When Was the Last Time You Reviewed Your Business Model?

When Was the Last Time You Reviewed Your Business Model?-1

Last year threw a glaring spotlight on different business models. What works, what doesn't, what can withstand enormous and unforeseen change. While COVID-19 might have been a reason to reshape, reconsider and re-evaluate your business model for the short, medium and long-term, it is a practice that all good CEOs should be in the habit of doing to keep their company or organisation competitive.

For most CEOs and their businesses, keeping up with the daily running means that they tend to look at what's happening today and how they can do it more efficiently moving forward. Perhaps they will also think about what's the logical next step. It leaves very little room for really looking at a company, the competition, customer demand and the broader context in which it all exists to find the gaps and consider where you could disrupt the market. It takes an even more unusual business leader to consider cannibalising their existing business model in favour of a new one if they find themselves no longer or soon to be no longer relevant.

The evolution of the business model

Every business has a business model, whether they know it or not, and at the core of that model is a value proposition. It comprises several different elements, ranging from the revenue model to distribution channels, customer relationships, core capabilities to partner networks, and the cost structure.

How organisations do business has changed over the last decade and will continue to do so. The advent of digitisation and technology has escalated a particular change, and the pandemic has strengthened our reliance on technology as an intrinsic part of most companies. This has made way for gaps in the market that those with eagle eyes can swoop in and capitalise on whilst taking an outsider's position. As yourself, if you bought your business today, what would you change and why?

The core question for any organisation, be it a not-for-profit or a venture capital business, is, 'How do we make money?' This is what businesses need to ask themselves to anticipate or prevent surprises from industry disruptors or even beat them to the punch.

How do you make money?

Ask any CEO if they know how their business makes money, and the answer will be a resounding and scoffing 'Of course'. When speaking to a member of our team, however, we find that in many cases, the answer to this question is so complicated that it begs the question: 'Do you really?'

The point of this question is not to be derogatory; it's to encourage self-reflection and analysis. It isn't to say that you don't understand your business, but that the space in which it operates may have changed in ways that you have not had time to take stock of. It may be that there's an opportunity to be had by exploiting a margin somewhere, and if you don't jump on it, someone else will. 

The need to step outside your organisation and look at the negative space is something that both established businesses and start-ups can consider when asking the fundamental question: 'How do we/are we going to make money?'

Recognising the opportunities for improvement

"People don't know what they want until you show it to them. That's why I never rely on market research. Our task is to read things that are not yet on the page." - Steve Jobs

Steve Jobs famously disliked market research, believing it would only lead to the next increment, not the next game-changing innovation. He was a marketing expert who knew marketing and innovation drive a business, although he never held the title of Chief Marketing Officer (CMO).

He hypothesised that market research only shows improvements on things that customers already have, not the things they never knew they wanted. Jobs believed that you needed to offer customers the latter, and that was why the iPhone was so revolutionary. In a market where Blackberry was king, they stripped out the iconic keypad and created an experience unlike anything in the market and unlike anything anyone was asking for.

Another significant example of industry disruption and a company that took the bold move to cannibalise its existing model by foreseeing a sweet spot in the development of reliable internet and changing consumer habits was Netflix. Initially a DVD rental delivery service, it launched into a market that was still heavily dominated by Blockbuster. In essence, a logistics-based business model transformed, almost overnight, into the streaming platform we know today.

The past 12 months have given many businesses a reason to reflect on their business model and its relevance in the current market. Now that we are looking at a space where we can think beyond Covid-19, that sense of self-reflection is once again prevalent. To what extent have consumer behaviours changed irreversibly? To what extent will the way we live and work return to the 'old' normal? The important thing is to look at the spaces in between and not merely think about the next step because if you aren't, the odds are your competitors are.

gigCMO will provide that valuable outside perspective to help inform your strategic decisions. Please speak with us today to learn more about how a Fractional CMO can provide you with the marketing leadership you need. 

Click here to read the Top Ten Business Models for CEOs and download the free Business Model infographic.

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