Dealing with lower revenue or changing customer needs? Develop a New Business Model
11 September 2014 Leave a comment
In my last post, I’ve written about the essence of Business Development, this post is about Business Model Innovation. Many companies nowadays are struggling to sell their products and services. So they start asking “Should I invest in more sales staff?” or “Should I invest in sales with this industry background?”. I don’t think that would be effective, instead they should look at their current business model and if out of time, start innovating there, developing a new one.
In the video below, author and entrepreneur Alexander Osterwalder explains the challenge in defining and discussing business models. He also describes his journey from academia to application in building a shared, visual language for articulating and testing business models.
So what are your main challenges nowadays?
The 10 main challenges companies deal with, are (not necessarily in order of severity):
- Lower revenue
- Changing customer needs
- New concept or startup
- Empowering your team
- Alignment after a merger
- Growing their market
- Fierce competition
- Reacting to market trends
- Clarity on future direction
- Create a common language
In this post I would like to focus on the first four challenges, the remaining six challenges will appear in the next post.
Challenge #1 – Lower Revenue
You are facing a tough market. On one side there’s fierce competition from almost everywhere, on the other side customers and consumers are still reluctant or at least cautious to spend. What’s your answer to that problem? Hiring more sales to pump up the revenues? This will not help if your business model is out of time.
Challenge #2 – Changing Customer Needs
Customers’ needs are changing really fast today. But even in this climate of constant change, price remains a consideration. But it is now rarely the most important factor when customers choose one supplier over another. You therefore need to better understand what it is that customer’s are really looking for. Here too, you have to analyze your current business model and innovate.
Challenge #3 – New Concept or Startup
The status of your startup is very unstable; your main challenges include sluggish demand, funding and competition. Creating a customer community is extra challenging since you are a new name in the area of suppliers. In fact, you need to be improving your business model constantly until you find the right one that brings you financial rewards.
Challenge #4 – Empowering Your Team
You have to give your team the right tools and the right skills for the future. This is more a requirement than a challenge, but tight budgets may jeopardize investment in this area. Having a good team is key to the growth of your organization, provided they dispose of a flexible and empowering workplace.
What Is a Business Model?
The business model is a key aspect of your company crucial for your success on the market. It describes how you create, deliver and capture value and it reveals the core processes that hold your business enterprise together. A clear understanding of your business model can lead to competitive advantage over your competitors, by delivering higher value to your customers, increasing your revenue streams, and improving the underlying processes that occur under your company`s surface. My favorite tool for developing business models is the business model canvas, developed by Alex Osterwalder.
Make Business Model Innovation Your #1 Priority
The business model topic is very popular today because you can see growth in new and innovative models, which are essentially new ways of making money. A business model describes how your business creates, delivers and captures value in economic, social, cultural or other contexts. The process of business model construction is part of your business strategy. If you belong to an established company you have to find new and innovative business models to compete against growing competition. If you are an entrepreneur you want to find new and innovative business models to carve out your space in the marketplace.
Here’s my takeaway
Coming across challenges in your day to day business, don’t just add resources to solve the problem. Chances are your business model is outdated and you need to look at it, improve it or develop a new one. If you are an entrepreneur it’s very important to develop business models since you are in a constant search of their best business model.
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