Season 4, Episode 7: DO YOU NEED TO CHANGE YOUR BUSINESS MODEL?
Play • 17 min

We take a look at companies with successful business models and companies who successfully pivoted their business models. We share questions you can ask yourself as a leader if you think you need to make a pivot too? 

COMPANIES WITH SUCCESSFUL BUSINESS MODELS 

When they were founded, they didn’t have rivals. 

  • Apple: Valuation in Trillions is 2.2 Founded in 1975. Function and design can co exist.
  • Amazon: Valuation in Trillions is 1.7 Founded in 1994. Reliable delivery of any item you want.
  • Facebook: Valuation in Trillions is .9 Founded in 2004. Worldwide connectivity.

WHAT DID THEY HAVE IN COMMON?

  • They had recurring revenue streams (subscriptions) or recurring traffic
  • They didn’t make a one time sale of a physical product. They build a long-term client relationship.
  • They tailored solutions to create value for the customer and more profit for themselves.

Kathie's STORY: While working at WSJ, and then consulting with multiple companies, we concentrated on LTV (Life Time Value) for our customers. Segmenting out those customers who would bring added value, allow for increased products and services, allowed companies to positively contribute to the bottom line and grow their businesses competitively.

NETFLIX SUCCESSFULLY PIVOTED ITS BUSINESS MODEL

Mailing DVD’s to pivoting to an online streaming service

  • What did it do for the customer?
    • Made it more convenient
    • Enabled impulse purchases
    • Enabled access to recent best sellers
    • Gave customers access to a large back catalog
    • VOD serves customers better than brick and mortar stores.  

Why Streaming Video Beat Rival Models:

  • Monthly subscription fees = recurring revenue
  • Lower cost to operate
  • Cost to Customer (2007):
    • §  Streaming: $0.25
    • §  DVD by mail: $1.25
    • §  Video Stores: $2.24

QUESTIONS YOU CAN ASK YOURSELF ABOUT YOUR BUSINESS MODEL  

  • Is what got you here, going to get you there?
  • Are you agile?
  • Does your team have the authority to experiment with new configurations?
  • Are you investing in capabilities for the future?
  • Don’t design a completely new competitive position. Can you support entrepreneurial activity in house?
  • Rather than fix the current operation, can you undergo a one time change-management process to execute a different strategy.
  • How do the elements impact each other? How are you testing the hypothesis, experimenting, learning, and taking action? The faster a firm cycles through the process, the more effective it will be in the marketplace.

LOOK AT YOUR COMPETITION

  1. Where are the hot trends?
  2. Where can you create value? Look at their business model.
  3. How attractive are you in the industry? How are you positioned?
  4. How are you realizing and implementing? 
  5. What is the outcome?

And then you “re-loop” the continuous improvement on the strategy.

QUESTION: CEOs of mature companies should ask themselves, “When did our annual strategy process last generate a truly breakthrough idea?” like ride-sharing or mobile banking or even “streaming as we discussed above”?

  • These higher-level strategic programs must be owned and championed by the CEO.

TO RECAP: HOW CAN YOU ASSESS A PIVOT IN YOUR BUSINESS MODEL?

  • Have clear direction and allow time for experimentation/innovation in house
  • Dedicate time to a change in strategy
  • Ear to the ground. What is working for the competition?
  • Be willing to be agile.
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