The Peter and Dilbert Principles applied to academe

  • Original Paper
  • Published: 07 February 2020
  • Volume 21 , pages 115–132, ( 2020 )

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  • João Ricardo Faria   ORCID: orcid.org/0000-0001-9998-7412 1 &
  • Franklin G. Mixon Jr. 2  

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The academic literature has long held that firms typically develop a system of incentives and rules that are meant to encourage employees to maximize their effort, and the firms’ profits. As a result, firms’ employees often rise through the ranks of the hierarchies in their firms through internal promotion, a process that results in the development of an internal labor market. This study explores the process of internal promotion, and its impact on firm behavior, with particular attention to both the Peter Principle and the Dilbert Principle . Both a formal model and a brief application of it to higher education are presented. In the case of the former, data related to U.S. business school deans indicate that more than one-third of all appointments come from internal candidates, with fully 20% of these being made from the rank-and-file professorate, thus supporting the model’s implications concerning the Peter Principle . Additionally, the data also reveal that the tenure of a typical “outside” dean exceeds that of a typical “inside” dean, thus supporting the model’s implications for the Dilbert Principle .

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Cassidy et al. ( 2016 ) and Kunze and Miller ( 2017 ) add educational attainment and executives’ gender to factors determining promotion such as past effort and performance.

In the context of this study, a hierarchy is an organization whose members or, in the case of a company hierarchy, employees are arranged in order of rank, grade or class (Peter and Hull 2011 ).

Gordon ( 1990 ) shows that the ratio within the firm’s hierarchy of supervisors to production-workers inputs has decreased from 1960 to 1990 for the major economies in the world.

See Goldsmith et al. ( 1999 ) for a study of motivation in a human capital model.

Competence, in the context of this study, refers to an employee’s ability to fill his or her place in the company hierarchy (Peter and Hull 2011 ).

Peter and Hull ( 2011 ) refer to this process of advancement as “hierarchical regression.” In this context, hierarchical regression results in “Peter’s Corollary,” which states that over time every post within a company hierarchy tends to be occupied by an employee who is incompetent to carry out his or her duties (Peter and Hull 2011 ). Lastly, the level of incompetence referred to here is also known by Peter and Hull ( 2011 ) as “Peter’s Plateau.”.

To use Adams’ ( 1996 ) definition, the Dilbert Principle asserts that “[t]he most ineffective workers will be systematically moved to the place where they can do the least damage—management”.

See Baker et al. ( 1994 ) for more recent evidence on internal labor markets.

See Milgrom ( 1988 ) for a discussion of how firms seek to avoid rent-seeking workers by imposing simple rules of promotions, based on seniority and past performance.

See Romaine ( 2014 ) for an examination of the evidence for problems with merit-based promotions, as well as various explanations that have been advanced for why such problems occur.

See Demougin and Siow ( 1994 ) for a general model of on-the-job training.

Use of this term is consistent with the descriptions in Peter ( 1969 ) and Peter and Hull ( 2011 ).

Use of the term Idiots (and “Idiot Space”) is consistent with the descriptions in Adams ( 1996 ).

See, for example, Landers et al. ( 1996 ) and Kessler ( 1998 ).

Prendergast ( 1993 ) shows that may optimally eschew the use of incentive contracts to retain workers’ incentives for honesty. See Faria ( 1998 ) for an analysis of envy in teamwork.

As stressed in the previous section, the Competence Frontier is based on the assumption that a pool of candidates is homogeneous (i.e., skills are observable).

See Brogaard et al. ( 2018 ) and Mixon ( 2018 ) for interesting empirical investigations of these concepts.

An important point should be made here. One may ask how, if the managers are themselves incompetent, and they exhibit some degree of control over the firm, is the firm able to maximize profits? The answer is that the highest tiers of the company hierarchy, where the major decisions by the firm are made, are insulated from the sorts of problems analyzed in our study. This is due, in large part, to the fact that the organization’s chief executives are typically hired from a national pool of elite candidates rather than internally from the middle ranks of the managerial pool. It would be an interesting exercise to explore the implications of the Peter Principle and Dilbert Principle when the company hierarchy is simpler than what is envisioned using our approach.

One can raise the question that what would happen in the model if \(\gamma \in \left[ {a,b} \right]\) , where 0 <  a  <  b  < 1. That is, if there are further constraints on the amount of skills firms wish to select. The qualitative results of the model are not altered by it.

Business organizations, for example, often want long-term growth and teamwork among employees, while they tend to reward on the basis of quarterly earnings and individual effort (Kerr 1975 ).

See also Faria ( 1998 ) for additional discussion of how university administrators often employ other faculty in productivity-stifling schemes.

Teamwork and cooperation are related to faculty appointment, promotion and tenure policies, which are, in part, shaped by business school deans.

For related literature, see Faria ( 2001 , 2002 ), Bensancenot et al. ( 2009 ) and Besancenot and Faria ( 2010 ).

These data were collected from various news reports by the authors.

Among the subsample of institutions hiring deans on more than one occasion, the mean tenure of “outside” deans is 35.2 months, compared to 32.7 months for “inside” deans. Also, the variance in the tenure of “outside” deans in this subsample is much smaller than that for “inside” deans (126 months vs. 189 months) and the left tail of the “outside” deans’ tenure distribution is a bit shorter than that of the “inside” deans’ tenure distribution.

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Acknowledgment

The authors thank two anonymous reviewers, Amihai Glazer, Chris Bajada, Arthur Goldsmith, Silvana Musti, and especially Miguel Leon-Ledesma for helpful comments on prior versions. The usual caveat applies.

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Faria, J.R., Mixon, F.G. The Peter and Dilbert Principles applied to academe. Econ Gov 21 , 115–132 (2020). https://doi.org/10.1007/s10101-020-00235-6

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Received : 17 May 2019

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Issue Date : June 2020

DOI : https://doi.org/10.1007/s10101-020-00235-6

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How “Dilbert” Practically Wrote Itself

  • Meghan Ennes

A few of our favorite cartoons – all based on real management blunders.

To mark his contribution to the hallowed halls of management comedy, we profiled Dilbert creator, Scott Adams , in the November 2013 issue of HBR. He was kind enough to lend us his 550-page tome Dilbert 2.0: 20 Years of Dilbert , where he reveals that more than a handful of the comics documented in his legendary workplace strip actually came straight – sometimes verbatim – from his readers’ work-lives, and his own.

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  • ME Meghan Ennes is an editorial coordinator at Harvard Business Review.

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The top 10 Dilbert cartoons, according to creator Scott Adams

The first syndicated comic that focused on the workplace when it launched in 1989, the exploits of the office everyman and his crew of incompetent colleagues never loses relevance

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Dilbert, the well-known comic strip by cartoonist Scott Adams about the office everyman and his crew of incompetent colleagues, was the first syndicated comic that focused primarily on the workplace when it launched in 1989. Five years later, it had become so successful that Adams quit his corporate career to work on it full-time.   

It wasn’t a straight line to success. Early versions of the comic were rejected by several publications, including The New Yorker and Playboy. It wasn’t until an editor at United Media saw it and recognized her own husband in the character that it finally got its start, says Adams in his upcoming book “ How to Fail at Almost Everything and Still Win Big .”  

The top 10 Dilbert cartoons, according to creator Scott Adams Back to video

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  • The 10 Funniest Dilbert Comic Strips About Idiot Bosses
  • 9 Outrageous Things CEOs Said And Later Regretted
  • 18 Signs You Have A Terrible Boss

Ever since, the comic has explored topics like the inefficiency of meetings, the uselessness of management, and the absurdity of office politics.  

Exclusively for Business Insider, Adams looked through the archives and shared his 10 favorite Dilbert comics. Below, he explains why he chose each and counts them down to his absolute favorite of all-time.

“This comic causes the reader to imagine a funny future in which Wally will only pretend to do the assignment. Humor sometimes works best when one suggests what is coming without showing it. People laugh harder when they need to use their imaginations to complete the joke.  

“I also like comics in which characters are unusually happy about something trivial, evil, or selfish. That juxtaposition is always funny to me.

“Another technique I often use involves characters saying things that should only be thought. That creates the inappropriateness that gives it an edge.”

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9) Sept. 24, 2009: “Opportunities”

“ Management-by-slogan usually comes across to employees as ridiculous and condescending. That, in part, is what makes the staff in this comic so uncaring about the boss’s house burning down. The ordinary evil of regular people is always funny to me. It’s easy to relate to it.”

8) Nov. 12, 2009: “Roll a donut in front of the cave”

“A common humor technique involves juxtaposing something of immense importance with something trivial. The pairing of things that don’t belong together makes your brain “sneeze” in the form of a laugh. In this comic, Wally is comparing his digestive system to Jesus rising from the dead. A dash of spiritual inappropriateness gives it some seasoning.”

