The Covid-19 pandemic has forced many business models to change and some were made completely obsolete – willingly or unwillingly the change was the only way to survive during the lockdown and immediately thereafter.
Now that the environment is becoming somewhat normal, it’s important that you make a strategic decision on the business model to take it forward.
A business model is a framework to systematically unlock medium to long-term value for an organisation while offering the right value proposition to customers and capturing value through business strategies to achieve objectives – it’s how you connect all your key stakeholders and run your business for profit.
It’s a holistic framework to understand, design, and test your business assumptions in the marketplace.
A business model is a more effective way to compete because it is hard for competitors to copy a business model but relatively easy to copy a product or service. The importance of the business model cannot be underestimated especially in the new normal world.
Today, any business can be put into 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 survive. The environment is very tough and it’s impossible to deliver results in the given environment. 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’.
Rethink your business
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. The 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.
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. Check 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 and 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 favouring their business model.
Your physical distribution model may no longer make sense with 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.
A successful business model represents a better way than existing alternatives to achieve improved business results. Creating a new business model is like writing a new story. At some level, all new stories are variations of old ones. Similarly, all new business models are variations of 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 and manufacturing.
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 proved product or service.
Don’t be biased towards the existing 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 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 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 continuously. 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.
In the new normal world, unless you get the business model alignment, doing anything else well might not get you anywhere.