Management Models – Pro's
tools and models – as the SWOT or the 7s-Model – are
discussed controversially. Some people use them as
important tools for analysing businesses and developing
strategies. Others call them “buzzwords”, used by
consultants to boost their profile. The truth about the
value of management models probably is somewhere
in-between. So what should you take into consideration
when using models?
management model is a model – that is a simplified picture
those elements of reality – that can be a business or an
industry – that are relevant for analysis of a certain
problem. Those elements that are not relevant are
neglected. Furthermore, models normally limit the number
of elements included, in order to reduce complexity. For
instance, the Boston Box analyses the market share of own
products in relation the competitors’ products. It
includes only existing products, but does not take into
account possible new competitive products to come. Hence,
this model does not allow analysing potential future
actions of players.
Never base your decisions just on
one single model.
models were developed in a particular historical context.
they presuppose some economical assumptions, e.g. the
competitive environment. If these conditions change,
models do not necessarily lose their validity.
Nevertheless, they cannot contribute to decisions as
precisely as they did in their historical context. Ian
Turner has allocated the most important management models
to various periods of competitive environments.
Period of Stable
Period of Competition
1945 – mid 70s
Mid 70s – mid 90s
Mid 90s onwards
Rapid, non-linear change
Spread of risks
Re-focussing to core
Mergers & Acquisitions
Re-definition of industry
Re-definition of business
Management tools and
Product lifecycle Model
In our time,
a single E-Start-up can revolutionise the business models
of whole industries (always a good example: Amazon.com).
That makes many of the “old” models limited in their
validity. Of course, even today every company has to make
the general decision, whether it wants to win its
customers with low prices or high quality (Porters Generic
Strategies). However, it would be a big mistake to base
corporate strategy solely on this decision. New
technologies and distribution concepts can change the
bases of any cost leadership within a short time.
Similarly, businesses can lose differentiation advantages
quickly when competitors imitate product or service
Never trust a model blindly, only because it proved
worthwhile in the past.
management models bear another great risk: They can become
a matter of fashion.
Sometimes it takes only one best-selling book by a
reputable author and the enthusiasm seizes whole
industries. An example is the era of diversification.
Large groups of companies emerged from the objective to
spread risks across operations in various industries and
to exploit synergies. Some of these groups grew that large
and complex that is was virtually impossible to manage
them economically. The result was the era of core
competencies. All subsidiaries and operations that were no
core businesses were sold or closed down. Some companies
reduced their operations to core companies in an extent
that they outsourced important corporate functions. Later
they had to realize that it is not always possible to
manage the quality of outsourced processes as perfectly as
this would be possible in-house. The management of complex
outsourcing-relationships turned out to be a demanding
model is valuable for every business in every situation.
So far the
risks. How about the strengths of management models?
In view of today’s information-overload, models can be
valuable tools to organize and to analyse information
systematically. A management model is not able to take a
decision; however, it can help to make an informed
It does make
sense to apply some selected models to a corporation or an
industry from time to time. This can be done as a
brainstorming-exercise, so that it brings together the
variety of knowledge of different members and departments
of the organization. If a particular model proves not
applicable (e.g. Porters 5 Forces analysis does not fit
the pace of change in an industry), it can be neglected
anyway. The combination of different models may compensate
for the weaknesses of some models with the strengths of
others. For instance, a PEST-analysis can supplement a
Boston-Box-exercise by pointing to possible future
tools can help to better understand particular aspects of
an organization or its environment. For the following step
– the analysis of insights provided by the models –
however, there is no model. Management models are
effective only if their users are able to realize
connections and gaps and to draw appropriate conclusions