Business Model : Part 2 - Pivoting Business

Part 1 of my article on Business Model focused on what it is and how to develop one using the Business Model Canvas (BMC).  The BMC is a template to assist you in your thinking process as you will consider each of the nine building blocks that will form your business model.

Since pivoting business to survive continues to be a hot topic, part 2 of my article is on how to pivot a business.  Here again, it is best to use the BMC’s nine building blocks as the guide as you pivot.

The first step in pivoting a business is to identify the root cause of the adverse impact to your business.  Whilst it is easy to say that customers have changed their spending and purchasing behaviour, it is more complex to identify the root of the problem faced by the business.  There is a need for a systematic process to go through layers of causes to identify the root causes for the changes that your customers are exhibiting. Even better, and to avoid making assumptions, reach out to your customers and ask the question “how can we serve you better?” or “we are looking to improve”.

Potentially, you may find that the root cause could be because of the customers of your customers if you are in the B2B business.  And therefore, it is crucial to have a clear understanding of what is affecting the business of your B2B customers.

Or changes in your customers’ spending behaviour can be due to competition or alternative products or change in lifestyle.  You may even find that changes by your key suppliers are affecting your value proposition, or how you deliver your value proposition to your customers.  You will need to have deep understanding of the factors that have influenced or caused the changes which are affecting your business.

Once you have established the root cause, ideate on the solution.  In this era of Industrial Revolution 4.0, where customers have more power than businesses, speed to act is key.  As the saying goes, it is the fish that swims fastest that will survive.  Therefore, you will need to think of a solution that can be implemented swiftly.

To pivot your business as quickly as possible and at the least cost possible, focus your solution on what you do best, use existing resources of your business, grow customer base from within your customer segment, and most importantly, fulfilling the needs of your existing customers.

Consider external factors too, namely your competition.  Try to find white space.  If you cannot find solution within your capabilities, try to find new key partners for collaboration.

In deciding which solution is best for your business, use the nine building blocks of your business model as your guide.  Evaluate and debate which building block of your business model that will need tweaking (or changing as a last resort).  It is of utmost important that your solution should have your customers at the centre of all that you do and, that you minimise changes to other blocks of your business model.

Because the blocks of your business model can be an intricate maze, you will find that you will be performing various iteration to your solution until you find on that is optimal.

To avoid getting yourself into a loop and lost in the maze, it is best to approach pivoting the business model systematically.  Group the blocks in groups of:-

• blocks affecting your customers directly;

• blocks that affect your business’ operations; and finally

• your business economy blocks - revenue stream and cost structure.

For purposes of narration, let us work on the basis that based on your root cause analysis, the solution is to change the channel of delivery of your value proposition to your customers.

For this narrative’s solution, the business model blocks that may potentially affect your customers directly are your customer segment, customer relationship and even your value proposition itself.  Consider the following as you work on simulating workability of your solution:-

1. How will your existing customers be affected?  Can you grow your customer base from the existing customer segment?  Can your new channel deliver your value proposition to your existing customer segment or do you need to identify new customer segment?  Is there a need, and how easy is it, for you to influence your customer segment to accept the change?

2. How will your new channel of delivery affect your customer relationship?

3. Is your value proposition suitable for the new channel of delivery?  Do you need to tweak your value proposition?  How will your existing customers be affected if you tweak your value proposition?  Is there a need for you to influence the change in behaviour of your customer segment and how easy can this be done?

In iterating this group of blocks, remember to continuously consider external factor play, namely competition and the impact on your solution.

The next step is to consider how your solution will affect the business operation blocks - your key partners, key activities, and your resources.  Depending on your final iteration above, you will need to consider if changes are needed for any of this operation blocks and how can that be done with minimum efforts since you need to shift to your new business model as quickly as possible.

And in the final group, the economy blocks, you will consider the effect of your solution on your cost structure and if you will need to reconsider your revenue stream.  If there is a need to reconsider revenue stream, consider the impact to your existing customers and how easy will it be for to influence them to such change.

You may find that you will need to perform numerous iteration to your solution before you can finalise on one that has your customer at the centre of the solution, and one that you can implement swiftly.

To avoid assuming customers will connect immediately with the solution, carry out market research or test the solutions prior to finalising and eventually full launch.

Before you move to implement your pivoted business model, take some time to review your business plan and business strategy.  Most likely, you will need to redo your business plan and re-strategise based on your pivoted business model.  It might sound a bit of a paradox that you need to implement your pivoted business model swiftly, but also the need to take the time to re-plan and re-strategise.  But, it is crucial that you take the time to do these to know how you want to, and what you need to do to achieve your pivoted business model to achieve effective and successful implementation.

Wishing you every success in your business!