When is the right time for a new business model?
Jonas Reuter
The digital transformation has long since arrived in the SME sector and is presenting companies with major challenges. Established business models are coming under pressure and it is becoming increasingly difficult to compete in the market. Many SMEs are missing out on change because the business model is falling by the wayside. Managing directors often don't have the business model on their radar and instead focus exclusively on digitalizing processes and the value chain. However, the development of new business models is an important success factor for the future viability of a company. For this reason, we will address the following question: When is the right time to tackle the business model?
The external pressure of the market.
How do you recognize that it is time for a new business model? An important indicator of this is the change in the market. If the demand for products or services decreases or the purchasing behavior of customers changes, this may already be a sign that the existing one is no longer up to date. Technological developments or new competitors can also lead to the need for a new business model. However, if the performance of existing models is already declining, it is often too late.
When the investment becomes necessary, capital is already scarce!
New business models usually go hand in hand with an investment and capital is required to implement them successfully. If you only start developing new ones when the performance of existing business models is already declining, the pressure is great and resources are often already tight. It is therefore advisable to deal with this at an early stage, while the company is still doing well and is financially stable. Plan investments at this stage and make provisions. As soon as you act under pressure, there is often a lack of time and the necessary capital to quickly implement a new business model. Acting under pressure also restricts creativity and reduces the chances of success.
Business models need time.
Developing new business models takes time. It can take several years for an innovation to grow into something viable. It may also be necessary to test the model in market trials and develop it further. A successful market launch is based on customer acceptance. However, acceptance also takes time. It is then necessary to transfer the new business model into the processes and day-to-day business. It therefore takes a long time for the "new business model" to become the company's core business. It is therefore worth starting early and mobilizing internal supporters.
New innovations faster and faster.
The speed at which new innovations and technical achievements are published is constantly increasing, and forecasts predict that this will become even faster in the future. However, many business models in the SME sector have been successfully in use for decades and are taken for granted. But especially in times of digitalization and technological change, it is only a matter of time before this changes. When the competition comes up with new business models and technologies, it may no longer be enough to continuously develop your own. Radical renewal is required in order to remain competitive in the future.
Those who start earlier have a big market advantage!
The competition never sleeps. After all, whoever is first on the market has a major advantage in being perceived as an innovator, and having a head start in development should not be underestimated. This is not just a question of competition, but of survival. If a disruptive business model comes onto the market, it could potentially replace entire industries. There is therefore a high risk of missing out on change and not being able to catch up with years of competitive developments. It is therefore very important to start thinking about new concepts for your company at an early stage.
Not every new business model is disruptive.
Not every new business model is disruptive and changes entire industries. Nevertheless, it is important to keep an eye on long-term developments, even with small innovations and improvements, and to constantly question whether your own model is still up to date. A gradual transformation keeps certain risks low and puts the company on the right track. However, as time goes on and technological development progresses, the risk of being disruptively replaced increases. In the worst-case scenario, all of the company's other business models may also be replaced if they are based on one technology or niche.
Diversification brings security.
The more diversified a company is, the more resilient it is as a whole. There are often efforts to open up new business areas. This can open up new sales markets and make the company less dependent on individual products or services. Diversification can also strengthen resilience in times of crisis, as losses in one area can be offset by profits in another. However, diversification should be approached in a strategic and planned manner to avoid wasting resources and capital and to ensure that all business areas contribute to the overall success. Consequently, it is important to look at opportunities outside of the core business when developing new business models.
When is the right time?
There is no right or wrong time for a new business model. Rather, working on it is an ongoing task for the management. It is always better and more convenient to act on the market rather than react. A new business model should therefore not only be developed out of necessity, but also out of the conviction that it offers potential and opportunities. This is the only way to muster the necessary motivation and energy to implement it successfully.
So the sooner you start, the better. It is therefore best to ask yourself every day whether you should not already "Morgen start tackling the topic of your business model". Of course, there are always a lot of items on the management's to-do list that need to be addressed urgently. There will always be items with a higher priority. But what is more important than the foundation of your company? So if you ask yourself this question every day, you will quickly reach the point where there is no more important emergency item on your to-do list. This is the right time.
Ask yourself the question every day whether you should not already Morgen start tackling the issue of your business model. The day on which there is no more important emergency item on your to-do list is the right time.
Jonas Reuter
You can do it!
And don't worry, the topic is not only important, it's also fun. It is a great opportunity to position yourself personally as strong and innovative in front of your employees and to drive change. In addition to the business model, this process will also drive many other changes in your company. Perhaps one of the many issues on your to-do list will be resolved in passing? - You can do it, whether alone or with help!
About us:
MORGEN is a specialized management consultancy that focuses on the development of new business models for medium-sized companies. In particular, it supports owner-managed companies in their future-proof transformation. Knowledge transfer is at the heart of its consulting activities, which is why the MORGEN Blog regularly publishes articles on key topics such as digitalization, transformation, customer centricity and sustainability.