Seeking Alignment Between a Business Model and Processes

Having a business model depicting how your company is creating and delivering value for the customers is a solid starting point for understanding your business and its inner logic from a high-level perspective. Business model, as a high-level business overview, is appropriate paradigm and even tool for understanding strategic elements and their connections. It is not only useful for understanding the current state of your business, but also its desired future state. When you have defined your future and current business model, it should be relatively easy to identify the gap between them and devise initiatives that will help you bridge this gap in a predefined period. The sum of these initiatives is actually your business strategy.

But how well does the business model depicts your everyday reality? How well it can guide you to actually understand the operational level of your business? In other words, how will you get from your current or future business model to the level of processes or even activities? And how to make sure there is an alignment between a business model and processes within your company? 

Taking a step further from a business model and onto the operations requires additional perspectives to be considered. Of course, the business model should be regarded as a starting point. It shows the main elements of a business: who are the customers, what value they get from the company, how is it being delivered, how is the value being transformed from inputs to outputs, etc. After the business model is defined, the next step is to consider the value chain or some other form of the process landscape. 

This means that the business model should be translated into the high-level processes that are producing outcomes required by the business model (at least those parts of the business model that can be translated into the process results). The outcomes and results of each process should be shaped in a way that is aligned with the business model. For example, if the business model states you will always serve the customers in the most innovative ways, you need to translate this statement into deliverables of your processes (new product every X months, change in service every Y weeks, always enriching the product with new information, etc.). These deliverables are then being translated into processes using backward imaging (starting from end of the process and going towards its start with defining the value being added on each step of the way). Alternatively and more usually, you may take a forward-looking approach that traces the logical direction of the process flow (from inputs through all activities toward outputs, while always having in mind the final deliverables at the end of the process). 

While designing these processes, no matter whether you are covering new (currently inexistent processes), or trying to redesign already existing processes, the Lean thinking coupled with appropriate Lean toolset should always be used as a framework. The Lean design methodology starts from understanding the process as a whole and then looking at each activity through the prism of adding value for the end customer. In other words, each activity within the focal process should go through a strict value-add filtration. 

In essence, you should be asking two following questions for each activity you are considering adding to the process: (1) Is it adding value for the customer, and (2) Is the customer willing to pay for that activity? If the answer to at least one of these questions is “no”, the activity does not add value to the customer. In that case, analysis should go one step further and the designer should ask the following: “Is this activity a business requirement?” A business requirement is something that has to be done due to regulatory or technology requirements. Therefore, it cannot be avoided. If the answer is “yes”, the activity must stay in the process and be labeled as a business non-value added activity. However, if the answer is no, the activity is clearly not adding any value to the customer and should be left out of the process. In that case, the activity should be labeled as a waste and potentially categorized[1] for the purpose of better understanding the current situation. 

It is worth mentioning that this approach to designing or redesigning processes allows for full implementation of the Activity-based costing.[2] Since each activity within the process is subjected to scrutiny, the associated costs could and should be calculated. In this way, the manner in which costs are adding up with each added activity will become transparent and it will be easy to assess the costs and benefits of each activity and the whole process. The sequence of activities being analyzed should follow their natural flow within the process, while the direction could go both ways, as already mentioned: forward (from input to output and onto customer) and backwards (from the customer to the process triggers and inputs). 

After the future process is designed and accepted by the stakeholders, the action plan and ensuing implementation should take place. Once the implementation is over and changed process is up and running, there should be no expectations that everything will run smoothly right away. Usually, it takes some time to identify things that may be out of alignment or that need some additional improvement work. Therefore, before the process is stabilized and standardized, there will be some trials and errors within the process followed by tweaks and adjustments – it is an expected process settlement period. After that, the new process will eventually take its hold.

The question of alignment between a business model and processes within a company is very important. If some processes are out of alignment with an intended business model, a business model will not be fully implemented and there will probably be some operational disconnects. So take your time in getting to know your intended business model, translate its requirement to the value chain and expected process deliverables, work on changing your processes using Lean until you get the expected results, and only once you get the results, stabilize and finally standardize your processes. Of course, keep in mind that processes will not be stabile for long. They will probably need to go through new rounds of changes in a not-so-distant future.