUCCESS

In an era when an entire business can be wiped out overnight, organisations need to be constantly reviewing the relevance of their business models. By Jeff Jackson and Tony Street.

or many companies organisational ambidexterity is becoming a key factor in developing sustainable business models. What is organisational ambidexterity?

Based on a concept developed by Harvard Professor Michael Tushman, an ambidextrous organisation is one that can simultaneously embrace an exploit mindset which is focused on making the core business more efficient, while also embracing an explore mindset that is focused on searching for new growth opportunities.

Every business model is transient. Eventually every business model will be replaced by a new one. Ambidextrous companies execute their existing business models efficiently while simultaneously reinventing themselves in order to stay relevant to their customers and to stay in business.

The exploit dynamic requires distinctive capabilities that drive efficiency, cost improvement and incremental innovation that leads to margin improvement and productivity. It values efficiency, quality, and efficient delivery to customers.

The exploit capability is focused on delivering efficiencies as quickly as possible.

It thrives in a stable environment, is only looking at the shorter term and has a low appetite for uncertainty. The exploit capability drives current profitability and cash flow.

In contrast, the explore dynamic requires distinctive capabilities that drive innovation and growth; new products and business model innovation. It values risk- taking, speed, and experimentation in the drive to create new value propositions for customers.

The explore capability has a higher risk appetite; it thrives on uncertainty and is focused on tomorrow. Explore drives the development of new products and services and requires cash flow for investment and development.

As Charles Handy identified many years ago, the best time to start a new business is before the existing business reaches a peak – when the cash flow from the existing business can fund the development of the new.

This means that the key to successful business model development is to achieve a balance between the exploit capabilities – making the core business more efficient and explore capabilities – finding new growth opportunities.