Wednesday, 16 March 2011

The Unspoken Business Model - Phantom Forces

I have been working with developing some business models for clients recently and I came to the conclusion that often there is a deep seated business model that is actually not voiced or declared and in some cases not even understood within the organisation.

Behind the scenes is an unknown or phantom business model that is simply there by default through competitive pressures, external environment and by business Darwinism.

Take insurance as an example most insurers tell us and believe that customer service is a prime driver to their business and particularly in claims. In reality though the market driver is that they make their money from those that do not claim and claims actually are rare in terms of customer contact, well that is how insurance works - is it not.

So bad claims service is not seen by many of the customer base by default and in reality if you loose customers who claim by giving poor service does it matter because does the business really want these people who claimed anyway - people who claim don't make money for insurers do they?

People buy on price and the promise of a good claims service is difficult to justify and sell when people are comparing insurance premiums so the driver is reduced costs not the higher costs of a quality claims service.

Insurance is a commodity based business where you make money by driving down cost and reducing claims so naturally "doing claims" well as an offering doesn't really get supported by the unspoken business model even though corporate mantra say "We pride ourselves on claims".

So, does the unspoken or natural selection based business model actually overwrite the explicit business model in the longer term? It is almost like defying gravity - an unresisting force.

Is there an unspoken business model behind every declared business model and how many organisations are actually planning strategically against those natural pressures with all the consequences of "rowing against the tide" ?