In my last blog post, I outlined how every organization’s business model has the same six components—(1) Value Proposition, (2) Culture, (3) Channels, (4) Operating Processes, (5) Resources, and (6) Pricing. I also talked about the need for continuous evolutionary business model improvement. In other words, these components need to change over time as you learn better ways and as the world around you changes.

But why is it that so many CEO’s in both small and large companies—including many in our industry—are reluctant to embrace business model change in a systematic way? Staying in your mental comfort zone can be a way to avoid stress. If something worked for you in the past, making fundamental changes can feel like jumping into the abyss. How many juvenile product companies have simply modeled themselves after what their competitors are doing or what used to work 10 years ago but is no longer appropriate for the times?

We all have mental models that structure how we see the world and drive our actions. You could define a mental model as a set of assumptions about reality. Just think Republicans versus Democrats or pro-life versus pro-choice. In business too, we all develop mindsets about what works and doesn’t work based on our nature and our experiences. In his book The Fifth Discipline, Peter Senge talked about the importance of “. . . the discipline of managing mental models—surfacing, testing, and improving our internal pictures of how the world works . . .” While the easy thing is to keep on doing what you’ve been doing, it’s more crucial for business survival than ever to not only be open to alternatives but to force yourself to routinely consider them.

Unfortunately, most managers never adopt this discipline. They may not even be consciously aware of the set of assumptions that is guiding their actions so they are unable to change it when change is necessary. Their mindset has become a mind prison. In my consulting work, as an outsider, I can often immediately see business model changes in client companies that would have rapid beneficial effects. But to get the client CEO to adopt the change is often a struggle simply because their mental model is blocking their view of current reality. The first step towards breaking out of jail is to recognize you’re incarcerated.

Managing your mental model is not a one-time thing. It needs to be done regularly. CEO’s not only need to manage their own mental models, but those of their employees as well if they expect to succeed. By “manage” in this case I don’t mean coerce. You need to work together with your senior team to jointly evolve first your mental model and then your business model.

This is why kids in garages can out-innovate giant corporations. The kids aren’t in mind prison yet. They’re open to new ideas and driven by optimism that is untainted by painful life experiences. They’re also willing to put in the time and effort required. Fortunately, you don’t need to be a wet behind the ears twenty-something in a garage to manage your mental model rather than be blinded by it.

What you need to do is institutionalize regular (at least annual—maybe even quarterly) review of your mental model and then your business model and its components. This is the new “strategic planning”. It’s not a planning exercise, it’s a design exercise and as such it starts with a clean slate every time. Once you know what business model components you want to change, then you plan the implementation. But, you first start with an open-minded design process. And, if you commit to doing it on a regular basis and with a “flexible mind”, it’s guaranteed to break your mind out of prison and keep you out.

If you’d like help creating the right business model development process for your company, sign up for a series of Skype mentoring sessions.

Action Suggestion for This Month: Meet with your key managers and list on a flip chart all your “mental model” assumptions and beliefs about the industry, target consumers, competitors, employees, channels of distribution, product opportunities, pricing, etc. Consolidate the list to the most important and then see if you can reach consensus and validate the accuracy. That exercise alone would be very beneficial. Then, based on these “shared assumptions”, discuss what your business model might look like if you were creating it today. You might be surprised and energized by the results.