Irizar Case MASTER
Irizar Case MASTER
Irizar Case MASTER
Authors:
Aqsa Butt Assad Hafeez Elisabeth Harvei Eric Osei Torje Fjotland
1
Executive Summary
IRIZAR is a luxury coach builder and a part of large Co-operative Corporation (MCC) with share holdings in five other countries. It went through crisis in the 1990s as a result of changes in internal and external environments. To survive in the crisis and regain competitiveness in the market place, Mr. Saratxaga was appointed as the new leader of the company. He made revolutionary changes (i.e. change in mission and business model through participatory management) and was able to achieve trajectory growth rate in sales and expansion into other countries. The key elements of Irizars business model included: flat organization (with decentralized autonomy of responsibility and control of own goals), value proposition (i.e. how value was delivered through human resources structure and its value networks), Target market segment (i.e. focused on luxury coaches in premium market), values chain activities (i.e. inter-play of interaction and communication between employees, teams, customers and suppliers in service delivery), Partner Networks (i.e. communication and distribution channels in the network) and Core competencies (i.e. leadership skills, recruitment process and incentive system). The features interconnect to create a network focused on building capacity for innovation, which created long term learning for Irizar. For Irizar to sustain the business model for long term growth however, it needs to make some choices. For example, they should implement control systems e.g. accounting controls and object controls like personnel controls, action controls and cultural controls for proper allocation of resources and responsibilities, and also steer the direction of the company towards its goals. Other choices available include performance management tools like balance scorecard to communicate the strategy within and across units of the partners in the network. Lastly, interactive control system and social network analysis (SNA) can be implemented to respond to uncertainties that may evolve within the network and especially as the company grows. These control systems however require training, motivation, commitment, clearer communication channels to make them workable.
Table of content
1 What are the features of Irizar's business model?...........................................................4 1.1.1 Figure 1: Main Features of Irizar Business Model...........................................4 2 What allows this business model to work?.....................................................................5 2.1 Management Control System...................................................................................5 2.1.1 Figure 2: Management Control Systems..........................................................6 2.2 Performance Management Systems.........................................................................6 2.3 Interactive Control System.......................................................................................7 2.3.1 Figure 3: Sample of a proposed Social Network Analysis (SNA) at Irizar.....7 2.3.2 Conditions.........................................................................................................7 3 The interconnection of the business models features, and why it has worked well.....8 3.1.1 Figure 4: Interconnectivity of Irizar Business Model Features (adapted from 7-S McKinsey Model)................................................................................................8 4 The role of innovation in the business model and in its enabling conditions..............10 4.1.1 Fig. 5: Roles of Innovation in Irizars Business Model.................................11 5 References:....................................................................................................................13
1.1.1
Source: Knowledge and Process Management, www.interscience.wiley.com (May 8, 2007). See diagram in question 3 on interconnectivity of features of Irizar Business Model
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
c) d)
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.
2.1.1
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.
2.3.1
2.3.2 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 7
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)
3 The
interconnection
of
the
business
models
3.1.1
Figure 4: Interconnectivity of Irizar Business Model Features (adapted from 7-S McKinsey Model)
From the diagram above, it can be seen that the features interact with another to make this business model of Irizar to work. Major interactions are briefly discussed below. Organizational Structure and Value Chain.
The flat organizational structure allows significant interaction between employees, teams and partners (customers and suppliers). This will enable equality and respect, thus increasing the motivation among the employees. The employees work across the organisation (with suppliers and customers) to create an on-time, high quality product. Making the team performance transparent in the organisation and base the incentives on organisational performance, will steer employees towards a common goal. Furthermore, Sarataxas leadership style allows for an environment of creativity and innovativeness. Core Competences/Value Proposition/Market Segment The shared vision (participation as a strong value) encourages commitment to the common company jargon, dreams and team involvement. This enables an environment of tacit knowledge transfer between the employees allowing competence building and innovation creation. The customer interaction with the Irizar teams allows the company to tap into unique source market knowledge. Employees and Partner Network (Suppliers and Customers)
Irizar has a strategy to keep excellent working relationship with the suppliers and customers, thereby aligning partner interests to achieve a common goal. The business model has been working well because of: The recognition and allegiance to the vision and shared value of the The leadership style of the Saratxaga which has rippled down to other Recruitment process; the type, training and commitment level of new employees The network itself, which has been the source of knowledge management (KM) Installation of KM tools to convert and transfer knowledge effectively, i.e. tools Corporation, i.e. project based on participation and mutual trust. employees
and innovation which is close to impossible to imitate, and like information and communication, education and training, working teams and committees, external relations, etc foster knowledge sharing. Unique measurement systems in Irizar are not only focusing on quantitative measures but strategic objectives as well. Forcadell. F.J et al (2002).
4 The role of innovation in the business model and in its enabling conditions
The interconnectivity of the features in the business model gives rise to shared learning process, capability building and hence evolvement of knowledge management as an innovation strategy at Irizar. The role of innovation is encapsulated in the features or building blocks of the business model that captures real value to the customers and all other stakeholders in the network. The following statements below give a snapshot of the role of innovation in the network. It builds a stronger culture through participatory decision processes, i.e.
project based on people Creation of Knowledge It converts individual or team tacit knowledge into explicit knowledge that can be stored, useful and add value to the entire network as a continuous learning process, within and outside of the organization. 10
proposition (i.e. mode of value delivery) is delivered Storage of Knowledge It conveys structured information giving rise to efficient processes and It also makes sure that the knowledge developed within the organization products along the customer lines gets to the right people, at the right time, to improve the functioning of the organization Distribution of Knowledge It develops competences through shared leadership, shared knowledge and team work to apply the knowledge as efficiently as possible. Application of Knowledge This together make up what is referred to as the KM cycle by Forcadell. F.J et al (2002), in their case study on the implementation of Knowledge Management Strategy Oriented to Innovation of Irizar. Figure 5 below gives general roles and enabling conditions of innovation within the main features of Irizars Business Model.
4.1.1
11
12
5 References:
1. Prof. Hanno Roberts (2007) Lecture Notes, MBA Norwegian School of Management 2. Responsibility Accounting, Cost Control and Environmental Costs (Chapter 12), McGraw Hill/Irwin[2004], Slide presentation 3. F.J. Forcadell and F. Guadamillas, Knowledge and Process Management, <www.interscience.wiley.com> (May 2007). 4. Business Model Design and Innovation, < www.business-modeldesign.blogspot.com> [November 05, 2005] 5. K. M Telleria, D. Little and J. MacBryde, Managing processes through teamwork, Centre for Strategic Manufacturing, DMEM, University of Strathclyde. Glasgow UK, < www.emeraldinsight.com/researchresgisters.com > [2007]
13