According to Business Insider, more than 3,800 retail stores will close in 2018. Toys R Us is gone, and well-known retailers such as Walgreen’s, Best Buy and Gap are all closing hundreds of stores. Retailers are selling products that are similar or identical to those offered by Amazon and other competitors, but they’re struggling to compete and meet the omni-channel demands of consumers.
Tesla, a trailblazer in the development and production of batteries for electric cars, is now struggling to compete. Well-established auto brands are starting to offer comparable vehicles that are much less expensive.
Of course, it’s not just major brands that are being affected by a rapidly changing business environment. About five years ago, companies promising to build mobile-only websites were popping up all over the place. Then responsive design became a thing. Mobile-only websites were deemed largely unnecessary, and those companies had to either adapt or die.
For decades, a business could carve out a niche in a particular industry and be successful. However, technology is driving unprecedented change. It’s changing how customers consume services. It’s changing the demands placed on businesses. The customer calls the shots, and businesses that fail to recognize who the real boss is and change how they do business will inevitably be replaced by a competitor.
As a result, organizations are being forced to rethink their business models. A business model includes everything you do to design and manufacture a product or develop a service, as well as everything you do to market, sell and deliver that product or service.A successful business model is based on a specific target audience’s needs and what they value, as well as extensive research and testing. The overarching goal, after all, is to make informed decisions that create value for the customer.
Organizations sometimes confuse a business model with strategy and tactics.All are important and related, but failure to distinguish them can lead to poor decisions. The strategy is the plan for implementing the business model based on market conditions or a competitor’s offerings. Tactics are the day-to-day decisions an organization can make based on its business model. In other words, the business model determines which options are available.
There are three critical characteristics of a business model.First, it has to be profitable. A business that isn’t making money has a broken business model. Second, a business model must be scalable. If you expect your company to increase market share and profitability, it has to be built for growth. Third, it has to be repeatable. Being able to standardize and replicate processes will help an organization grow and become more resilient – and adapt if necessary.
As I mentioned previously, the overarching goal is to create value for the customer. To create value, you must never lose sight of the customer’s problems and preferences.Ask for their feedback. Remain flexible enough to tweak your model based on that feedback. Remember, the customer will ultimately determine the success or failure of your business. Listen to them.
Success isn’t always achieved by developing the best product. Success is often driven by the best business model. When you put as much effort into designing the model as you do the product, you’re more likely to grow market share and profits and continue to meet the needs of your customers.