By Eoin O'Hara
Here’s a brief exploration of how this process might work, and some of the things you will need to consider.
Why? What’s the problem?
What is the reason that you want to change your business model?
- Are you not making enough money?
- Is it less efficient at making money than you’d like?
- Are your customers not happy with the service you’re providing?
- Have you spotted a niche in the market that is crying out to be filled?
- Are you bored of the status quo and need a new challenge to excite you?
These are all worthy catalysts for a shift in business strategy, but consider carefully what particular motivation you have, as this will play a chief role in reshaping your business model.
Specifically, having a clear incentive in mind will make it easier to eliminate those things which deliver a poor return on investment (of time or money), whilst protecting the activities which perform well.
From this solid starting point you can put together a plan-of-action which will refashion your business model, whilst maintaining and utilising any strengths, industry position, or beneficial reputation that you have developed.
For example: A well known business model revamp tale is that of Starbucks, which began life in 1971.
They began selling espresso machines and coffee beans for brewing in the home. Struggling to remain lucrative, the company realised that people were willing to pay well over the odds for ready-made coffee, and thus the Starbucks business model that we know today began in earnest, and proved a phenomenal success.
It was a slow and organic process for the coffee giant, and demonstrates well how shifts in revenue models can happen by degrees, and don’t necessarily need to be earth-shatteringly significant.
Get feedback first
The biggest (and easiest) mistake to make when reimagining your business model is to assume you know what your customers / clients want better than they do.
For example: Coca-Cola didn't do sufficient market research when they unilaterally introduced ‘New Coke’ in 1985.
It was a move which was so poorly received that it nearly sank the brand. It is remembered as one of the greatest marketing gaffes of all time, and remains a cautionary tale for would-be customer mind readers.
Although carrying out market research of this kind can be a complex and time-consuming activity, you neglect it at your peril. Approach customers with an open mind that is willing to accept opinions and make amendments where necessary.
Remember that one of the easiest ways to grow a business is to sell more to the customers that you already have, so place them at the centre of your plans as a motivated and familiar customer base.
Specifically the following can be explored at this point:
- What value do they place on the service you provide?
- Would this value increase or decrease given the changes you are proposing?
- What additional industry specialisms could you provide to them, and what value would they place on these?
Keeping the findings of your market research in mind, assess the potential positive and negative impacts that your shift in business model could have for your current customers. Weigh these against a number of other factors including time constraints, finances, potential customer acquisitions and you will soon build a picture of how cunning (or otherwise) your proposed changes are.
Embrace negative feedback as a valuable insight into your industry, and a reminder of how important it is to never assume to know the mind of your customer.
What to change?
A change in revenue model can range in scale from the miniature to the massive. Oftentimes it means just a minor addition to your existing activity, but can also take the form of a complete business overhaul.
A few hypothetical examples include:
- An online advertising agency which diversifies into print advertising
- A retailer that adds industry specific services to its offering e.g. an IT retailer that adds specialist repair services
- An SaaS startup that moves towards providing white label versions of its software.
The level of change that you plan to implement will greatly affect how and when you put your amended model into action. Minor modification can be introduced very rapidly, whilst more comprehensive changes can take many weeks or months to fully implement.
The most important thing to remember, is that if you have existing customers, you also have an obligation (moral or legal) to keep them informed of changes which might impact their relationship with you. You do not want to find yourself in a situation where once loyal customers are blindsided by a drastic shift in you business that they are unhappy with or concerned about.
Keeping customers up-to-date with changes is also a great way to market your new services, and tap into a familiar and motivated customer base.