This is the second post of this series (Here is a link to the introductory one). Through a set of stories, this series aims to highlight the complexities of real-world decision-making, providing organizational leaders with a resource that helps them reflect on decision-making in their organizations / domains of responsibility*.
In this post I introduce the context in which our story takes place. I decided to choose a generic large private sector organization, that has been around for a while, and that is facing generic competitive challenges . I felt that this kind of context provides a setting where the breadth of decision-making complexities can be described with adequate detail and clarity. Nonetheless the challenges faced and the associated learning points apply to decision-making in a wide variety of contexts.
So let’s dive in. Below is the business model of the organization, modeled using the Business Model Canvas. I suggest clicking on the link and watching the short introductory video before moving further, as this will help get the most out of the below.
Some key points that will be important for this series**:
- The organization is large with revenue in the Billions of USD and more than 5000 employees in different geographical locations.
- The company has invested in a key resource (Resource X) that enables its business model. This resource is capital intensive and could be something like building a warehouse, buying equipment, or signing a large multi-year contract with a supplier.
- As highlighted, the business model is changing:
- The company traditionally “won” by providing standardized services to customers. Due to regulatory protection or first mover advantages competition was largely tactical focusing on attracting and retaining new customers. For a long period of time profit margins were high as the company recouped the investment in resource X.
- The structure of competition within the industry changed; the barriers to entry became lower due to factors such as regulatory change as well new technology (For example: digital technologies enables online-only banking models which have lower capital requirements).
- Technology is allowing new entrants to provide more sophisticated solutions to customers. The increased competition puts a downward pressure on profits and is what is driving the change in the business model.
- The organization is organized functionally. This partially due to the standard products and services it pushed onto customers historically (think a bank).
- The organization prides itself on providing opportunities for growth for its employees which it continues to invest in.
In the next post, we continue setting the stage for our decision-making stories and we meet James, who will be our main character and we will be seeing the world through his eyes. We will learn about his professional background, his career, as well as a little bit about him as a person.
** I have used concepts / language to describe the organization that is common to the business world. These concepts are “models” that are used for decision-making and are subject to the challenges / problems that will be explored in subsequent posts. The reader should consider these “models” to be how the organization is described by characters in our story. Hopefully the stories will help leaders reflect on how the “models” they use to describe their businesses affect decision-making.