Introducing the Management Model Canvas© - Part 6: Execution Capabilities
Updated: Jul 4, 2018
In part 5 of our introductory series, we’ve looked at the dual role of the business model in designing great management models.
On the one hand, the business model is itself a necessary component of every management model. After all, how do you know what to manage for, if you’re not crystal about how to create value for your customers?
On the other hand, the business model is a major source of design constraints for your management model: it directly or indirectly specifies conditions that other components must satisfy.
The first and most obvious candidate for this influence is of course the component we deal with in this part of the series: execution capabilities.
Execution capabilities clarify what the organisation must be really good at in order to flawlessly execute its business model. While the business model clarifies things like your value proposition, how you engage in customer relationships or which key activities are involved in creating value, execution capabilities take this a step further. Execution capabilities identify the underlying capabilities an organisation needs to develop and nurture to bring the business model to life and to create the kind of customer experiences that set you apart from the competition.
Execution capabilities are things you excel at systematically as an organisation. You don’t leave these up to chance and you don’t rely solely on the talent and dedication of individual team members to pull it off. You build the organisational infrastructure which supports talented and dedicated individuals to pull it off consistently and with ease.
As is the case with the business model component, at this level of the management model we only require you to identify and name those capabilities. In an actual design exercise you will need to go deeper and describe the anatomy of these capabilities, ie, how they come to existence in your organisation. Again, there are different theories and frameworks that help you think about what drives organisational capabilities. We won’t prescribe one in particular - the important thing is that you choose one at all. Again, the MMD Library will offer you different possibilities.
One option we’ve found particularly useful, however, is RPP theory (by Clayton Christensen et al.). RPP stands for resources, processes and priorities. The theory says that a particular capability can be explained by how priorities and processes determine where (and how effectively) you deploy your resources. If you like to learn more about RRP theory check out Assessing your organization’s capabilities: resources, processes and priorities (Harvard Business School Module Note, for purchase). You might also like this short video in which Clay talks about capabilities in the context of disruptive innovation and reinventing business models.
What goes in
The capabilities we need to execute our business model(s):
to focus our organisation on actually delivering to customers what we promise them
to excel at the key activities and processes involved
to learn and iteratively improve our business model(s)
Questions to ask
What are possible sources of distraction that would cause us to lose sight of our customers? How do we mitigate against those distractions?
Which activities are the most important ones to create and deliver value to customers? Which underlying capabilities (organisational and individual) must we have to excel at them? What are we doing to cultivate those capabilities?
Are we investing our resources wisely and where they create most value for customers?
How are we cultivating the necessary partnerships that allow us to be at our best?
What metrics are we using to track our performance and are they consistent with what we promise our customers?
Are we obsessing over customer satisfaction, loyalty, quality of service, actually getting the job done for customers?
Or are we pre-occupied with attributes (customer demographics, segments, ...) and outputs (market share, profitability, ...) that are not directly linked to what customers value?
How do we keep learning about our customers’ jobs and how well we’re contributing to help them get those jobs done?
How do we act based on what we learn?
Another good example comes from the Ritz-Carlton Hotels and Resorts. The luxury hotels group is famous for its extraordinary levels of customer service and making guests feel at home. While many aspects of the customer experience can be explained by standardised processes, others come down to total personalisation. Yet even this personalisation, which means individual employees doing the right thing in non-standard situations, is supported systematically through their management model.
For starters, they have defined and then broken down their idea of the perfect customer experience into various functional and emotional components. Every employee knows them by heart. At the start of each shift, employees conduct short standup meetings during which they explore one such component in detail. They discuss what it means for their work and share stories of how they brought it to life for specific guests in specific situations. What’s more, these meetings are cross-functional: front desk staff participate alongside room maids, concierges, fitness instructors and bellmen, for example. The full customer experience thus gets a whole new meaning.
But it does not stop there. It’s not enough to know what the right thing to do is, you also need to do it. That, too, is supported by the management model: every employee gets a budget of USD 2’000 per quest per day that they can spend (no questions asked) on creating the perfect customer experience. Yes, that’s USD 2’000 per guest per day! This simple design element not only demonstrates extraordinary levels of trust but also gives employees real power to act quickly, without jumping through bureaucratic hoops. Of course, only a fraction of that is ever used. But when the minibar carries Coke and you learn that a guest actually prefers Pepsi, you simply walk across the street to the nearest 7-eleven and buy some Pepsi for that guest. It’s these simple things that leave a lasting impression with guests.
This concludes the first half of our introductory series. We’ve discussed the overall logic of the Management Model Canvas© and looked in detail at purpose and results as well as the first of three pillars that connects the two: exploitation (business model and execution capabilities).
When we continue this series, we will next turn to exploration (innovation model and innovation capabilities) and later end with the heart of it all, which pretty much comes down to people and how they behave to fill the entire organisation with life. Stay tuned!