PMOs are responsible to execute strategy. But what if the business model is flawed? Most organizations are not ready to deal with this risk. They always assume the business model is fine, when in many cases it is not. So what is the role of the PMO in validating the business model assumptions? And how can an organization ensure they are functioning based on value-adding business model that works.
Strategies are put based on where the organizations want to be in the future and what they want to offer. However, some strategies prove not feasible, even if executed perfectly. To demonstrate here are a couple of high level quick examples:
– Company A had a business model that would work perfectly well today, but they had one problem: they implemented the model 20 years ago. So what they offered 20 years ago would have been perfect today, but not when they offered it back then. They went bankrupt. Do not get me wrong; they had a perfect PMO setup. Their PMO sat on board meetings, ensured projects are proposed evaluated, and selected in alignment with strategy. Then the PMO ensured the projects were successfully executed. Unfortunately the whole model was flawed. It took a marketing executive to come in and give them the bad news. And by the time they got it, it was too late.
– Company B developed an ingenious software application in the 1980’s. It was perfect for the mid 90s market. He was ahead of the market.
– Some are late for the market. Company C came in with a different twist on the services it wants to offer. It looked good on paper, but the customer did not feel their product wad different enough to leave their existing suppliers and work with them.
All these are examples of flaws in the business model. Usually, it takes a special kind of expertise to catch such flaws. It usually is a mix of experience, understanding of the market, and partly luck. Most of the time, such expertise and capability is not in the PMO. So, how can a PMO help in ensuring the company has the right business model? Another pressing issue is how do we ensure our model will work? The problem is that you cannot be 100% sure.
I have rarely seen a PMO capable of contributing effectively on this issue. I think the main problem is that most PMOs see themselves as executors, not strategists. Even when hiring PMOs most companies do not look for a strategist. They want a doer. At one point the market will start realizing that we need a doer yes, but we cannot do much without a good business model.
There is good news and bad news in this. The good news is that in a dynamic environment, a business model can be flawed and then refined. The important thing is to setup the organization where continuous short loops of feedback are available so we do not invest too much too soon in a wrong business model. So, organizations need to setup in a way that ensures the business model is always challenged and refined, then reflected in execution. This requires high level of maturity and willingness to change on the part of the executives first as well as the whole organization.
Even if a company had a good business model for a while, things do change fast in today’s environments. So, we need a continuous challenge of the way we do business and for that challenge to be encouraged across the organization.
Setting up such an environment requires executives who have enough confidence and conviction in the importance of change, to allow such changes to take place.