Does Your Business Model Sucks?

Does Your Business Model Sucks?

Statistics have proved that 90 % of small businesses fail within the first year of start-up. One secret to maintaining a struggling business is to recognize when it needs a fundamental change. The biggest problem is most businesses does not even understand their existing business model well enough- the basis behind its development, its natural interdependencies and its core strengths and drawbacks. In this article, I will address a few of the issues to identify whether does your business model sucks.


The success story of Apple’s business model is well known. In 2003, Apple introduced the IPod with ITunes Store. What’s less well known is that Apple was not the first company to create digital music players. Apple’s success was something beyond than taking a good technology and wrapping it in a business model. Their true innovation was to make downloading digital music easy and convenient.

What are the circumstances that need business model innovation?

1. The liability to fulfill the needs of a large group of potential customers who are shut out of a market because existing solutions are too costly or sophisticated for them.

Under this, businesses could democratize products in an emerging market. Business model innovation should not only focus just based on developing a new product to reach a new market segment. To create a new market segment is often harder and requires a lot of research to actually understand the market requirement.

 

Your business model must be oriented to solving your customer’s problem and frustrations. Your customers are more concern on how you are solving their problem, their fear and their burning desire. It’s not about your qualification, your credentials or how long your company has been established.

 

2. The opportunity to exploit on a brand new technology by focusing your business model around that.
For instance, people have been looking for a technology that allows them to do more than just text message and phone calls as a function of mobile phones. There has been increasing demand to connect to the internet from anywhere without sitting on your old desktop or laptop. Apple saw this demand and introduced a new technology called Apple Iphone to address the needs of this large group of potential customers. This has boosted the mobile marketing technology with the introduction of smart phones into the mobile phones marketplace.

 

3. The opportunity to solve a job-to-be-done where one does not correlate yet.

Businesses should be focused on customer’s segments by redefining existing products to increase industry profitability. For instance let’s talk about FedEx. It is a package delivery company which changes its core competencies to be able to thrive in the industry by concentrating on solving the job-to-be-done. In package delivery industry, the issue that most customers are concern is not the rates of delivery but instead on the need to receive delivery packages at far faster rate and more reliably than any service could do. FedEx understand this needs of their potential customers and integrated its resources and key processes in more efficient way. This business model has resulted FedEx a competitive advantage than its competitors.

 

4. The necessity to respond to competition.

New businesses and companies are entering the marketplace by introducing new products and services to get the market share. Business must be able to accommodate the changes and respond to it. In airline industry, 10 years ago only middle class people are able to travel by airplanes but since the low cost airline industry emerges over time, it started to threaten the existing airlines companies to fundamentally shift their business model and respond to the changes in the market.

 

Businesses should only change their business model if they are confident that the opportunity is large enough to bring the changes to the company in terms of industry profitability and increase market share. There’s really no usefulness incorporating a new business model unless it is a game-changing to the industry. These circumstances will help you appraise whether innovation in business model will help you to get the desired outcome for your business.

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