By Robin Higgons
I recently came across a fascinating article in the Harvard Business Review on ‘Reinventing Your Business Model’ by Johnson, Christensen, and Kagermann (2008). Among the many good points they raised, one stood out for me in the context of the challenges that we see in many companies – ‘Few companies understand their existing business model well enough—the premise behind its development, its natural interdependencies, and its strengths and limitations. So they don’t know when they can leverage their core business and when success requires a new business model.’
It reminds me of a saying by G. K. Chesterton – “It’s not that they can’t see the solution. They can’t see the problem.” For most companies, the challenge is not reinventing the business model, as was being explored by the authors of the article, but evolving the business model as market requirements change. Businesses often remain wedded to their business model for far longer than they should. As the inevitable issues of market share erosion, pricing pressures, and declining profit margins pile in, good operational strategies are adopted to ameliorate the situation, but rarely are the underlying causes evaluated.
I have never seen a company write down a clear statement of its business model, nor have I seen discussions of business model development / evolution on the agenda of board meetings. Yet this can be critical to the success of the business. I strongly recommend that every company writes down its business model on one side of A4, following the golden rules of brevity, clarity, and empathy (for the customer).
There are a number of tools to help do this, with the “Business Model Canvas” being well respected. The exercise will often be a challenge, but will bring a clarity of thinking about the strengths and weakness of the company’s business model that will dramatically improve its strategic thinking and its success.
Robin works for a wide range of companies helping them develop new markets and solve issues arising as the result of changing market conditions. If you would like to discuss his thoughts above or other such issues in your business, please contact him on email@example.com or 01223 422404.