7) Dec. 3, 2009: “Reusable presentation”

“ As I mentioned, I enjoy humor that highlights the selfish nature of people. We all relate to it. If you have a job, you probably spend some part of each day trying to disguise your selfish motives as win-win scenarios. And your attempts are probably as transparent as Wally’s.  

“I also like jokes that involve inappropriate solutions to problems. This one has both. When you can layer two humor triggers in the same comic it almost always works.”

6) Dec. 9, 2009: “Catching up to competition”

“ This one works because you never see the pointy-haired boss’s reaction, but you can imagine it vividly.  

“Keeping true to the major theme of Dilbert, this comic highlights the uselessness of management. If you’ve ever had a boss, this one probably hits home for you.”

5) Jan. 7, 2010: “Synchronizing excuses”

“ I very much enjoy mocking common sayings. Often those little nuggets of wisdom make no sense whatsoever, but we’ve heard them so often they feel as if they do. Good things  might  come to those who wait, but so does starvation.

“This comic is also an example of what I call an ‘engineered solution.’ Wally has cleverly synchronized his excuses to the thunderstorm. I find cleverness to be funny when it is in the service of selfishness.”

4) April 13, 2010: “Asok’s snout”

“ Here I’m juxtaposing an ordinary workplace lunch with the ridiculousness of Asok having a dog snout. Dilbert and Wally take it in stride. That’s the first humor level, but it wouldn’t be enough to make it work.  

“The second level is that we all know people who value form over function while being oblivious to how others view them. When you shine a light on irrational human behavior it usually triggers a laugh reflex.”

3) Sept. 27, 2010: “Brain golfing”

“ If you attend meetings, you probably spend a lot of time thinking your own thoughts while your coworkers drone on. This comic is funny to me because the boss is revealing his selfish thoughts, and also because ‘brain golfing’ is a funny combination of words. I figured most golfers could relate. I doubt I’m the only person who brain golfs.”

2) Dec. 2, 2010: “Old Johannsen”

“ Wally is the worst employee of all time, but he’s likeable in his own way, so we enjoy seeing him get a win at the expense of the pointy-haired boss. And I think everyone who has a boss also dreams of becoming indispensable. It’s easy to relate to Wally’s glee in the third panel.”

“This might be my all-time favorite Dilbert comic. When I was on the speaking circuit I always used it to end my talks to thunderous laughter. It’s naughty, clever, and it has a point of view. And it makes the reader imagine what happened before that moment shown in the comic and what might happen after. It’s rare to pack so many elements in one comic.”

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The Dilbert Principle: A Hilarious Take on Office Management

Introduction: the dilbert principle.

Dilbert Principle: In the realm of office management , few satirical comics have achieved the level of cultural resonance as Scott Adams’ “Dilbert.” Created in 1989, “Dilbert” cleverly and hilariously depicts the absurdities, frustrations, and quirks of corporate life. Among the many amusing insights it offers, the Dilbert Principle stands out as a captivating concept that shines a satirical light on management practices. In this blog, we will delve into the Dilbert Principle , discuss its origins, explore its key observations, and analyze its relevance in today’s management landscape.

Origins of the Dilbert Principle

The Dilbert Principle , named after the comic strip itself, was first introduced by Scott Adams in his book of the same name, published in 1996. Adams humorously describes the principle as “the most ineffective workers are systematically moved to the place where they can do the least damage: management.”

Key Observations in Dilbert Principle

Dilbert Principle

1. Incompetent individuals are often promoted to management roles:

One of the core premises of the Dilbert Principle is that people who lack the necessary skills to excel in their current roles are frequently rewarded with promotions to managerial positions. Adams humorously explains this phenomenon as the “confusion of promotion with competence.”

2. Decision-making becomes increasingly detached from reality:

The comic strip regularly highlights how management decisions, driven by unnecessary bureaucracy and politics, often have little connection to the actual needs and concerns of employees. Adams exposes the absurdity of executives making questionable decisions with limited knowledge or understanding of their employees’ work.

3. The prevalence of the “idiot boss” stereotype:

The Dilbert Principle emphasizes the all-too-common scenario of employees being saddled with clueless and inept managers. These managers lack the technical expertise, communication skills, and leadership abilities required to effectively guide and support their teams.

4. The rise of the Peter Principle:

Adams also touches upon the Peter Principle, which states that individuals are promoted to their highest level of incompetence. The Dilbert Principle humorously expands on this concept, suggesting that even in managerial positions, employees may still continue to be promoted despite their incompetence.

Effects of Dilbert Principle

Dilbert Principle

1. Reduced Employee Engagement:

The Dilbert Principle posits that incompetent employees are more likely to be promoted to managerial positions, creating a paradoxical situation where the least qualified individuals are making crucial decisions. Consequently, this leads to a decline in employee morale and engagement as talented workers become frustrated by the lack of recognition and reward for their efforts.

2. Stagnant Innovation:

Under the Dilbert Principle, bureaucratic structures often prioritize maintaining the status quo rather than embracing new ideas or innovative practices. As a result, organizations fail to adapt to changing market dynamics and miss out on opportunities to grow and thrive. This stifling environment hampers creativity and limits the potential for breakthrough innovations.

3. Communication Barriers:

Bureaucracy typically leads to a complex chain of command, with multiple layers of management separating the top decision-makers from frontline employees. The Dilbert Principle highlights the adverse effects of such hierarchical structures on communication. Critical information often gets lost or distorted as it passes through multiple layers, leading to miscommunication, delays, and misunderstandings.

4. Inefficiencies and Wasted Resources:

Inefficient decision-making processes are a hallmark of the Dilbert Principle. The notion that incompetent employees rise to management positions means that essential organizational resources are often misallocated. Inefficient practices, redundant tasks, and unnecessary bureaucracy drain time, effort, and financial resources that could have been better utilized in pursuing more value-adding activities.

5. Lack of Accountability and Transparency:

The Dilbert Principle often results in a lack of accountability within organizations. Incompetent managers may resort to blame-shifting or hiding behind bureaucratic processes when faced with challenges or failures. This absence of accountability erodes trust among team members, leading to decreased collaboration and hindered problem-solving capabilities.

Relevance of Dilbert’s Principle in Today’s Management Landscape

 While the Dilbert Principle originated over two decades ago, its observations and satirical commentary remain highly relevant in today’s corporate landscape. Here are a few reasons why:

Dilbert Principle

1. Corporate bureaucracy persists:

Despite advances in technology and the rise of agile working, many companies still struggle with excessive red tape and bureaucratic processes. The Dilbert Principle captures the frustration employees experience when dealing with unnecessary hurdles and pointless paperwork.

2. Managers’ lack of technical knowledge:

The comic strip’s portrayal of managers who lack the technical expertise required to understand and support their teams is a common struggle in organizations today. This insight highlights a critical gap in management development that needs to be addressed by companies seeking to foster effective leadership.

3. The impact of office politics:

The depiction of office politics in Dilbert serves as a reminder that personal agendas and power struggles can overshadow the pursuit of efficient and effective decision-making. Cultivating a culture of transparency and collaboration can help mitigate the negative consequences of office politics.

4. The enduring issue of poor leadership:

The Dilbert Principle continues to shed light on the repercussions of poor leadership. Incompetent managers can not only hinder individual performance but also negatively impact team dynamics and overall organizational success.

How to Overcome the Dilbert Principle

Dilbert Principle

1. Foster Open Communication and Transparency:

To tackle the Dilbert Principle, it is crucial to establish a culture of open communication and transparency within the organization. Employees should feel comfortable sharing their ideas, concerns, and feedback without fear of reprisal. This can be achieved through regular team meetings, suggestion boxes, or even anonymous feedback channels. By encouraging dialogue, managers can identify areas of improvement and address any underlying issues that contribute to inefficiencies.

2. Set Clear Expectations and Goals:

Creating a framework of clear expectations and goals is essential to overcoming the Dilbert Principle. Employees need a clear understanding of what is expected from them and how their work contributes to the overall objectives of the organization. This clarity helps align individual efforts with organizational goals, promoting a sense of purpose and preventing aimless work.

3. Empower and Delegate:

Micromanagement is a prominent problem in organizations trapped in the Dilbert Principle. Empowering employees and delegating tasks can help address this issue. When employees are given autonomy and ownership over their work, they are more likely to feel motivated and demonstrate greater commitment. Delegation also allows managers to focus on strategic decision-making and higher-level initiatives.

4. Invest in Professional Development:

To overcome the Dilbert Principle, organizations should invest in their employees’ professional development. By providing opportunities for training, workshops, and continuous learning, organizations can enhance employee skills and knowledge. This investment not only improves overall productivity but also fosters a culture of growth and innovation.

 5. Recognize and Reward Excellence:

Motivation and recognition play significant roles in overcoming the Dilbert Principle. Managers should acknowledge and reward employees for their exceptional performance, innovative ideas, and contributions to the organization. By establishing a fair and transparent system of recognition and rewards, employees are more likely to feel valued and motivated to excel.

