I see a weakness in management models. It’s not the models themselves that are the problem, but rather their application in smaller organizations. Those of us with either business experience or a business-related degree can be expected to have an understanding of at least a few management models, but this might not be the case for the average small business operator. Yet, even a one-person shop can benefit by test-driving a management model before opening the shop door.
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A management model should be used before the business plan is clearly defined. A management model is “a simplified picture of reality,” and like business plans, there are many available. These include Ian Ansoff’s Product-Market Expansion Grid, the Boston Consulting Group’s Growth Share Matrix, Blue Ocean Strategy (Harvard Business Review Press, 2005), strengths, weaknesses, opportunities, threats (SWOT), and benchmarking. An organization can use more than one model, and it’s advantageous to perform a SWOT analysis regardless of which model is used.
Although all organizations can benefit from the use of a management model, I suspect many small organizations go straight to the business plan without taking the time to apply a management model. Management models such as that proposed by the SGMI Management Institute may function well for a small organization but might be too detailed to be implemented by mom-and-pop shops.
I propose a simplified management model. Although it isn’t meant to replace models a Fortune 500 company might use, it could help small organizations where management hasn’t been exposed to much business theory. This model is simple enough to apply to a child’s lemonade stand, yet still detailed enough to help professionals who decide to become independent consultants. The simplified model is shown in figure 1.
Figure 1:
In the simplified model, the terms are broad and should be expanded as necessary. For example, core competencies—i.e., a skill, process, or technology that other organizations can’t easily reproduce—aren’t directly mentioned. This is because a core competency can be viewed as a part of an organization’s resources. What about an organization that doesn’t possess a special skill, process, or technology, but its location gives it a massive competitive advantage? This ideal location isn’t a core competency but does belong in the resources category. Resources are what the organization has available to support it. Investors, a solid connection to a potential customer, unique technology, a unique skill set, and an ideal location all count as resources.
The organization must also consider its processes. Processes, such as such as payroll and logistics, should be viewed as either value-added, or nonvalue-added but necessary.
The organization’s environment also must be evaluated. This can be the physical environment around the organization, but it may also include the business environment, natural resources, and infrastructure. The environment might contain both advantageous and disadvantageous aspects. For example, a location in a pedestrian zone could be advantageous for an organization that consisted of one person selling hotdogs at a stand. Local regulations may be disadvantageous if the hotdog stand must apply for expensive permits before any hotdogs can be sold.
And for any business, both suppliers and customers must also be considered. After identifying the basic elements, the resulting simplified management model will be unique for each organization.
For example, consider the case of somebody who owns the only structure on the side of a busy recreational lake. This might be the ideal place for a business selling fish bait and light meals. Such a person probably doesn’t have a business-related degree but would still benefit from using a management model. An example of a simplified management model for such a business can be seen in figure 2.
Figure 2:
In this example the various types of customers are considered. Once they have been evaluated, the business owner can assess what must be done to deliver products or services that would appeal to these diverse groups. Processes must be created to deliver the products and services, and then the needed suppliers must be identified. This isn’t a linear process; it may be necessary to go back and update a section. For example, suppose the business owner decided that a self-made sign stating “Eat Here and Get Worms” may not actually be the best way to appeal to customers. A small advertising agency can then be added on the supplier side of the diagram to help attract customers.
The business’s environment might offer both advantages and disadvantages. Having the only structure on the lake side and a local ordinance preventing the building of new structures would be a big competitive advantage. A local law prohibiting the burning of waste would necessitate a process for waste removal; in this example a waste removal organization would be viewed as a supplier.
Figure 3 shows an example of resources and processes. The organization must identify key resources that it can exploit. In this example, owning a building on the lake side and knowledge of bait types are both good resources to have. Key processes also must be identified and later detailed. The processes can also be separated into value-added, such as food, drinks, and bait sales; and nonvalue-added, but necessary, such as storing bait and cleaning.
Figure 3:
The simplified management model shouldn’t be used as a replacement for more complex models in large organizations. But, due to its simplicity, it can be quickly applied in organizations where an understanding of more complex models is lacking. It can, and whenever possible should, be supported by additional methods such as SWOT. Anybody starting a new business should create a business plan, and the simplified management model is an ideal tool to do this in a smaller organization.
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