• Riikka Tanner

Business models: It’s time to move from defense to offense



This year has been somewhat a struggle for majority of companies and many have been testing the limits of their business models that were digitized last spring with brute force rather than delicate finesse.

All this digital transformation talk about business disruption became first-hand experience for many and the disruption which in less turbulent times might have taken years became reality within weeks instead.

Very few, if any strategic plans will survive the pandemic without any changes. From the initial respond phase companies have quite fast moved on to recovery phase and updated their plans accordingly. The third phase of the post-pandemic response strategy is still awaiting but very soon, all eyes will be focusing on what's next.

We are on a what you could call a "new normal curve". Since the outbreak of the crisis, our first instinct as company owners and executives was to go on defense. Beginning with immediate actions to keep core business operational and people safe, within weeks business was already moving on to recovery and focusing their efforts into cost and budget cuts and increased effort on operational efficiency. The talk about what's next started early yet majority of companies still find themselves in the recovery phase.

If not today, tomorrow it will be time to move from defense to offense and start looking at what's next - specifically regarding your changed business model.



Business models under scrutiny

As we are now entering peak season for enterprise budgeting, there is a point in a recent HBR Article “What Really Prevents Companies from Thriving in a Recession” which I wish to highlight; We have a tendency to stick to our preferences when it comes to budgeting, and in general we are very reluctant to make any changes to our budgets after they have been finalized.

This is also where many promising business opportunities go to die before they can ever take off since from core business perspective the risk ratios and ROI calculations for the new business don’t look convincing enough. It’s called playing safe. Take the last year’s numbers and add 2%. The problem is that this year that might actually be a bad call.

The bottom-line question is, how do we know which one of the behavioral changes we have seen, will be more pervasive than others? Are the changes in our business model temporary or permanent? And how will we allocate or deallocate our resources next year?

When situation becomes more or less normalized, will people flock back to their lives as usual or will there be changes into their habits and behavior for good? These new trends and shifts in behavior such as WFH should be assessed based on their likely duration, whether the trend existed before the pandemic and is now being accelerated or if it has only now emerged which might imply that it will be only temporary in nature.

Based on the assessment of shifts in behavior you can start assessing your current business model and how it needs to be reconfigured.

Most probably some of the choices that were made in the spring will now have to be scrutinized. Were some temporary fixes made that are no longer needed? Are there some actions that were made in a hurry (bubble-gum fixes) and will now need to be strengthened and made more permanent such as e-commerce platforms or other digital business opportunities?

And finally, where do we see continued risk, where do we see new growth opportunities and how can we start building a business case around those new opportunities? It is a challenging situation but also a significant opportunity at the same time.

I for one, am welcoming the challenge.

Riikka

Melkki Strategy & Business Development Advisory is focused on strategic renewal and commercially viable business model innovation with high expertise in operational model design. For further information, please contact Riikka Tanner via LinkedIn or email riikka.tanner(at)melkki.fi.

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