A lack of clear governance can derail new business model initiatives, leading to inefficiencies and resource misallocation. Establishing well-defined structures, clear decision-making processes, and transparent communication is crucial for ensuring strategic alignment and successful execution.
A lack of clear governance is another significant barrier to developing new business models. Governance refers to the structures and processes that ensure an organization is managed effectively, with clear accountability and decision-making pathways. When governance is unclear, initiatives aimed at developing new business models can become disjointed, leading to inefficiencies, resource misallocation, and ultimately, failure to achieve strategic goals.
In many companies, the challenge of unclear governance arises when new business model initiatives are launched without a defined framework for decision-making. For example, in large organizations with multiple departments and divisions, it is common for different teams to pursue conflicting goals due to a lack of centralized oversight. This can lead to situations where new initiatives are either duplicated, underfunded, or deprioritized, causing frustration among teams and undermining the overall strategic vision.
Recommended Approach: To address governance issues, it is critical to establish robust structures that clearly define roles, responsibilities, and processes for decision-making. Deloitte emphasizes the importance of creating governance frameworks that are aligned with the organization’s strategic objectives. This includes setting up cross-functional committees or steering groups that can oversee the development and implementation of new business models, ensuring that all initiatives are consistent with the company’s overall direction​(Deloitte United States).
McKinsey suggests that companies adopt a “distributed governance” model, where decision-making authority is delegated to the appropriate levels within the organization. This approach can help maintain agility while ensuring that strategic initiatives are well-coordinated. For instance, an international manufacturing company might implement a governance structure where regional managers are empowered to make decisions about local business models, but within a framework that aligns with the global strategy​(TSI).
In addition to formal governance structures, it is also essential to establish clear communication channels. Regular meetings, transparent reporting mechanisms, and accessible documentation can help ensure that everyone in the organization understands their role in the process and how their efforts contribute to the larger strategy. For example, a technology company developing a new software-as-a-service (SaaS) product might use a project management tool to track progress and facilitate communication between different teams, ensuring that all stakeholders are aligned and informed.
Moreover, The Strategy Institute highlights the importance of using data-driven decision-making in governance. By leveraging analytics and performance metrics, organizations can monitor the progress of new business models and make informed decisions about where to allocate resources or make adjustments. This approach not only enhances accountability but also allows for real-time adjustments to strategy, ensuring that initiatives remain on track and aligned with overall business goals​(TSI).
A practical example of effective governance can be seen in the banking sector, where regulatory compliance is critical. Banks often establish governance committees that include representatives from risk management, legal, and compliance departments to oversee new product development. This ensures that new business models adhere to regulatory requirements while also aligning with the bank’s strategic objectives.
In conclusion, clear and effective governance is crucial for the successful development of new business models. By establishing well-defined structures, delegating decision-making appropriately, and ensuring transparent communication, companies can overcome governance challenges and ensure that their initiatives are strategically aligned and effectively executed.
Wraping up
Developing new business models is a complex process that requires strategic thinking, clear governance, and the ability to adapt to market changes. By proactively addressing each challenge and exploring the recommended avenues, companies can increase their chances of success. Don’t hesitate to reach out to our team to discuss how we can help you in your journey