6. Embrace Technology and Process Improvement:

The Dilbert Principle often thrives in organizations with outdated processes and inefficient technology. Embracing modern technologies and continuously improving processes can help streamline operations, eliminate unnecessary bureaucracy, and increase productivity. Regularly assessing and reevaluating existing practices can lead to more efficient workflows and reduced frustration among employees.

The Dilbert Principle, born out of Scott Adams’ iconic comic strip, continues to captivate readers with its sharp humor and insightful commentary on office management. Its observations on promotion, decision-making, and the prevalence of inept managers strike a chord with many employees. Despite its satirical nature, the principle resonates because it reflects aspects of reality within modern workplaces. By acknowledging and addressing the issues highlighted by the Dilbert Principle, organizations can strive for more effective and equitable management practices, ensuring a more productive and fulfilling work environment for everyone involved.

Samrat Saha

Samrat is a Delhi-based MBA from the Indian Institute of Management. He is a Strategy, AI, and Marketing Enthusiast and passionately writes about core and emerging topics in Management studies. Reach out to his LinkedIn for a discussion or follow his Quora Page

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By prof. torbjørn netland, the top-ten dilbert cartoons on lean.

Is your organization struggling to implement lean or any similar process improvement program? This post presents the 10 best Dilbert cartoons on lean management.* Scott Adams’ brilliant and popular cartoons provide a reality check for any change agent involved in process improvement. Next time, ask yourself: What would Dilbert do?

#10 Develop a long-term corporate lean program

DILBERT © 2006 Scott Adams. Used By permission of UNIVERSAL UCLICK. All rights reserved.

Restarting a new improvement program every quarter or year? The only ones wagging their tails are the consultants. Instead, develop a lasting corporate lean program —and stick with it for a long time.

#9 Make it simple, but significant

Making things complex because complex must mean smart? Go instead for the advice of Don Draper (Mad Man, season 4 episode 6): “Make it simple, but significant”.

#8 Educate the managers

Despite what many of them seem to believe, managers do not know everything. A successful lean transformation requires managers that take the lead and motivate change. To do so, managers need to be educated in the content and process of lean management.

#7 Focus on value for the customer

To have goals are great, but they should be right. Dilbert gets it; lean starts with a focus on value for the customer.

#6 Go to Gemba

It can be hard to be a manager. They often feel too busy to get going, and too important to engage in daily operations. Instead of being out of touch, go regularly to Gemba (shop-floor) and experience the power of solving issues before they get out of hand.

#5 Respect for people

If we are to succeed, you must… at least understand the most important lean principle of all: Respect for people. The Boss could certainly do a better job at motivating Dilbert, Alice, and Wally for implementing change.

#4 Use consultants wisely

Consultants can be tremendously helpful in any lean transformation. Most organizations could benefit from their experience and external view (especially in the early and late stages). But consultants must be used wisely; use them to build in-house competence, not to drain your budgets.

#3 Embrace problems as opportunities for learning  

If you don’t have any problems, you will soon have too many. Problems are opportunities for learning. Embrace them to move forward (and don’t mind the belts).

#2 Develop a lean supply chain

Whereas supply chain thinking is a given at Toyota, most companies are not able to take their lean programs beyond their own factory walls. Just in time inventory management and supply chain integration is not risk free. That is why progressive lean companies build trust in their supply chains.

#1 Watch out for improvements and results

The question is no longer whether improvement programs can be useful, but how to implement them with success (see post about the S-curve ). If your program doesn’t pay off, it doesn’t matter if it’s labelled “lean”, “six sigma”, “lean six sigma”, “total quality management”, “world class manufacturing”, “[company name] production system”, or anything else. Watch out for improvements and results, celebrate them, and enjoy the lean journey.

Are you feeling like Dilbert sometimes? At least, you’re not alone. Have a laugh and carry on. Any Dilbert cartoons on lean management I missed?

* The Dilbert cartoons on lean in this post are published with an exclusive permission of Universal Uclick. Please see www.dilbert.com for the general terms of distribution.

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12 thoughts on “ The top-ten Dilbert cartoons on lean ”

😀 /Martin Kurdve

Hi Torbjørn,

I love it 😉

And you grasped it, by using the Dilbert – it’s som much easier with a good sence of humour and a humble approach.

thnaks for the inlightment 😉

Thanks René! I appreciate your comment – and agree:)

That is funny

Brilliant. Sounds so familiar

Very good Torbjørn. This made me smile. I´ll also make sure i borrow some of these for my in-house training!

Thanks Eivind:) Good luck with your training programs.

VERY FUNNY INDEED

It’s really great and useful

Thanks Hermann! Good luck with your lean journey.

Pingback: Academic life explained by WuMO - better operations

VERY true and entertaining! Thanks for sharing !

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If there’s a mascot for Internet users, it’s the nerdy engineer Dilbert from Scott Adams’ comic strip of the same name. No other character in the mass media combines the feelings of technological superiority and wage-slave hopelessness present in the lives of most computer users. But the play of computer users versus management is only part of Adams’ comic ouevre ; his hilarious take on everyday blue-collar workers touches not only on computer use in companies, but the combined forces of Total Quality Management, endless meetings, doughnuts, cubicles, business plans, and all the other aspects of working in a modern office. Although most of Adams’ strips play on the plight of the nameless cubicle worker against an uncaring and oblivious management, he also covers the flip side of work where managers are unable to motivate employees beyond using the office LAN for Doom and the fine art of making sleep look like work. Given all of this familiarity with business, and the increasing popularity of business books, it makes sense that Adams’ most recent book, The Dilbert Principle isn’t a collection of Dilbert strips but a incisive look at the frailty and foibles of self-help management books under the guise of being one itself.

Business books were overdue to move from the bestseller list to the parody shelf. What was once simply just a few “feel-good”self-help psychology books for managers like Stephen R.Covey’s 7 Habits of Highly Effective People and Kenneth Blanchard’s The One Minute Manager is now a plague, including books like The Management Secrets of Attila the Hun and The Star Trek Guide to Management . What these books spend so many words doing that Adams deconstructs so brilliantly is to take what is common sense to anybody else and grafting the buzz words of business schools and management training on it. Take, for example, this wonderful bit of normal business communication that might have come straight from Management 101:

“Perform world-class product development, financial analysis, and feet services using empowered team dynamics in a Total Quality paradigm until we become the industry leader.”

Take out the double-speak, and what you have is a mission statement that says:

“Do the best work to provide the best product with the best people until we become the best in our field.”

Unfortunately, the first statement probably took ten people who get paid in the high five figures (if not more) at least three days at an exclusive resort in Florida to write. Even more than mission statements such as this, business double-speak of the nineties has centered around terms such as “downsizing” and “re-engineering”. By putting a different spin on the timeless tradition of firing and re-organization, today’s companies act more like politicians than producers.

Ninety-five percent of Adams book is examples such as this, cartoons illustrating the examples, and email from Dilbert readers telling how their companies have fallen into the Dilbert Zone. All of this is great reading, although sometimes disconcerting when you see your own company being portrayed. The last five percent of The Dilbert Principle is Scott Adams’ own philosophy for managers. He says, in the introduction to unveiling his company model OA5 (standing for “Out at Five O’Clock”), that:

“In this chapter you will find a variety of untested suggestions from an author who has never successfully managed anything but his cats. (And now that I think of it, I haven’t seen the grey one for two days.) … I doubt that anything you read here will improve your life, but I’m fairly confident that it won’t hurt you either, and that’s better than a lot of things you’re doing now.”

Although humble, his suggestions have much merit because they return the business of work to common sense. When a company remembers, as Adams suggests, that it has three main reasons for being (its customers, its employees, and its stockholders), and treats all three fairly, then the rest will fall into place. If all the management consultants and business book authors condensed their theories into brief summaries such as this, it would be tough to charge $100 an hour and $25 per book for it. Which means that there will always be consultants and treatises for the clueless, and an endless supply of material for Adams’ cartoon.

[Finished 14 June 1996]

First Impressions Copyright © 2016 by Glen Engel-Cox is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License , except where otherwise noted.

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Lisa Kramer, Ph.D.

Behavioral Economics

Dilbert does behavioral economics, the dilbert comic strip offers a case study on common behavioral biases..

Posted January 30, 2014

The Dilbert comic strip series, written and drawn by Scott Adams, is not only a hilarious caricature of office life, it also offers many concise yet spot-on lessons about behavioral economics (plus one about financial literacy).

High investment fees:

The above strip highlights the obstacle posed by the low financial literacy of many would-be investors. While the comic makes the exaggerated point that an investor facing a 10 percent per year fee would nevertheless blindly proceed with investing, this parody is not far from the truth. Many mutual fund and hedge fund investors pay 2 percent per year or more on the amount invested— whether the value of their investment goes up or down!

Framing refers to the way our decisions are affected by the way information is presented. For instance, framing can influence whether we see a glass as half empty or half full. The same glass framed different ways can be perceived differently depending on the context. In the above strip, Dogbert and his client describe as "dumb" those shoppers who think something labeled as "50 percent off" must be a bargain. Yet the client considers himself a "genius" when he falls victim to the same bias .

