Kayode Omosebi: Changes in the Market Place? This is a Good Time to Review Your Business Model

Business as usual is dead and it has been for quite a while. The rules of the game have changed. Change or die, and to do this you’re going to need some good direction.

The business world we operate in seems to be changing with every passing day; majorly due to series of events in our domestic economy. New dynamics are being added and new markets are opening up. Hence, you cannot afford to stick to the same model from which your business grew. Gone are the days when a growing business with any hopes of long-term survival could etch a strategy in stone and follow it into oblivion. Reviewing and adjusting your model as captured is the only way your business can adapt and keep the pace with the now dynamic marketplace. Savvy customers and a fragmented marketplace require businesses to move on, adapt or die. In a short while, your business will also face disruptive innovations that enter the marketplace and challenge your business model.

My Pastor once told a story about a small restaurant that had huge sales levels and was extremely profitable. Then, market dynamics changed and the owner of the restaurant had to go back to his drawing book to see how to stay profitable, it was then he realised that the cash cow in his restaurant was actually the bread he was making and not the food. Now, he runs a successful bakery as against his “fantastic” restaurant business. “Just as a fish doesn’t know it is wet, so companies often can’t see or feel the very opportunities where they are swimming” Pam Henderson

According to Jeff Boss, in today’s business environment, the gap between relevance and obsolescence has the potential to grow wider every day. If companies are to stay relevant then they must adapt to change, but they must do so before change beckons the call.

Your business model is a journey. Your company is a living and growing thing, and so is your business model. A perfect business model is an articulation of the entrepreneurial business plan for managing the risks and challenges involved in building or expanding the business. As such, it should acknowledge that growth and success are moving targets by anticipating as many future events or circumstances that will affect the business objectives. To do so you first have to answer the following questions:

• Who are you and what are you trying to do?
• What does your business stand for?
• What problem does your business solve?
• How are you going to get it done?
• How do you reach your customers?
• Who else is doing this business venture?
• How do you obtain our initial customers?
• Which are the easiest to reach?
• What are the target customers’ decision-making processes?
• What relationships do they currently have in place that will need to be terminated for them to do business with you?
• Can you truly modify the way business is being done in your industry or is this more of a fad or a trend?
• What is the end-value of your product to the customer?
• Is there a significant threat to the value of your product going forward?
• Are these targeted customer relationships profitable?
• How do you make money?
• What do you need to accomplish your goals?
• When are you profitable?

Now you have the Business Model Canvas. The Business Model Canvas is the new language for describing, visualising and assessing business models. It is a necessity in developing a perfect and flexible business model.

So now it’s all written down. What’s next? You have to better understand the business model you already have. “Before dreaming about the future or marking plans, you need to articulate what you already have going for you – as entrepreneurs do.” Reid Hoffman

• What connections can you draw from each of your answers? Draw out how your business looks to you based on the information you’ve just written down; write down key statements that tie important pieces of information together.

• What appears unnecessary? As the marketplace changes, it’s inevitable that you’ll find parts of your business that just are not serving you. Write what you can remove from your model to simplify your business strategy.

• What’s missing? Inevitably, there are holes in your business model. Is there an underserved customer or an opportunity to make a connection between a product and an activity? Write down all the opportunities you see in your model.

Lastly, you need to figure out if what you have is viable.

• Ideally, how many of each could you produce in a week?

• Ideally, what would your product spread be?

• What is your ideal turnover based on what you can produce and how you would like to sell it? Multiply each item in your product spread by the number of sales you’d like to achieve

Now when you take into consideration the costs to run your business, is this a number you can live with? Does it feel scary, abundant or ridiculously low?

You can then draw conclusions from this number

• If the number is very high – How can you make those numbers a reality? Can you reach more customers? Can you attract more appropriate clients? Can you better use the resources you have available to you? Can you move your product spread closer to what you’d like and further from what it is now?

• If the number is very low – How can you adjust your product spread to create better revenue? Can you raise your prices? Can you create more products by outsourcing? Could you develop a more profit-friendly product or service to boost your bottom line?

• If the number is scary and un-exciting – Can you incorporate one of those missed opportunities into your model? Can you create clearer value propositions & offers? Can you seek strategic partnerships to sweeten the deal?

What makes the business thrive is how the answers for the business model canvas are fiddled over time to ready customers for a bigger, more profitable offer. We all come out on top when our business model is built to deliver higher levels of value over time and in highly effective and profitable ways.

“What if” questions help us break free of constraints imposed by current models. They should provoke us and challenge our thinking. They should disturb us as intriguing, difficult-to-execute propositions.” Alexander Osterwalder

Photo Credit: Dreamstime