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Changing Business Models

Changing Business Models

Lets talk about the pain of changing business models. There are a lot of articles about companies that are going through painful changes. Volkswagen has announced a multi-billion dollar plan to go all electric. We know the story about Quibi, the short-form streaming service that did not build the following it wanted and had to shut down. These articles show that changing a business model is extremely painful.

I’ll give you an analogy for this. Imagine you get up one morning, and you talk to your wife or husband, and you don’t get the response you’re used to getting. They’re ignoring you. You think it’s an anomaly. You go to the office, you come back, and they’re not there. They didn’t tell you they were going somewhere. It’s not that they’re divorcing you—they just changed. In a manner of speaking, in your marriage, your primary market is your spouse. You do things to make that market happy, but what happens if the market changes?

A change in the business model is like that. As a business, you do things for your customers, but they don’t respond to you. And you don’t know what is happening. You can give your customers many different products, services and prices. But there are so many options out there that you just don’t have enough money, time and resources to figure it all out. You are stuck—just like when your spouse doesn’t respond, you don’t know what to do, and there is a level of paralysis. Every company that’s ever failed will tell you they had a plan, but they still failed.

What distinguishes a successful plan from an unsuccessful plan?

We all have personal business models. Whether or not you know it and are cultivating it, you have a skill to offer. Maybe you’re a tax accountant. Let’s say you work for KPMG, which is a good firm, and they agree to pay you a fixed, monthly amount for the work you do. The question is, are you happy with that business model? Are you happy with the service you’re offering? Are you happy with your remuneration? Do you really understand your market—your manager, your company and your clients? Do you understand what the best pricing is? Can you change your business model?

You need to think carefully about your business model in life. It’s not just that Volkswagen needs to change its business model, or the European Space Administration. (There is a great piece from Financial Times about how they’re losing business to space exploration under Elon Musk.) Do you have funding to change as a person? Do you have a plan to try new things? The difficulty of implementing anything is complex.

This is an excerpt from Monday Morning 8 a.m. newsletter, issue #4.

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