Framing shows up again in the above strip when Dilbert's boss frames Dilbert's lack of a salary raise relative to the alternative of being attacked by bears, which Dilbert finds compelling.

Confirmation bias:

Confirmation bias is the tendency to seek evidence consistent with a prior belief. In the above strip, Dilbert's boss demonstrates this bias to a tee when he assumes his astute managerial skills are what caused a minuscule (and clearly unrelated) improvement in the company's stock price.

Overconfidence:

Overconfidence is the tendency to be overly optimistic , to overestimate one's own abilities, or to believe their information is more precise than it really is. In the above strip, Dilbert's boss falls victim to this bias when he assumes that all managers (presumably including himself) are better than average, all the while not recognizing Dilbert's impolite jab at his poor math skills.

Winner's Curse:

Sometimes having the inflated sense of abilities that accompanies overconfidence can lead to very bad outcomes. For instance, in corporate finance, the tendency of companies to overbid for projects and take on commitments they perhaps cannot manage is known as the winner's curse. In the above strip, Dilbert's boss has clearly fallen victim to this inclination.

Losses Loom Larger than Gains:

Finally, in prospect theory (which is a key concept in behavioral economics), the pain associated with a possible loss is much greater than the pleasure associated with a gain of the same magnitude. In the above strip, Dilbert's garbage man clearly understands this concept much better than Dilbert.

Lisa Kramer, Ph.D.

Lisa Kramer, Ph.D. , is an expert on behavioral finance, drawing on human psychology to shed light on financial markets in unconventional ways.

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10 Dilbert Cartoons That Get Project Management Just Right

Rachel Burger profile picture

Rachel Burger

I was doomed to be an office worker because of my upbringing.

My father loves Dilbert . The family bookshelves are stuffed full with classics like Bring Me the Head of Willy the Mailboy , It's Obvious You Won't Survive By Your Wits Alone , and the management classic, The Dilbert Principle .

dilbert pm

Over the past 26 years, Scott Adams has entertained millions of readers with his humorous workplace satire--and also poignantly highlighted some workplace problems that many easily glaze over.

One particular community that seems enamored of  Dilbert is project managers. Many have been in offices where they have been micromanaged… or have become the pointy-haired boss themselves.

After scraping through thousands of Dilbert cartoons, I’ve found the best strips related to project management humor. Enjoy.

Project managers with a PMP certification tend to outperform those who don’t have one. In order to pass the PMP exam, project managers must memorize project management vocabulary, understand project management processes, have experience in managing projects and, in some cases, must have taken project management courses .

With that said, PMPs can all too often get wrapped up in the minutiae of good processes--so much so that they hold them above the people they’re working with. No one wants to waste time in meetings, even if it’s vaguely recommended by other PMPs. Keep yourself grounded with real-time communication and simplified reporting that everyone can access and keep updated with instead of relying on meetings to do so.

“Resource allocation” is a term familiar to many project managers, and it can often refer to people in addition to non-human assets.

Project management can often be a cold industry, where numbers and deadlines outweigh your team members’ desires and even capabilities. Keep in mind that your team members are people and that they each have their own unique needs and values.

For many companies, risk management software adds safety to your project.

Unfortunately, even the best systems can’t function without the cognitive skills of a human working on the project (unfortunately, the successful Turing test has yet to come to risk software). If the data that you input does not match reality, your software will become useless.

dt110306

The Project Management Institute has continually found that poor communication is at the heart of most project failures .

There are many reasons for this, but the most common mistake that leads to poor communication is a poor system. Emailing every thought is unsustainable, but zero communication ultimately leads to project failure.

Investing in project management software is one of the best ways of addressing communication issues. In fact, 52% of project managers say that communication was “significantly improved” after implementing PM software. Consider using PM software instead of email--for instance, tools like Asana , Wrike , and Trello can help optimize communication.

In this article, we mentioned Asana, one of the most reviewed project management solutions in Capterra's directory. If you woud like to explore similar products, these Asana alternatives are a great starting point.

We have all met this project manager (or boss).

The know-it-all attitude is not only grating but also unhelpful. No team member wants to work for a “holier than thou” manager in any setting.

In this strip, Ratbert does not consider the skills of those he’s working with--he wants to dole out menial tasks while he does all the real thinking. Project managers cannot expect to come up with the best solutions to all problems all the time, and they can’t expect to have all their team’s individualized, specialized skills.

Make use of your team--distrusting your team to do any of the critical thinking will only end in disaster.

Along the same lines as the previous cartoon, here Dilbert doesn’t trust his team not to sabotage his project. Unfortunately, that means he is not sharing the purpose or the scope of the project.

Can you spell d-i-s-a-s-t-e-r?

There is little that can be gained from keeping your team members in the dark. Transparency is the key to trust --and a team that trusts its leader will outperform those that don’t. Every time.

As far as communication goes, I often hear project managers complain about their team members refusing to put in updates to their software, or having to chase down individuals for simple status updates.

On the other end of the spectrum, it’s also up to project managers to keep themselves informed. If checking status reports and staying up to date isn’t a part of your daily routine, you are opening up your project to unnecessary risk. Forecasts and requirements easily change. Don’t fall victim to your own inability to receive information.

We’ve all heard stories about difficult team members . Some project managers get frustrated and chalk up inefficiencies with an unalterable personality trait. For example, the project manager here might think Wally is lazy, unavailable, and insubordinate.

In this case, that might very well be the reality. In the real world, however, there are many more variables. For example, the team member might think you’re unapproachable, unrealistic, and cold.

Invest in cultivating your workplace personality to best fit with project management , and try to get real-time feedback from your team members about your management style. Don’t wait for them to come to you.

We’ve all experienced this problem. Unfortunately, dependencies are the greatest downfall to the Waterfall method of project management.

Going Agile, particularly for software products, is one way of addressing this issue, as is having realistic deadlines and properly matched tasks with skills.

Well, that and hiring competent employees, as is the issue in this strip.

Ah narcissism.

Listen when your team is trying to communicate with you. If you’ve built a reputation for poorly receiving information and status updates, you’ve set yourself up for poor team management.

No one wants to be the pointy-haired boss.

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About the author.

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Rachel is a former Capterra analyst who covered project management.

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Dilbert & business plans...and sales.

I've been a student of the comics forever and well remember waiting dutifully for my father to come every night and hand me the Boston Traveler , which I then immediately thumbed to the funnies.  Today, I'm still addicted to the comics although it's my iPad now that delivers my daily fix, since my daily download of BostonGlobe.com sadly does not include the comics.  Dilbert continues to be one of my favorites for the simple reason that the parallels to daily business life are so close to reality that they either make me laugh or cringe.

sales plans

As a business planning architect and often the actual writer or editor of business and sales plans, I know that the planning processes that often start to take place in most companies at this time of year are a lot better than that explained here by the Pointy Hair Boss.  Having said that, my own feeling is that there are still way too many management teams that lack a business or even a sales planning process, or they shroud what process they do have in the inner sanctums of the finance department who then magically delivers a budget to the board for approval in December.

Q3 begins the business and sales planning processes in most companies, and should be regarded by both the senior and middle management teams as the single most important thing that they do all year .  The process actually creates the word "team" in management.  Done right, it defines tactical integration, it creates strategic balance, and it provides absolute focus of priorities.  At the end of the annual sales and business planning process come December, at that singular moment in time, the jigsaw puzzle has been assembled and all of the irregularly shaped pieces fit perfectly together into a total picture of what the next year is going to look like.  At least at that one point, there's an agreed on roadmap to follow for the upcoming trip that management is going to set out on for the upcoming year.

We actively participate in 70+ business plans a year, review another couple of hundred and then annually participate in hundreds of sales plans, so a few things that you might want to consider as you start down the annual Q3-Q4 planning process this fall:

  • Start with the End Define the deliverables that you want to solve for and work your way backwards. Before you just jump into the planning process with your senior team, agree on what the end point objectives are going to be in terms of rough metrics, but more importantly, significant strategic achievements for 2013.  An example might be that you want to have achieved the successful implementation of an indirect sales channel by 12/2013 that can bring in 10% of the 2014 revenue. Define the overarching strategic objectives first.  Take a look at where you are today and then begin outlining the primary strategies which would become the overarching initiatives through through which you are going to connect the dots between here and there.
  • Focus for Success Great management teams narrow their focus, put solid muscle behind a small number of 3 or 4 real strategic annual initiatives, and never try to boil the ocean.   Even if you think you can accomplish more than 3 or 4 strategic objectives in 12 months, the data says that you can't so don't try to be Super Manager here.  At the very worse, you will fail.   At the very best, you will have most probably totally confused your middle management team. Focus not only on what are those small number of strategies that you're going to chunk into for the year, but be very clear as to what you are not going to do. De-prioritizing strategies is as important as prioritizing.
  • Consistently Communicate & Review Once the plan is agreed on, have all of your management team physically sign the business document going to the board-just a tactic, but an important one.  More importantly, put in your calendar in December, the once-a-quarter full days that you and the management team will do a complete review of your business plan.  Re-plan where you must.  Communicate fully to the entire company what you're doing with as much transparency as practical confidentiality allows.   Acknowledge openly where you failed while you celebrate the company's successes.   And then do the same thing for every quarter during the year.

