1. Business Models & Management Models
Julian Birkinshaw
London Business School

2. Types of Innovation Management model innovation
Business model innovation
Imagine a hierarchy of innovation . . .
Most companies have a process for managing every kind of innovation except the kind that matters most.
It’s a rare company that lacks a formal methodology for product innovation. Hundreds of companies have R&D groups that explore the frontiers of science. And in recent years, virtually every organization on the planet has been obsessed with operational innovation—reinventing core business processes for the sake of speed and efficiency. How odd, then, that so few companies apply a similar degree of diligence and creativity to the kind of innovation that matters most—management innovation.
Sure, senior staffers busy themselves rejigging performance measures, reworking training programs and redrawing organizational charts, but most of this innovation is incremental and ad hoc. If you doubt this, try to find a management process or practice in your company that differs substantially from that of your competitors and is widely seen as a source of competitive advantage.
Product or Service innovation
Technological innovation
Operational innovation

3. Some companies with innovative business models

4. Some companies with innovative management models

5. Some definitions
Business Model: “the content, structure, and governance of transactions designed so as to create value through the exploitation of business opportunities” (Amit and Zott, 2001)
Management Model: “The choices made about how work gets done inside the organisation” (Birkinshaw, 2008)

6. Management as a set of conscious choices
Business Model
Choices firms make about:
Sources of revenue
Cost structure
What to make / buy
How to make a profit
Management Model
Choices firms make about:
Coordinating activities
Making decisions
Motivating employees
Defining objectives

7. Management Model: Related bodies of literature
Contingency / Configuration theory
Structures and systems fit with environment
Different archetypes can be identified (e.g. Burns & Stalker, Greenwood & Hinings)
Organization Culture
Beliefs, norms, practices shape behaviour
Different cultural models can be identified (e.g. Denison, Goffee &Jones)

8. A management model framework
Coordinating Activities
Bureaucracy
Emergence
Making Decisions
Hierarchy
Collective Wisdom
Defining Objectives
Linear Alignment
Obliquity
Motivating Employees
Extrinsic
Intrinsic
Traditional Principles
Alternative Principles

9. Shared Space: An intriguing analogy
Emergence
Shared Space: An intriguing analogy

10. A management model framework
Coordinating Activities
Bureaucracy
Emergence
Making Decisions
Hierarchy
Collective Wisdom

11. Collective Wisdom
65%
91%

12. A management model framework
Coordinating Activities
Bureaucracy
Emergence
Making Decisions
Hierarchy
Collective Wisdom
Defining Objectives
Linear Alignment
Obliquity

13. Obliquity Goals are best achieved indirectly
If you want to get to point A, aim at point B

14. Two perspectives on goal setting
“We must continuously achieve superior financial and operating results while simultaneously adhering to high ethical standards.”
“To improve the quality of life for the communities we serve.”

15. A management model framework
Coordinating Activities
Bureaucracy
Emergence
Making Decisions
Hierarchy
Collective Wisdom
Defining Objectives
Linear Alignment
Obliquity
Motivating Employees
Extrinsic
Intrinsic
Traditional Principles
Alternative Principles

16. Extrinsic and Intrinsic Motivation
Theory X
We work to live
Effort is driven by material rewards
Theory Y
We live to work
Effort comes from intrinsic need to achieve

17. Management model = explicit choices on these four dimensions
Bureaucracy Emergence
Means
Hierarchy Collective Wisdom
Linear alignment Obliquity
Ends
Extrinsic Intrinsic
Loose Means, Tight Ends
Loose Ends, Tight Means

18. Four models “Quest” Model “Discovery” Model Loose MEANS
“Planning” Model
“Scientific” Model
Tight
Tight Loose
ENDS

19. Planning Model
Clear objectives, clear incentives for achieving those objectives
Tight control from the top, carefully-designed structures and processes

20. Quest Model
Clear objectives, clear incentives for achieving those objectives
Enormous degrees of freedom in how objectives will be achieved
William dyce’s painting; lancelot kisses guinevere’s hand

21. Scientific Model
Broad purpose, not clear objectives; emphasis on intrinsic motivation
Well-understood methods for making progress

22. The Scientific model in action: Arup
“There are two ways of looking at how you earn a living:
One is to view work is a necessary evil; the other is to make your work interesting and rewarding. We opt uncompromisingly for the second way.”
1970 Key Speech by Ove Arup

23. Serendipity (n): “The art of making happy discoveries”
Discovery Model
Broad and often vague goals; emphasis on intrinsic motivation
Many pathways to success, all equally valid
Often seen in entrepreneurial settings
Serendipity (n): “The art of making happy discoveries”

24. A common trajectory “Quest” Model “Discovery” Model Loose MEANS
“Planning” Model
“Scientific” Model
Tight
Tight Loose
ENDS

25. A research agenda
Which management model(s) are most effective under which conditions?
How do management models and business models relate to one another?
How do companies change their management models?
What other management model dimensions might we identify?