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Business Model Innovation--Share Benefits Widely to Provide More for Each Stakeholder

Aug 27, 2008
CEOs have typically reported that their most difficult decisions relate to how the economic rewards of a company should be divided among stakeholders. This challenge is increased by the competition that stakeholders can feel with each other.

Shareholders and employees often see themselves in opposition. Communities are wary of hidden corporate agendas. Suppliers sometimes learn that partnerships mainly involve them giving more to the customer and receiving less and less. Partners can find the reality of bold promises disappearing as people and priorities shift. Lenders see what helps shareholders, employees, and suppliers as often coming at their expense. Customers aren't sure they are getting what they need, and resent being placed below the top of the pecking order.

When a company isn't as successful as it would like to be, the question of how to share the smaller benefits that are available becomes tougher, and more important. What should the CEO do?

Yet even if these stakeholder interests can somehow be aligned, the shape of the shared rewards can dissatisfy rather than encourage. For example, payment received without providing a sense of respect and honor makes people feel cheapened. Respect and honor without appropriate financial payment after a time can make people feel like they have been taken advantage of. Standards for respect and reward differ among reasonable people. Providing the wrong benefits sends a fundamental message of not being respected that will annoy almost anyone. How can the proper balance be established?

What should the company's objective be for stakeholders? Is answering that question like politics where compromises leave everyone somewhat displeased, or can we do better?

Few would argue that perfection has been achieved in answering this fundamental question. And certainly, the best answer for each company will be different in kind and degree from the next firm, because of the differences in possibilities and stakeholders.

But I can offer some principles to start with for testing where you are today, and assessing how you should adjust the way that resources are applied in ways that will support your future, improved business models. In each case, the equity of the decision is important, but the appreciation of the equity of result is even more important.

Most stakeholders have a very poor understanding of how serving their needs affects their ability to prosper in the future, and what the costs of providing for them are for other stakeholders. Your decision to adopt an improved business model will provide even more confusion unless you use this opportunity to fill in this gap in stakeholder understanding.

In looking at these questions, let us assume that you have now completed many successful tests of ways to improve customer benefits without changing prices, adopting more demand-stimulating pricing, and cutting costs in ways that make the company more effective.

Before making a business model decision, you need to find out how your stakeholders react to your choices in terms of their willingness to support the alternative models, how they would like to benefit, and what adjustments they think are required to make the new business model more exciting to them.
About the Author
Donald Mitchell is an author of seven books including Adventures of an Optimist, The 2,000 Percent Squared Solution, The 2,000 Percent Solution, The 2,000 Percent Solution Workbook, The Irresistible Growth Enterprise, and The Ultimate Competitive Advantage. Read about creating breakthroughs through and receive tips by e-mail through registering for free at

http://www.fastforward400.com .
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