Prior to running Casadesus’ and Ricart’s analysis on all firm types, I made a test diagram of Choices and Consequences to evaluate how useful it is as an analytical and an educational tool. The only differences were color conventions, title in the middle of the diagram and geometric shapes. These differences did not have influence over the content of the diagram and therefore did not influence the outcome of the analysis.
As an analytical business tool it shows many choices that need to be made in order for this firm type to be in virtuous cycle. It can be used as a prototype. However, it does not have the structural strength to prioritize these choices in order to make incremental recommendations to architecture firms of this type.
As an educational tool it is showing the complexity of putting a firm on a virtuous cycle, but it is lacking visual order to be comprehended more easily.
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| Ryanair - Original Diagram (to view diagram closer: right click, open link in new tab) |
As an analytical business tool it shows many choices that need to be made in order for this firm type to be in virtuous cycle. It can be used as a prototype. However, it does not have the structural strength to prioritize these choices in order to make incremental recommendations to architecture firms of this type.
As an educational tool it is showing the complexity of putting a firm on a virtuous cycle, but it is lacking visual order to be comprehended more easily.
In order to eliminate these weaknesses I will use the work of Edward Tufte, who is an American professor of statistics and political science, with concentration of data visualization and effective methods of presenting information. Tufte developed six principles of analytical design based on principles of analytical thinking. These principles are discussed in his book Beautiful Evidence, and include:
1. Showing contrasts and differences
2. Showing causality and systematic structure
3. Showing multivariable data
4. Integrating words, numbers, images and diagrams
5. Describing evidence
6. Using relevant and quality contents
(Engelhardt, 2007)
1. Showing contrasts and differences
2. Showing causality and systematic structure
3. Showing multivariable data
4. Integrating words, numbers, images and diagrams
5. Describing evidence
6. Using relevant and quality contents
(Engelhardt, 2007)
Based on Tufte’s analytical design principles, Casadesus’ and Ricart’s diagrams are missing systematic structure and multivariable data. In other words, if I add more complexity to the business model diagrams, but structure them, the diagram will be stronger visually and analytically. Therefore, I will deviate from the original layout by differentiating the choices and thus bringing structure to them, as well as by adding multivariable component to the choice type and add another dimension to types of consequences. I modified the RyanAir example that Casadesus and Ricart illustrated to show the difference and to guide a reader through the steps of modification. See figure below.
I added three tiers to the choice types which will order and prioritize them. Three is a commonly used number when it comes to numbering in presentations. It adds enough complexity and structure, but does not over-complicate the content. First tier of choices is the overall strategic choice. It is located in the middle of the diagram and it is the first item that draws the eye right away to inform the reader what type of business this is. Second tier of choices is central choices which are the ring of choices that surrounds the strategic choice. These choices are key components to implement the strategic choice and lead to virtuous cycle. And finally, the third tier of choices is reinforcing choices that in turn support the central choices and the virtuous cycle. They play an important role in the business model, but are not main choices and should not be given similar attention as the central choices. The reinforcing choices can be different if they lead to the same result or eliminated if no longer needed based on the environment. For example in RyanAir one of the central choices is using non-unionized workforce that is done by a reinforcing choice of high incentives. In case that the demand for labor is low, the staff will be willing to work without high incentives and the reinforcing choice will be eliminated completely.
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| Ryanair - Modified Diagram (to view diagram closer: right click, open link in new tab) |
The reason why I think it’s possible to prioritize items in business model is because of their relationships to one another. For example let’s look at RyanAir choice relationships again. Strategic choice (Low fares) leads to having to decrease costs by central choice (non-unionized labor), that are in turn supported by the reinforcing choice such as (high incentives for workers). It becomes obvious that (low fares), (using not-unionized labor) and (high incentives for workers) are choices that have a causal relationship and therefore can be ordered.
To continue further with diagram modifications, there is another dimension that helps to explain the choices better. It is whether the choice is unique (only belonging to one archetype) or varying (belonging to more than one archetype with variations). I cannot show this nuance in the RyanAir example because it would need to be compared with another airline's business model to determine what choices are unique to RyanAir and what choices are variations on choices made by other airlines. The importance of this dimension will become apparent in architecture firms’ business models comparison because it would highlight the distinct features of certain firms.
I am also adding virtuous cycle consequences to consequence types because the right choices leading to reinforcing consequences form a virtuous cycle that in turn also leads to positive consequences as profitability. Profitability is considered to be a flexible choice in the original diagram, but since it was caused by a chain of events it should be treated and illustrated differently.
The modifications discussed above helped eliminate the weakness of the original diagrams. Now the diagrams can be used as a tool to make incremental recommendations to architecture firms and explain the concept of business modeling through a clear visual.
The interviews with architecture professionals proved my reasoning right. I did not make a specific question to ask interviewees if they find the change appropriate. Instead, I explained the changes as an introduction to business model diagramming before the interviewees were to think about their own business models. I thought that a question may distract my interviewees from the main point of business model analysis, and that they may be inclined to sympathize with my changes if asked. The semi-structured interview allowed us to go on tangents if needed, and as a result four out of six interviewees commented positively on the changes. The majority opinion was that the updated diagram was clearer and better visualized.
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