From Reason To Profit: Redefining The Business Model For Change

To always be positioned to win in an ever-evolving competitive world, you must first acknowledge the illusion of control. Then, accept the universal reality of the exchange of value, shift your mindset to focus on reasons, and take on a harmonizing leadership role.

The objective of any business is to generate revenues and profits. However, its mission must be to harmonize satisfaction among its stakeholders (i.e., customers, employees, partners, investors, and society). It’s a balancing quest that continually focuses on reasons, motivations, and causes for decisions and actions that lead to consequences, effects, outcomes, and ultimately, revenues and profits. It’s a pursuit that, when ignored, leads to compromised performance.

The Illusion Of Control

No company or leader can claim to have control over revenue or profits. That is a false narrative commonly believed. Revenue and profits are outcomes. What drives them are a series of interdependent reasons that influence the decisions to buy from, partner with, invest in, and/or be employed by an organization — critical stakeholder decisions that can be influenced but are never controlled by leaders.

The Reality Of Exchange

All decisions in life and business are a function of an exchange of one situation/condition with another: an exchange of a situation, a condition or a state for another that offers more satisfaction and is therefore preferred by the decision maker. For example, a decision to buy a product may be based on an exchange of money for functionality, experience or loyalty, and a decision to accept an employment offer may be an exchange of compensation and financial stability with an employee’s skills and commitment.

As a company, you are only in control of creating and offering an effective exchange (an acceptable bundle of satisfaction) to influence the decisions of your stakeholders that lead to action (e.g., a purchase) and drive outcomes (revenues and profits).

The Mind Shift

The journey from an effect- or outcome-based business model to a reason- or cause-driven model begins with a fundamental mind shift in leaders. It’s a shift of perspective from “we sell” to “they buy” and from “we hire” to “they choose to work for us,” and a fundamental appreciation of those controlling the decisions and the exchange relationships that influence the resulting outcomes. It’s important to acknowledge the power that truly fuels an organization: stakeholders’ ever-evolving bundle of satisfaction (reasons) influencing their exchange requirements and their control over decisions and actions.

Some possible stakeholder exchange components and the reasons (bundles of satisfaction) that drive their decisions include:

• Customers: functionality, price, delivery, brand message, security, prestige, experience, etc.

• Employees: salary, options, benefits, creativity, career path, free lunches, remote work, social cause, etc.

• Partners: price and volume, consistency of orders and payment, bragging rights, cause alignment, etc.

• Investors: dividends, cause resonance, prestige, contribution value, etc.

• Society: employment, tax revenue, environmental support, etc.

The Ever-Evolving Reason-Centric Business Model

Business success hinges on a set of five interconnected yet independent decisions made by stakeholders (pillars of an enterprise: customers, employees, investors, partners, and society). The value offered to each pillar influences the entire organization and creates a dynamic tradeoff. For example, the effect of a fruitful exchange with customers is the revenue generated from a purchase (a decision to buy). However, the profit that it may promise is subject to the effective satisfaction of the exchange for other stakeholders.

People’s expectations are continually subject to change. Hence, in a reason-centric business model, it is important to realize the always-in-flux power of connectivity and change. For example, customers need different products and experiences, employees expect different work environments and investors’ return on investment expectations change as economic conditions change. Exchanges and resulting decisions that, although on the surface appear disconnected and independent, are connected and hugely interdependent. These are expectations that at times may be in conflict — for example, higher return to investors vs. lower cost to customers vs. higher pay to employees.

There are a few noticeable examples of how imbalanced exchange relationships can lead to loss. In 2023, when three car manufacturers in the United States failed to harmonize the needs of employees and investors, the consequences included an estimated economic impact of more than $9.3 billion in just a few weeks. At its peak in the 2000s, BlackBerry had close to 50% market share, yet it failed to stay relevant and offer a continued bundle of satisfaction to customers. In 2010, Toyota was slow to respond to vehicle malfunctions and failed to harmonize the needs of its partners and supply chain against its investors, resulting in a $54 million daily loss.

The Orchestra, The Symphony And The Leader

An organization that follows a reason-driven model can be viewed as an orchestra that can create many magical symphonies of success — an orchestra that can quickly learn and perform new music pieces flawlessly. Stakeholders offer the necessary instruments to make the harmony of achievements as the symphony ebbs and flows through various movements. All instruments are tuned and have the right pitch when stakeholders are satisfied with the value the organization offers to exchange with them.

The role of leadership in a reason-driven business model is to focus the enterprise on the reason (cause) and not the outcome (effect). It is to be the conductor that leads the orchestra and coordinates, facilitates, synchronizes, and harmonizes satisfaction — the ever-changing value exchange relationships — across the five pillars. It is to build and nurture a sustainable value delivery system that can dynamically focus and refocus on delivering relevance to each stakeholder.

Your enterprise has the capability of giving more than it takes; a compounded effect of harmonized satisfaction. In my experience, the essential revenue and profits are all but guaranteed when the stakeholders’ value exchange relationships are harmonized, and the organization continues to remain relevant; the effects are significantly more probable when reasons are considered.