The 10 main challenges companies deal with, are (not necessarily in order of severity):

  1. Lower revenue
  2. Changing customer needs
  3. New concept or startup
  4. Empowering your team
  5. Alignment after a merger
  6. Growing their market
  7. Fierce competition
  8. Reacting to market trends
  9. Clarity on future direction
  10. Create a common language

In my previous post I covered the first four challenges, now I continue with number 5 to number 10.

Challenge #5 – Alignment After a Merger
Research by Deloitte indicated three main reasons why companies fail to achieve M&A synergies:

  • Planning – since companies focus on short-term synergies rather than taking a holistic view
  • Preparation – because companies overlook the overall business and operational compatibility
  • Execution – while companies underestimate the complexity to execute a successful integration

Sufficient reasons to work towards a common business model.

Challenge #6 – Growing Your Market
Both B2C consumers and B2B customers drive market trends, which in turn largely influence the consumption of goods and services. To grow your B2B market, you need to look at what customers are buying and how those products or services meet their needs. If you are in the B2C market, you also need to look at demographics. Adjust your business model to grow your market as best as possible, either in B2B or B2C.

Challenge #7 – Fierce Competition
Companies that focus on price competition instead of investing in innovation, added value and adjusting their business models will inevitably face steadily falling prices for substitutable products or services. This means profit margins will continuously shrink, the industry will consolidate and many companies will fold. Without a proper business model, it will be difficult to beat the competition.

Challenge #8 – Reacting to Market Trends
Global market trends with the greatest influence today include:

  • Globalization – global branding, local relevancy
  • Digitalization – transformation from physical and offline to virtual and online
  • Mobility – new ways of connecting with customers, employees and other stakeholders
  • Data – inundating businesses with external unstructured data and
  • Analytics – from Big Data to meaningful insights to make business decisions

All these trends require innovative business models to stay ahead of the crowd.

Challenge #9 – Clarity on Future Direction
When a business has clarity and focus on their future direction, the resources within that business are used in their most effective manner and the human resources are totally engaged on the same identified goals and targets. There is a minimum of waste and an increase in productivity over similar companies that do not have clarity and focus. To achieve the right clarity and focus, you need to develop a business model.

Challenge #10 – Creating a Common Language
Understanding your current business (model), everyone in the organization is heading in the same direction, together and faster. Your business model provides a common language to all stakeholders related to the company.

Here’s my takeaway
In this post and the previous one I have summarized the 10 main reasons why organizations need to analyze and update their business model. I have also mentioned the Business Model Canvas (BMC) developed by Alex Osterwalder. With the BMC, you have a tool to develop, enhance, simulate and innovate your business model.

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