What allows this Business Model to work?
Irizar’ Business Model captures real value through a network of activities with its major stakeholders including; customers, partners, owners, employees and suppliers. Creating a sustainable competitive advantage, in an increasingly dynamic and competitive environment (i.e. uncertainty); Irizar will have to make relevant choices. Three choices are available: 1) Management Control Systems 2) Performance Measurement System and 3) manage the network. A Social Network Analysis should be performed and furthermore implement Interactive Controls Systems to identify and capture key individuals in the network. This also allows for the creation of contingency plans/strategies.
Forcadell. F.J et al (2002), reports that the process of creation, storage, distribution and application of new knowledge has been systematized (with Knowledge Management Tools) in Irizar through working, supported by values like trust and tolerance. This indicates that more conventional control and performance systems are necessary to sustain the model in case of unpredicted happenings like:
- Saratxaga leaves the company
- The company continues to expand into other product areas and regional areas with less regard for such a model.
- One or more members begin to break trust and behave opportunistically and,
- Unpredicted changes in the competitive environment might requires different business model
Irizar should not design a different system, but, revise the existing reporting channels and incrementally change and become more sustainable. I.e. monitor, measure performance and make someone responsible and accountable.
Management Control System
Irizar should design a control system that monitors activities and control the respective recourses efficiently and effectively, in meeting organizational goals. This is essential because different tasks need different resources, hence there is the need for monitoring processes and control. The figure 2 below defines the objects of control framework and accounting control and their enabling conditions as relevant choices in a management control system.
Figure 2: Management Control Systems
These control systems increase commitment, responsibilities and performance measurement suitable for the members of the network.
To foster innovation, the controls should not be too tight to because it is essential to foster and keep the flexible culture (which is the innovation enabler). On the other hand, controls should not be too loose; as it grows into other areas there is higher probability of cultural clash and relatively tight controls are necessary. For example, action and personnel control, with key performance indicators, should be tighter than cultural controls where core values of the company are communicated.
Performance Management Systems
For Irizar to sustain its Business Model, may use tools like Balance Scorecard to communicate its strategy and team goals through the organization. Furthermore, the Balance Scorecard can replicate business models activities and goals to other countries where, Irizar is represented. It can also be easily adapted to Irizar’s business model.
The organizational structure of Irizar, which is supported by network of relationships and activities, requires the Balance Scorecard to be implemented at the functional level and not at the individual level. This is to avoid constraints/restrictions of innovation which begins at the roots (or individual level) of the organization.
Interactive Control System
Irizar should add Interactive Control System to manage the network between people, teams, customers and suppliers. In managing the interaction between players in the network, one should identify gaps to be improved (e.g. customer preferences, innovation, etc). Furthermore, the company is advised to influence direction of interaction and learning among teams/persons and across firms. Ergo Irizar is advised to perform a Social Network Analysis and make them interactive (See sample in figure 3 below).
In the network below, groups of four or five interact among themselves and between team leaders within the company. The customer-lines allow coordinating teams to interact with customers and suppliers continuously. The interaction is a two way process where information is shared between the participating members in the network where learning is achieved. In the value chain, from customer call-ins to manufacturing processes to the end of product, these players continuously interact and hence SNA and interactive control systems are necessary.
Figure 3: Sample of a proposed Social Network Analysis (SNA) at Irizar
Conditions
- Training/Leadership Skills – In this kind of network, training is required to increase leadership skills. Leaders and all the employees who assume leadership roles will empathise, collaborate, motivate, communicate and influence one another for effectiveness and efficiency. Furthermore, the rotation of leaders within the team enables all the respective employees to understand what is required from a team leader and respect the leader decisions.
- Communication and Information Channels – This network analysis requires clear communication and information channels in identifying core informal roles in the organisation (i.e. personnel that informally possesses a unique and core network essential for the organisation to function)