Here's a couple of things to help you on your way: 1.  A 30 minute video on the critical parts of creating solid business plans

2.  The download page for our just-finished update of our 75 page free ebook on Writing the Winning Business Plan

Good selling...and planning!

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10 funniest dilbert comics every office worker can relate to.

Laughs straight from the cubicle. These are the 10 funniest Dilbert comics for the long-suffering office worker.

  • Dilbert's ability to outwit his boss is empowering for frustrated office workers who can relate to the humor of the strip.
  • The comic strip exposes the lack of trust in work environments and uses silence as a clever comedic tool.
  • Dilbert's takedowns of middle management resonate with workers who have experienced bosses with bad ideas, making the humor universally relatable.

Though the funny pages are usually a distraction from the everyday frustrations of life, Scott Adams' satirical comic strip Dilbert makes the mundane work of the office the source of endless humor. With its relatable jokes and archetypal characters, nearly every person who has stepped foot in an office can get a chuckle from the denizens of Path-E-Tech.

Whether they are poking fun at brain-dead bosses or simply lamenting the mind-numbing nature of office work in general, almost every reader has been in Dilbert's shoes at some point. Though they are all usually funny, only the very best Dilbert strips perfectly embody the cubicle lifestyle.

1 The Perfect Manager

Dilbert talks to the pointy haired boss

Dilbert works so well because the titular character can say whatever he wants to his oblivious boss without consequences. The hilarious strip shows how easily Dilbert is able to intellectually out-maneuver his superior, and it is quite empowering to the downtrodden office worker.

While poking fun at his boss in particular, Dilbert makes a pretty apt observation about management in general. The strip perfectly exemplifies what makes Dilbert a classic comic, and the joke could be rearranged in a million different ways and still be just as funny.

2 Survey Says!

Dilbert talks to the pointy-haired boss about his employee survey

Though comic strips like Calvin & Hobbes are known for being heartwarming , the humor of Dilbert comes from how soul-crushingly true the jokes often are. In his meeting with the pointy-haired boss, Dilbert exposes the problematic lack of trust in many work environments.

The use of empty space in the panels also reveals Adams' cleverness as a visual storyteller as the silence is just as funny as any words written on the page. Dilbert has always gone somewhat dark with its humor, but the employee surveys strip gets more sinister the longer it stays with the reader.

3 The Strategy

Dilbert talks to the pointy-haired boss about his strategy

Managerial meddling is one of the most consistent themes of the Dilbert strip, and the eponymous character committed one of the most brutal takedowns of middle management in three simple panels. Not only is it cathartic to see Dilbert voice his frustrations in a sarcastic way, but it is, unfortunately, true of a lot of work environments.

Workers in every field have suffered under bosses who dictate their bad ideas with carefree abandon, and there is a universality to Dilbert 's humor that helps it shine. The greatest workplace comedies of all time owe a heavy debt to Scott Adams' creation, and the above strip is a perfect illustration of it influence.

4 Meetings Within Meetings Within Meetings

Dilbert tricks the pointy-haired boss into scheduling meetings within meetings

Meetings might just be the worst part of working in an office, and whether they are overlong or totally useless, no one enjoys them. Dilbert is notoriously averse to the corporate meeting, and he even uses the strip as an opportunity to subject his co-workers to a bit of workplace torture.

dilbert business model

5 Workplace Comedies That Are An Accurate Portrayal Of The Occupation (& 5 That Aren't)

Essentially creating meeting-ception, Dilbert tricks the pointy-haired boss into getting stuck in a loop of pre-meetings until nothing ever gets done. Some have interpreted Dilbert's workplace as purgatory, and the never ending slew of meetings seems to prove that take might be correct.

5 The Reusable Presentation

Wally explains why he can't do his work in Dilbert

Wally takes center stage in a sidesplitting Dilbert outing all about avoiding work at all costs. The presentation format is a common trope in the strip's history, and Wally makes a case for why he can't do his work by doing more work.

Brutal honesty is the norm for the characters in Dilbert and Wally isn't afraid to say exactly why he went so far out of his way to avoid doing his job. Considering that most office work is just pretending to work, it is extra hilarious that Wally would go through so much trouble.

6 Some Guys Have All The Luck

An office worker is moved to a corner office in Dilbert

Though Dilbert is usually pretty grounded with its sense of humor, occasionally Adams uses absurdity for his funniest strips. Dilbert and Wally are the two characters most on top of things in the office, but even they are hilariously baffled by their coworker's promotion.

Utilizing a style of humor that is seen in the funniest Far Side comics from Gary Larson, Adams proved he wasn't afraid to get adventurous now and then. Even so, the strip still pokes fun at the seemingly random way in which some workers are promoted while the best languish in their lower level jobs.

7 Chop Chop

The pointy-haired boss confuses eunuchs with Unix in Dilbert

The best Dilbert comics work on multiple levels, and some just get funnier the longer they are ruminated on. Proving himself to be a true dolt, the pointy-haired boss almost makes a grave mistake at the expense of a few office workers' anatomy.

Split images of comic book covers of Transmetropolitan, Maus, and The Sandman

The 10 Best Graphic Novels Not About Superheroes, According To Ranker

As a send-off of the emasculating nature of office work, the strip is genius. On top of that, it is just a funny joke about how the mistakes of superiors are often pushed off on the people below them with no consequences. Fortunately, Dilbert is there to save the day.

8 Failing At Any Speed

Dilbert tells his boss how quickly he can fail at a project

The funniest comics in history must stay current to stay relevant, and Dilbert has certainly rolled with the technological changes over the decades. Lampooning the ever-changing tech field, Dilbert delivers his classic snarky wit when it comes to the rise of not-so-user-friendly gadgets.

Always on the ball, the joke is not only about the goofiness of some technology, but it is also an examination of the ridiculous expectations put on some workers. Dilbert knows the idea is bad, but the timetable he is given to work on it certainly dooms it to failure long before it could hit the market.

9 The Secret Of Success

Alice screams at her coworkers from Dilbert

Subtly breaking the fourth wall, Adams uses the Dilbert comic to poke fun at himself while also capturing the frustrations of working with teams. Alice takes her rage to cartoonish proportions for the sake of the joke, and the quiet ending of the strip is what really sells it.

Dilbert is never phased by anything he witnesses at work, and many offer dwellers can relate to the jaded apathy that has overtaken him. Also, the strip brings up the age-old question that most cartoonists constantly receive, to which Adams' delivers his sarcastic answer.

10 Performance Review

The pointy-haired boss asks Dilbert to do his own performance review

Many office workers feel as if they do everything at their job anyway, and the pointy-haired boss only confirmed Dilbert's life-long suspicion that he is somewhat useless. After asking Dilbert to do his own performance review, the wise-cracking hero can't help but get one last dig in on his lazy superior.

While Dilbert's jokes usually go over the bosses' pointy hair, he isn't totally oblivious and even gets in a dig of his own. The true humor of the skit is how quickly everything goes down, and the reader can imagine a host of meaningless interactions like the one in the panel each day that they go to work.

NEXT: 10 Workplace Sitcoms To Binge If You Like Superstore

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Barry Diller’s Business Model Bears Fruit

dilbert business model

By Andrew Ross Sorkin

  • Nov. 23, 2015

Pop quiz. Which company has created more value for shareholders over the last two decades: Disney, Microsoft or IAC/InterActiveCorp ?

If you guessed Disney or Microsoft, as most people do, you’d be wrong.

The correct answer is IAC, Barry Diller ’s hodgepodge of Internet businesses that has long lived in the shadow of tech behemoths like Amazon and Facebook.

Mr. Diller, the colorful media mogul turned early Internet evangelist, has somewhat accidentally built a unique business model: Buy digital businesses, fold them into a conglomerate and then spin out the most successful ones, like the Match Group, the online dating company that had its initial public offering last Thursday after being carved out of IAC. Match now has a market value of about $3.7 billion.

In 2008, Mr. Diller began a grand experiment of breaking up IAC, which is based in New York. There’s Expedia, TripAdvisor (a spinoff of Expedia), Ticketmaster, LendingTree, Interval Leisure Group, HSN and now Match. At the time, IAC was considered by some to be suffering under what skeptics called the “Diller Discount.” A 2006 Barron’s article, “Barry Diller’s Dilemma,” argued that IAC’s assets were vastly undervalued as a conglomerate, but even when he began to split the company up, the stocks of the spinoffs initially underperformed.

But today, the numbers tell a different story.

