Any operating business today can be put in three buckets; those that have had tough times, those that are having tough times and those that are going to have tough times.
Generally, tough times relate to poor revenue and profits due to multiple issues that you control and do not directly control. Yet you need to figure out a way to overcome them.
“The environment is very tough and it’s impossible to deliver results in the given environment,” is a common complaint. Blaming external parties has become a fashion and an excuse.
In the middle of a tough time it is very natural to start freaking out based on ‘what could be’ as opposed to ‘what actually is’. It is imperative to do the right analysis around what is going on and to only deal with facts, regardless of what is going on in your head.
Those people who are responsible for performance will always amplify the issues or interpret them to their advantage and link unrelated developments to find refuge for their poor focus, skills and application.
Rethink your business
Tough times are crossroads in your business and they provide an opportunity to make hard decisions about what is working and what is not.
This is the perfect time to stop and really reflect on your business fundamentals and make the changes that deep down you know you need to make.
This can be such a cliché but it is true. Look at checking the business fundamentals and ask the question as to what fundamentals you believed in are not working anymore despite your persistent attempts?
Markets contract for any product that’s old, with customers moving towards alternatives, and competitors matching your value proposition. Your supply chain strategy may no longer offer the targeted cost savings to be competitive in price to the customer - your competitors may have figured out more cost effective supplies with external developments globally or locally favoring their business model. Your physical distribution model may no longer make sense with the customer buying habits changing. These issues are not new in the business world but in the fast paced world you operate in, business models have a short life.
Not all issues can be tackled through operational strategy and execution effectiveness. Complete overhaul is necessary to stay relevant to the customer and to build new competitive advantages. Not to discuss theory but for context setting, a successful business model represents a better way than existing alternatives to achieve improved business results.
Creating a new business model is, then, a lot like writing a new story. At some level, all new stories are variations of old ones. Similarly, all new business models are variations on the generic value chain underlying all businesses.
Broadly speaking, this chain has two parts. Part one includes all the activities associated with making something: designing it, purchasing raw materials, manufacturing, and so on.
Part two includes all the activities associated with selling something: finding and reaching customers, transacting a sale, distributing the product or delivering the service.
A new business model’s plot may turn on designing a new product for an unmet need.
Or it may turn on a process innovation, a better way of making or selling or distributing an already proven product or service
Changing the business model
Be it in business or anything else humans do, when what you are doing isn’t working having tried all options available with all your heart and energy, it makes sense to try something new and very different.
This sounds logical, yet I have watched so many businesses slowly go bust simply because they kept doing the same thing, right to the end. Many talk about the Kodak example but leave that aside, in Sri Lanka we have many examples from apparel brands to spice grinding.
One time business giants and household names we thought will never ‘die’ due to strong value and bond, have collapsed offering good management learning. Never allow your business to look old. Continue to invest in your business. It is time to give the outside a coat of paint, upgrade the showrooms, come up with a new identity and corporate image, train and motivate your staff, invest in new technology and really anything else that will make your business look more impressive and run more impressively.
Changing your business model can be a tough decision to make, but it’s crucial for some businesses that have failed continually. Or it can even be a successful business model delivering good results but yet a change in the business model can take you further, faster.