Business models by organizational stage
Notes on System 1-4
Some notes on how organizational stages of development correlate with the kind of business model you would expect to find. I use Likert’s “system” nomenclature for compatibility with the broad literature on organizational development.
System 1 (Authoritarian-Coercive): based on establishing a relationship with customers based on need: create a monopoly, create addiction, be the authority, obligate customers.
System 2 (Authoritarian-Benevolent): home of the buy/sell, mercantile orientation. Win/lose, zero sum game. Flow of benefits is from the customer to the company only. Purpose of sales and marketing is to do whatever it takes to get the customer to part with their money. Counter-dependent, in that the things such companies try to do show that they are always reacting to customers, boasting about their services, trying to be different. Customers construed as stakeholders who must be won over, persuaded, convinced, and who will do what you want if you can find the right trick to convince them.
System 3 (Consultative): purpose is to satisfy customers and thereby gain. Complimentary relationship between customers and companies. Customers construed as free agents who make decisions based on their own judgement and information-gathering. Instead of marketing and sales, there is informing, communicating, and a problem-solving orientation.
System 4 (Participative): mutual ongoing relationship of complementary and common aims. The marketing and sales functions dissolve. The distinction between “inside” and “outside” the company gets blurry, as customers perform the functions of support, sales, marketing, and R&D. In this stage, the firm is more properly understood as a community that includes its customers and suppliers. Wealth is measured in terms of the wealth of the whole community. At the time of writing, it is rare for any financially self-supporting communities of this type to exist in large numbers or on a large scale. Open source software communities are one example. API platforms are another. Progress towards this stage is hampered by network inequalities that aggregate all the value for those at the top of the network, our bias for free information, and the ill-suitedness of our legal and institutional concepts of labor and money as transactions. Even when those issues are mitigated conceptually, existing payment infrastructures tend to facilitate and distribute exchanges of financial wealth in ways that try to re-exert the old system structures; payment is “exchange of money for goods or services rendered” — an intrinsically pre-system 4 idea.