If you invested $1,000 in IAC in August 1995 when Mr. Diller began the business — at the cusp of the dot-com boom (and subsequent bust) — you’d have about $16,000 today, assuming you reinvested dividends and held on to shares of the various companies spun off from IAC. By comparison, if you invested $1,000 in a fund that tracked the Nasdaq index, you’d have about $4,800 today. In other words, you would have done more than three times better with Mr. Diller.

“I had no idea in my head,” Mr. Diller said in an interview, when asked whether he set out to create this unusual business model from the outset. “Everything that I’ve ever done is one foot in front of the other.”

But he said he did recognize that IAC could act as a sort of “central flywheel” to create, buy and finance companies to later be spun out. It occurred to him, he said, when he was talking to the chief executive of Ticketmaster, which was then a wholly owned company of IAC in the mid-2000s.

“I first realized it” when the unit’s chief executive “came into my office and said that he wanted to spend money on technology and that he wanted approval,” Mr. Diller said, because the investment would reduce operating profits by half. “I said, ‘So you mean I’m like your daddy and you’re coming to ask me permission to do this thing?’”

It was at that moment, Mr. Diller said, that he decided the business would be better off as a stand-alone entity in the public market. “If you were on your own,” he told the chief executive, “do you really think you’d go out in one year and take your operating income in half with nothing else to say about it?” Mr. Diller added: “That night I thought, ‘You know what? The shining light should not be shielded. The guy’s actions should be subject to real-world conditions rather than the false condition of being inside this so-to-speak capital-allocated company.”

And so began what has turned IAC into a minifactory of spinoffs. “I’m really an anti-conglomerateur,” Mr. Diller said.

He is not the only media chief executive whose anti-conglomerateur tactics have paid off. Three other companies that have aggressively spun off assets — Dish Network, Time Warner and Liberty Media — performed even better in the stock market than IAC.

And it is a business strategy, Wall Street analysts say, that might be deployed by that other Internet giant, Google, which recently reorganized its corporate structure. Earlier this year, Google changed its name to Alphabet and reorganized the company to give its many divisions more independence from its dominant search and advertising business. Alphabet’s founders have said they intend to keep all of the divisions as part of the company, but it’s only logical that Alphabet could one day spin off Google Life Sciences or its Nest Labs home products unit.

Unlike the Google guys, Mr. Diller did not start IAC in a garage. In 1995, after a successful Hollywood career, Mr. Diller struck out on his own, acquiring a 20 percent controlling interest in Silver King Communications for $10 million. Silver King was a small media company, but it broadcast the Home Shopping Network, which became his vehicle to make acquisitions, eventually renaming the entire company as HSN. In 2004, it became IAC/InterActiveCorp, which, at least in architecture circles, is best known for its Frank Gehry-designed headquarters along the West Side Highway in Chelsea.

Invariably, skeptics say that all of these restructurings and spinoffs are nothing more than financial prestidigitation. So I put the question to Mr. Diller: Isn’t this not so much a business model as it is a bunch of paper shuffling? Shouldn’t all these businesses have the same value, together or apart?

“It’s the opposite of paper shuffling,” Mr. Diller snapped back, somewhat outraged by the question. “It is the total distribution of shares in a multibusiness company into a successive number of independent companies, some of which may be controlled or not, but that’s not the issue.” These companies, he said, “are under the scrutiny of a set of shareholders only wanting to own that business. I think that’s very healthy.”

In Mr. Diller’s view, spinning out a business imposes a discipline and focus that it might lack inside a conglomerate. In some cases, it’s hard to argue with Mr. Diller’s point. In 2012, Expedia, which had already been spun off from IAC, spun off its popular travel guide site, TripAdvisor. Today, TripAdvisor is worth more than $12 billion on its own. (Dara Khosrowshahi, the chief executive of Expedia, is a director of The New York Times Company.)

“Nothing fundamental changed,” Mr. Diller said, except that TripAdvisor was public and had to swim on its own. “The result of it was of course that TripAdvisor was a much better company.”

Still, despite all the carving out and spinning off, IAC remains a monolith of some 150 digital brands including Ask.com, About.com, Vimeo, Collegehumor.com , Dictionary.com and The Princeton Review. Just two weeks ago, IAC made a hostile bid for Angie’s List, a repository of online reviews for home repairs and other services. In its letter to Angie’s List’s board, IAC said it would consider combining Angie’s List with its HomeAdvisor business. Hmm. Sounds as if Mr. Diller is shopping for his next spinoff.

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What Is a Business Model?

Understanding business models, evaluating successful business models, how to create a business model.

  • Business Model FAQs

The Bottom Line

Learn to understand a company's profit-making plan

dilbert business model

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

dilbert business model

Investopedia / Laura Porter

The term business model refers to a company's plan for making a profit . It identifies the products or services the business plans to sell, its identified target market , and any anticipated expenses . Business models are important for both new and established businesses. They help new, developing companies attract investment, recruit talent, and motivate management and staff.

Established businesses should regularly update their business model or they'll fail to anticipate trends and challenges ahead. Business models also help investors evaluate companies that interest them and employees understand the future of a company they may aspire to join.

Key Takeaways

  • A business model is a company's core strategy for profitably doing business.
  • Models generally include information like products or services the business plans to sell, target markets, and any anticipated expenses.
  • There are dozens of types of business models including retailers, manufacturers, fee-for-service, or freemium providers.
  • The two levers of a business model are pricing and costs.
  • When evaluating a business model as an investor, consider whether the product being offered matches a true need in the market.

A business model is a high-level plan for profitably operating a business in a specific marketplace. A primary component of the business model is the value proposition . This is a description of the goods or services that a company offers and why they are desirable to customers or clients, ideally stated in a way that differentiates the product or service from its competitors.

A new enterprise's business model should also cover projected startup costs and financing sources, the target customer base for the business, marketing strategy , a review of the competition, and projections of revenues and expenses. The plan may also define opportunities in which the business can partner with other established companies. For example, the business model for an advertising business may identify benefits from an arrangement for referrals to and from a printing company.

Successful businesses have business models that allow them to fulfill client needs at a competitive price and a sustainable cost. Over time, many businesses revise their business models from time to time to reflect changing business environments and market demands .

When evaluating a company as a possible investment, the investor should find out exactly how it makes its money. This means looking through the company's business model. Admittedly, the business model may not tell you everything about a company's prospects. But the investor who understands the business model can make better sense of the financial data.

A common mistake many companies make when they create their business models is to underestimate the costs of funding the business until it becomes profitable. Counting costs to the introduction of a product is not enough. A company has to keep the business running until its revenues exceed its expenses.

One way analysts and investors evaluate the success of a business model is by looking at the company's gross profit . Gross profit is a company's total revenue minus the cost of goods sold (COGS). Comparing a company's gross profit to that of its main competitor or its industry sheds light on the efficiency and effectiveness of its business model. Gross profit alone can be misleading, however. Analysts also want to see cash flow or net income . That is gross profit minus operating expenses and is an indication of just how much real profit the business is generating.

The two primary levers of a company's business model are pricing and costs. A company can raise prices, and it can find inventory at reduced costs. Both actions increase gross profit. Many analysts consider gross profit to be more important in evaluating a business plan. A good gross profit suggests a sound business plan. If expenses are out of control, the management team could be at fault, and the problems are correctable. As this suggests, many analysts believe that companies that run on the best business models can run themselves.

When evaluating a company as a possible investment, find out exactly how it makes its money (not just what it sells but how it sells it). That's the company's business model.

Types of Business Models

There are as many types of business models as there are types of business. For instance, direct sales, franchising , advertising-based, and brick-and-mortar stores are all examples of traditional business models. There are hybrid models as well, such as businesses that combine internet retail with brick-and-mortar stores or with sporting organizations like the NBA .

Below are some common types of business models; note that the examples given may fall into multiple categories.

One of the more common business models most people interact with regularly is the retailer model. A retailer is the last entity along a supply chain. They often buy finished goods from manufacturers or distributors and interface directly with customers.

Example: Costco Wholesale

Manufacturer

A manufacturer is responsible for sourcing raw materials and producing finished products by leveraging internal labor, machinery, and equipment. A manufacturer may make custom goods or highly replicated, mass produced products. A manufacturer can also sell goods to distributors, retailers, or directly to customers.

Example: Ford Motor Company

Fee-for-Service

Instead of selling products, fee-for-service business models are centered around labor and providing services. A fee-for-service business model may charge by an hourly rate or a fixed cost for a specific agreement. Fee-for-service companies are often specialized, offering insight that may not be common knowledge or may require specific training.

Example: DLA Piper LLP

Subscription

Subscription-based business models strive to attract clients in the hopes of luring them into long-time, loyal patrons. This is done by offering a product that requires ongoing payment, usually in return for a fixed duration of benefit. Though largely offered by digital companies for access to software, subscription business models are also popular for physical goods such as monthly reoccurring agriculture/produce subscription box deliveries.

