model hierarchy

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From Hamel, 2002, pp 153-154 -- All business organizations have four models. Theoretically, if the models are perfectly aligned, the business organization should be highly successful. And that would be true if the world was not changing. In an evolving world, business models do not last forever. In order for the organization to innovate, the top three models must be misaligned. This makes an organization theoretically less efficient in the immediate present, but the misalignment also is the source of innovation. With misalignment, ideas can surface and produce innovations which challenge existing power structure and current orthodoxies. When the models are aligned, new ideas get quashed by either the orthodoxy or the politics.

  • political model -- the way power is distributed throughout the organization and, in particular, the distribution of power to enforce mental models
  • mental model -- all the beliefs that individuals hold about what drives success in their industry. It is the prevailing dogmas or orthodoxies about what customers to serve, what those customers want, how to price, how to organize, which distribution channels to use and so on.
  • business model -- the choices, conscious and unconscious, the company has made about the various components of its business concept
  • operating model -- what people actually do on a day-to-day basis - how they are organized, what activities they perform, how they interact with customers and what processes they run.