Jason Walton

7½ signs you’re ready to start thinking about alternative business models: A checklist

August 28, 2015

Checklist

Is an alternative business model a sensible path for you?  We’ll yes, no and maybe. iMPOWER have helped many councils answer exactly this question. Based on that experience I have set out below a checklist of some of the fundamental questions councils should be asking themselves (and these are the very questions we ask of them) when considering alternative business models.

Firstly it’s worth being clear on what we mean by the term ABM (alternative business model).  We use it to refer to a new way of delivering services that doesn’t make use of the existing organisational structure; it may be underpinned by some type of external provision with a new staffing model, legal status, funding approach and/or commercial model. It will also have a new and different type of relationship with the organisation that it has originated from.

ABMs may include – but are not limited to – cooperatives, social enterprises, joint ventures, outsourcings, shared services and community interest companies.  It’s also worth noting that there is some overlap between these and indeed not all of them have any legal definition; even a joint venture is more of a concept than a thing (but that’s not to say it isn’t a useful model).

ABMs are often perceived to be the silver bullet to the public sector’s financial pressures. But ABMs are complex and bring about their own – and very different – challenges. However, if you agree to most of the statements below, then an ABM might be worth considering:

  1. Things need to change. What I mean by this is that the status quo is not a viable future option. Typically this manifests as a need to reduce spending or improve delivery (or – more commonly – both).  There may of course still be merit in exploring alternative models even when not driven by such an imperative; improvement should not rely on a need to change.
  2. There is good reason to think a new model may help. There is a danger that an ABM can be seen as a panacea for all ills. It isn’t. If you can’t put into a clear and concise statement why you think an ABM will work for you then maybe it’s not the right path.  Look first at the logical underpinnings (such as potential economies of scale) and benchmarks (what have others done and how successful have they been?) to get a sense of how a new model might benefit your organisation.
  3. The current organisational model is the problem. For example, if your issue is poor data quality then maybe an ABM may not be the right way to tackle the problem. However if the data quality is poor due to organisational constrains that the current organisation will continue to insist on, then the organisational model is the problem.  Other examples include excessive red tape, an inability to flex to changing needs, lack of strategic alignment with the service’s needs and legal constraints.
  4. There are no insurmountable statutory reasons that will prohibit change. Increasingly this is less of a blocker to ABMs but in some areas statutory responsibilities can only be efficiently dispensed through the existing model.
  5. You can effectively manage and control an ABM. Given that the new model is likely to be a separate entity but with some relationship to the parent organisation then you need to know that you can obtain the rights of control and management that you need, and the ability to exercise them effectively.
  6. Deep change is needed but cannot be delivered internally. Where real change is needed and the current organisational model does not have a track record of being able to deliver it, then a new model may provide the freedom of thought, purpose and action to enable it.
  7. The political realities will allow it. This is a tough one as in a perfect world logical actions would not be hampered by less than logical reasons. The reality however is that new ways of doing things in a local public services context (indeed in any organisational context) need the right level of support from the top. If you know that doesn’t exist yet and it is genuinely not winnable then maybe there is a longer game to be played.

Finally, my ‘and a half point’ is: It’s not core business. Whilst this is often cited as a factor, how ‘core’ a service is to the business is not an argument for it needing to remain in-house in the current form of provision.  I would actually say it’s an even greater argument for why it should be in the form of provision that best suits its function.

If you are ticking off most of the statements above then maybe an ABM is something to consider. It’s not a panacea and every council and service has a unique set of circumstances to deal with, but the statements above are the first steps to truly thinking about why and how ABMs can work for your organisation and your citizens.

jwalton@impower.co.uk

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