Example: Spotify

Freemium business models attract customers by introducing them to basic, limited-scope products. Then, with the client using their service, the company attempts to convert them to a more premium, advance product that requires payment. Although a customer may theoretically stay on freemium forever, a company tries to show the benefit of what becoming an upgraded member can hold.

Example: LinkedIn/LinkedIn Premium

Some companies can reside within multiple business model types at the same time for the same product. For example, Spotify (a subscription-based model) also offers a free version and a premium version.

If a company is concerned about the cost of attracting a single customer, it may attempt to bundle products to sell multiple goods to a single client. Bundling capitalizes on existing customers by attempting to sell them different products. This can be incentivized by offering pricing discounts for buying multiple products.

Example: AT&T

Marketplace

Marketplaces are somewhat straight-forward: in exchange for hosting a platform for business to be conducted, the marketplace receives compensation. Although transactions could occur without a marketplace, this business model attempts to make transacting easier, safer, and faster.

Example: eBay

Affiliate business models are based on marketing and the broad reach of a specific entity or person's platform. Companies pay an entity to promote a good, and that entity often receives compensation in exchange for their promotion. That compensation may be a fixed payment, a percentage of sales derived from their promotion, or both.

Example: social media influencers such as Lele Pons, Zach King, or Chiara Ferragni.

Razor Blade

Aptly named after the product that invented the model, this business model aims to sell a durable product below cost to then generate high-margin sales of a disposable component of that product. Also referred to as the "razor and blade model", razor blade companies may give away expensive blade handles with the premise that consumers need to continually buy razor blades in the long run.

Example: HP (printers and ink)

"Tying" is an illegal razor blade model strategy that requires the purchase of an unrelated good prior to being able to buy a different (and often required) good. For example, imagine Gillette released a line of lotion and required all customers to buy three bottles before they were allowed to purchase disposable razor blades.

Reverse Razor Blade

Instead of relying on high-margin companion products, a reverse razor blade business model tries to sell a high-margin product upfront. Then, to use the product, low or free companion products are provided. This model aims to promote that upfront sale, as further use of the product is not highly profitable.

Example: Apple (iPhones + applications)

The franchise business model leverages existing business plans to expand and reproduce a company at a different location. Often food, hardware, or fitness companies, franchisers work with incoming franchisees to finance the business, promote the new location, and oversee operations. In return, the franchisor receives a percentage of earnings from the franchisee.

Example: Domino's Pizza

Pay-As-You-Go

Instead of charging a fixed fee, some companies may implement a pay-as-you-go business model where the amount charged depends on how much of the product or service was used. The company may charge a fixed fee for offering the service in addition to an amount that changes each month based on what was consumed.

Example: Utility companies

A brokerage business model connects buyers and sellers without directly selling a good themselves. Brokerage companies often receive a percentage of the amount paid when a deal is finalized. Most common in real estate, brokers are also prominent in construction/development or freight.

Example: ReMax

There is no "one size fits all" when making a business model. Different professionals may suggest taking different steps when creating a business and planning your business model. Here are some broad steps one can take to create their plan:

  • Identify your audience. Most business model plans will start with either defining the problem or identifying your audience and target market . A strong business model will understand who you are trying to target so you can craft your product, messaging, and approach to connecting with that audience.
  • Define the problem. In addition to understanding your audience, you must know what problem you are trying to solve. A hardware company sells products for home repairs. A restaurant feeds the community. Without a problem or a need, your business may struggle to find its footing if there isn't a demand for your services or products.
  • Understand your offerings. With your audience and problem in mind, consider what you are able to offer. What products are you interested in selling, and how does your expertise match that product? In this stage of the business model, the product is tweaked to adapt to what the market needs and what you're able to provide.
  • Document your needs. With your product selected, consider the hurdles your company will face. This includes product-specific challenges as well as operational difficulties. Make sure to document each of these needs to assess whether you are ready to launch in the future.
  • Find key partners. Most businesses will leverage other partners in driving company success. For example, a wedding planner may forge relationships with venues, caterers, florists, and tailors to enhance their offering. For manufacturers, consider who will provide your materials and how critical your relationship with that provider will be.
  • Set monetization solutions. Until now, we haven't talked about how your company will make money. A business model isn't complete until it identifies how it will make money. This includes selecting the strategy or strategies above in determining your business model type. This might have been a type you had in mind but after reviewing your clients needs, a different type might now make more sense.
  • Test your model. When your full plan is in place, perform test surveys or soft launches. Ask how people would feel paying your prices for your services. Offer discounts to new customers in exchange for reviews and feedback. You can always adjust your business model, but you should always consider leveraging direct feedback from the market when doing so.

Instead of reinventing the wheel, consider what competing companies are doing and how you can position yourself in the market. You may be able to easily spot gaps in the business model of others.

Criticism of Business Models

Joan Magretta, the former editor of the Harvard Business Review, suggests there are two critical factors in sizing up business models. When business models don't work, she states, it's because the story doesn't make sense and/or the numbers just don't add up to profits. The airline industry is a good place to look to find a business model that stopped making sense. It includes companies that have suffered heavy losses and even bankruptcy .

For years, major carriers such as American Airlines, Delta, and Continental built their businesses around a hub-and-spoke structure , in which all flights were routed through a handful of major airports. By ensuring that most seats were filled most of the time, the business model produced big profits.

However, a competing business model arose that made the strength of the major carriers a burden. Carriers like Southwest and JetBlue shuttled planes between smaller airports at a lower cost. They avoided some of the operational inefficiencies of the hub-and-spoke model while forcing labor costs down. That allowed them to cut prices, increasing demand for short flights between cities.

As these newer competitors drew more customers away, the old carriers were left to support their large, extended networks with fewer passengers. The problem became even worse when traffic fell sharply following the September 11 terrorist attacks in 2001 . To fill seats, these airlines had to offer more discounts at even deeper levels. The hub-and-spoke business model no longer made sense.

Example of Business Models

Consider the vast portfolio of Microsoft. Over the past several decades, the company has expanded its product line across digital services, software, gaming, and more. Various business models, all within Microsoft, include but are not limited to:

  • Productivity and Business Processes: Microsoft offers subscriptions to Office products and LinkedIn. These subscriptions may be based off product usage (i.e. the amount of data being uploaded to SharePoint).
  • Intelligent Cloud: Microsoft offers server products and cloud services for a subscription. This also provide services and consulting.
  • More Personal Computing: Microsoft sells physically manufactured products such as Surface, PC components, and Xbox hardware. Residual Xbox sales include content, services, subscriptions, royalties, and advertising revenue.

A business model is a strategic plan of how a company will make money. The model describes the way a business will take its product, offer it to the market, and drive sales. A business model determines what products make sense for a company to sell, how it wants to promote its products, what type of people it should try to cater to, and what revenue streams it may expect.

What Is an Example of a Business Model?

Best Buy, Target, and Walmart are some of the largest examples of retail companies. These companies acquire goods from manufacturers or distributors to sell directly to the public. Retailers interface with their clients and sell goods, though retails may or may not make the actual goods they sell.

What Are the Main Types of Business Models?

Retailers and manufacturers are among the primary types of business models. Manufacturers product their own goods and may or may not sell them directly to the public. Meanwhile, retails buy goods to later resell to the public.

How Do I Build a Business Model?

There are many steps to building a business model, and there is no single consistent process among business experts. In general, a business model should identify your customers, understand the problem you are trying to solve, select a business model type to determine how your clients will buy your product, and determine the ways your company will make money. It is also important to periodically review your business model; once you've launched, feel free to evaluate your plan and adjust your target audience, product line, or pricing as needed.

A company isn't just an entity that sells goods. It's an ecosystem that must have a plan in plan on who to sell to, what to sell, what to charge, and what value it is creating. A business model describes what an organization does to systematically create long-term value for its customers. After building a business model, a company should have stronger direction on how it wants to operate and what its financial future appears to be.

Harvard Business Review. " Why Business Models Matter ."

Bureau of Transportation Statistics. " Airline Travel Since 9/11 ."

Microsoft. " Annual Report 2023 ."

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Künstliche Intelligenz in Unternehmen: Innovative Anwendungen in 50 erfolgreichen Firmen

Der Bestsellerautor und Geschäfts renommierter KI-Experte Bernard zeigt, wie sterben Technologie des maschinellen Lernens das von Unternehmen verändert. Das Buch bietet einen Überblick über einzelne Unternehmen, beschreibt das spezifische Problem und erklärt, wie KI die Lösung erleichtert. Jede Fallstudie bietet einen umfassenden Einblick, der einige technische Details wichtige Lernzusammenfassungen enthält. Marrs Buch ist eine aufschlussreiche und informative Untersuchung der transformativen Kraft der Technologie in der Wirtschaft des 21. Jahrhunderts.

dilbert business model

Bernard Marr

Bernard Marr is a world-renowned futurist, influencer and thought leader in the fields of business and technology, with a passion for using technology for the good of humanity. He is a best-selling author of over 20 books, writes a regular column for Forbes and advises and coaches many of the world’s best-known organisations. He has a combined following of 4 million people across his social media channels and newsletters and was ranked by LinkedIn as one of the top 5 business influencers in the world.

