Do You Need A New Business Model to Survive?
By Kelly Lawrence
When market conditions change, it’s a good opportunity to revisit your strategy and the business model utilized to implement it. As the world fights Covid-19, we’ve adjusted how we live, work, and play. In late April, Forbes cautioned Chief Marketing Officers to pay close attention to changing consumer demand and the impact on purchases.[1]
B2B business leaders recognize that when consumer demand changes, it can significantly impact upstream supply chains and invalidate previously accepted assumptions. As one example, consider the impact of falling auto sales in Q1 2020.[2] IHS Markit expects global vehicle sales to decline 22% this year to 70.3 million.[3] According to the International Monetary Fund, the car industry accounts for 5.7% of economic output and 8% of goods exports.[4] Tier one parts suppliers through raw material suppliers are feeling the impact.
In some cases, the change in customer needs is so profound that it triggers a need to change our business models to survive. In the auto industry, we’ve seen automakers adjust production lines to produce ventilators.[5]
There is evidence companies in other industries are challenging their strategies to explore unfamiliar markets, expand product offerings and embrace new business models. Imaging manufacturer, EFI announced it converted factory space previously dedicated for ink production to produce hand sanitizer, which it is sending to companies in healthcare.[6] Spoonflower, a pioneer in print-on-demand fabric, announced a shift in production to fill a need for non-medical grade fabric masks.[7] Milliken & Company, pivoted its textile manufacturing to produce advanced medical PPE.[8] All have listened to customer needs and addressed them by changing their traditional offering. But what if your business is not in a position to offer supplies directly related to fighting the pandemic?
To understand the changing needs of customers, The AIM Institute suggests engaging in Virtual VOC and offers a free white paper at www.virtualvoc.com.[9] Advantages include safely connecting customers from around the world without travel time or costs. Another example of a changing business model, The AIM Institute is currently offering its New Product Blueprinting workshops virtually.
Why do business models matter? According to the Harvard Business Review, “when a new model changes the economics of an industry and is difficult to replicate, it can by itself create a strong competitive advantage.[10]” A good business model should describe how a company creates and captures value.
What value does your offer create for your customers? What is your competitive advantage?
At Lawrence Innovation, we’re dedicated to helping companies accelerate growth. Contact us to realize your potential.
About Kelly Lawrence
Kelly Lawrence is the Founder and CEO of Lawrence Innovation. We bring over two decades of expertise in converting customer and market insights to growth. We’ve delivered results for B2B innovators around the world including Berkshire Hathaway’s Lubrizol & Fortune Brands’ Moen. We know how to identify profitable problems to solve, develop and communicate unique value propositions, and implement profitable business models that generate results.
References:
[1] https://www.forbes.com/sites/martyswant/2020/04/22/cmos-take-note-length-of-isolation-affects-consumers-definition-of-essential-and-indulgent-purchases/#6ad181096016
[2] https://www.businessinsider.com/q1-car-sales-tumble-in-us-as-coronavirus-rocks-economy-2020-4
[3] https://www.cnbc.com/2020/04/21/global-auto-sales-expected-to-plummet-22percent-in-2020-due-to-coronavirus.html
[4] https://www.cnn.com/2020/01/20/business/global-auto-recession/index.html
[5] https://www.washingtonpost.com/business/2020/04/04/ventilators-coronavirus-ford-gm/
[6] https://www.facebook.com/EFIPrint/posts/10158426582737059:0
[7] https://www.spoonflower.com/en/coronavirus
[8] http://www.milliken.com/news-overview/press-releases/milliken-pivots-textile-manufacturing
[9] Institute for the Study of Business Markets Town Hall, April 28, 2020 https://isbm.com/events/marketing-in-uncertain-times-part-3-a-town-hall-expert-panel-discussion/?cat=past-events