Bernard’s latest books are ‘Future Skills’, ‘The Future Internet’, ‘Business Trends in Practice’ and ‘ Generative AI in Practice ’.

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Bernard Marr ist ein weltbekannter Futurist, Influencer und Vordenker in den Bereichen Wirtschaft und Technologie mit einer Leidenschaft für den Einsatz von Technologie zum Wohle der Menschheit. Er ist Bestsellerautor von 20 Büchern, schreibt eine regelmäßige Kolumne für Forbes und berät und coacht viele der weltweit bekanntesten Organisationen. Er hat über 2 Millionen Social-Media-Follower, 1 Million Newsletter-Abonnenten und wurde von LinkedIn als einer der Top-5-Business-Influencer der Welt und von Xing als Top Mind 2021 ausgezeichnet.

Bernards neueste Bücher sind ‘Künstliche Intelligenz im Unternehmen: Innovative Anwendungen in 50 Erfolgreichen Unternehmen’

The 9 Most Successful Business Models Of Today

2 July 2021

Times are changing so fast, particularly in the world of business. How businesses interact with their customers, how companies innovate, and even the very business models that organisations are built on – all are undergoing rapid change.

dilbert business model

Yet, from what I’ve seen, many businesses are failing to keep up, and far too many are operating on outdated business models.

If you’re leading a company – whether it’s small or large, a brand-new start-up or an established business – you’ll need to understand the latest business models and assess how they might apply to your company. That’s why I’ve picked some of the most successful business models for 2019 and beyond. Let’s take a look.

The servitisation (subscription) business

Instead of selling a product or a service as a one-off, servitisation companies operate on a subscription or ongoing service model, building a more intimate understanding of their customers in the process. As an example, let’s compare content creators Netflix and Disney. Disney produces a film, releases it in cinemas, and the film is either a hit or it’s not. They won’t necessarily understand exactly how many people watched it and how much those viewers liked it. Netflix, on the other hand, has an intensely close customer relationship, understanding exactly how many users have streameda movie or series, whether they gave up part-way through and watched something else, whether they then went on to watch more content starring the same actor, etc. Another example is Dollar Shave Club (grooming subscription company) versus Gillette (razor manufacturer with limited direct customer relationship).  

The platform-based business

This model is closely linked to the sharing economy and subscription models (see above– in fact, platforms are particularly powerful when combined with a subscription model). Well-known examples of platform businesses include Facebook, GitHub, Uber and Airbnb. As you can probably guess from these examples, platforms provide a mechanism or network – this could be a physical network, not necessarily online – for parties to interact with each other. Platforms deliver value for users by facilitating direct connections and exchanges between people (the more valuable the network is to the user, the more successful it is). In return, the platform gets incredible insight into its user communities.  

The social, authentic business

The traditional, corporate business model,with its hierarchies, silos and endless formal meetings is changing. These days, customers want to see the people behind the brand; they want to really “connect” with a business. Remember how companies and, more specifically, the people who work for them were discouraged from voicing personal view points or discussing the company outside of work? That’s now an outdated way of operating. Today’s authentic businesses share their opinions and stand up for their values. Typically,the CEO is active on social media and employees are actively encouraged to be brand ambassadors. And crucially, the brand itself has a lively and engaging social media presence, with a strong brand message that really connects with the target audience. Some of today’s most authentic brands include Adidas, Apple and Lego.

The employee-centric business

The way we work is changing. People are more nomadic in their work, and the days of a “job for life” are well and truly gone. To be successful, companies still need great people, but the way they go about attracting those people is changing.The “gig economy” has played a huge role in this transformation, since it gives businesses the means to create a fantastic team in lots of different ways – not just the traditional, full-time, permanent employee route. As such, businesses are increasingly happy for people to come and go, and to work for more than one company at a time. In this changing environment, it’s vital companies become employee centric. This means offering people an attractive place to work, flexibility, space to grow, and the means to develop their career.Google is a prime example of such a business.

The partner-centric business

As well as becoming more employee centric, companies are also becoming more partner centric. They are almost like networked businesses, outsourcing work, tapping into on-demand services, partnering with providers, and in sourcing expertise where necessary. They create attractive networks of partnerships – and are a valuable partner to others.Just look at the average small or mid-sized business these days and you’ll likely see an example of a networked, partner-centric business. They might, for instance, outsource their social media strategy to one firm, partner with a web design company, bring in a brand consultant, enlist external training providers, and so on. In today’s rapidly changing business world, larger companies have a lot to learn from this flexible, scalable model.

The customer value-obsessed business

For me, this model applies to absolutely every business because it’s all about solving customers’ problems,anticipating their needs,making people’s lives easier and removing any friction or hassle. Amazon is an obvious example of this. Online personal styling subscription service Stitch Fix is another great example. With Stitch Fix, users detail their size and style preferences by filling out a questionnaire (they can also link to their Pinterest account). Then, using artificial intelligence, the system pre-selects clothes that will fit and suit the customer, and a (human) personal stylist chooses the best options from that pre-selected list. And voila, the perfect clothes for you arrive at your door every month. No more shopping in crowded shopping centres, queueing for changing rooms, or ordering items online only to find they don’t fit.

The constant-innovation business

The ability to innovate is crucial to business success. But, today, the pace of innovation isn’t just fast, it’s constant. Some of the most successful businesses in the world are constantly innovating and transforming, even if it means cannibalising their own products and services to create something new. Take Apple’s iPod, for example. By introducing smart phones that could hold your music, the company effectively killed off the need for a separate device. Sure, some people still love their iPod. But even die-hard iPod lovers won’t be surprised to learn that iPod sales have been in decline since 2008 – which, funnily enough, was the year after the iPhone was introduced. 

The data-driven business

Smart organisations recognise that data is one of their critical business assets.  Really  smart organisations encourage a data culture, where the importance of data is recognised at every level of the business, and decisions across the company are based on data, not assumptions. The data-driven business has measures in place to understand exactly what’s happening now, and uses that information to make better decisions, refine operations and even create new revenue streams. Companies who really value data are well placed to experiment and innovate at a faster pace, which ties in with the previous business model.

The tech-savvy business

We live in a time of break-neck technological innovation. AI,big data, blockchain, 3D printing,augmented reality and virtual reality are just some of the massive changes that are taking place right now.So it’s no surprise that many of the most successful companies on the planet are tech businesses. Apple, Alphabet (Google’s parent company), Microsoft, Amazon and Facebook are, at the time of writing, among the six most valuable companies in the world; the only non-tech company in the top six is Warren Buffet’s Berkshire Hathaway. Regardless of your sector and company size, it’s vital your organisation embraces technology. If you don’t, you risk being left behind.

Many of today’s most successful businesses have managed to combine a number, if not all, of these business models to catapult their companies to stellar success.Over the years, I’ve helped companies big and small reshape their businesses and create more successful business models.So,if you’d like help with your business model transformation, get in touch . 

Where to go from here

I hope you’ve enjoyed my list of successful business models. If you would like to know more, check out my related articles:

  • How to Build a Platform Strategy for Your Business
  • Why Every Company Needs A Plan-On-A-Page
  • How To Develop Your AI (Artificial Intelligence) Strategy – With Handy Template

Business Trends In Practice | Bernard Marr

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Bernard Marr is a world-renowned futurist, influencer and thought leader in the fields of business and technology, with a passion for using technology for the good of humanity.

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COMMENTS

  1. Dilbert principle

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  2. The Peter and Dilbert Principles applied to academe

    This study presents a formal model that explores aspects of the process of promotion, and its impact on firm behavior, within internal labor markets. 3 One of the tools available to those at the top of a firm's hierarchy for extracting maximum effort from the firm's employees is the use of promotions to higher ranks, such as middle-level manager...

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  7. The Dilbert Principle, Scott Adams

    The last five percent of The Dilbert Principle is Scott Adams' own philosophy for managers. He says, in the introduction to unveiling his company model OA5 (standing for "Out at Five O'Clock"), that: "In this chapter you will find a variety of untested suggestions from an author who has never successfully managed anything but his cats.

  8. Dilbert Does Behavioral Economics

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  11. 10 Dilbert strips that show a Product Manager's life

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  12. Dilbert: Business Series by Scott Adams

    Dilbert: Business Series 5 primary works • 6 total works Book 1 The Dilbert Principle: A Cubicle's-Eye View of Bosses, Meetings, Management Fads & Other Workplace Afflictions by Scott Adams 3.86 · 9,959 Ratings · 420 Reviews · published 1996 · 16 editions The creator of Dilbert, the fastest-growing comic … Want to Read Rate it: Book 2

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  14. Dilbert & Business Plans...and Sales

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  16. Dilbert Animated Cartoons

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