MANAGEMENT ACTION
THE coronavirus pandemic has definitely forced companies to change ho… they create and deliver value to their customers.
TakeL for exampleL Philippine fast- food giant Jollibee Foods Corp. The Nikkei Asian Revie… reported that the company recently announced “it …ill spend P7 billion ($ 138 million) to build discreet ‘ cloud kitchens’ and a stronger delivery service as part of a global restructuring plan” to offset the impact of the pandemic. These kitchens …ould be in discreet, low-rent sites and not include dine-in facilities.
In ChinaL Econsultancy. com reported, “beer brands Budweiser and Carlsberg, cognac brand Rémy Martin and drinks brand Pernod Ricard joined forces … ith e- commerce site JD. com and Chinese music label Taihe Music Group to create an online clubbing experience, streamed directly to people’s living rooms and complete … ith liquor that they could buy from the stream and have delivered to their door.”
In London, fitness chain Frame quickly changed the …ay it operated …hen it …as forced to close its doors because of the lockdo… n. They launched Frame Online, an online fitness hub with a £10.99-a-month subscription fee that allo…ed people …ho …ere stuck at home to get moving and keep fit with virtual classes, according to The Telegraph.
These are just a fe… examples of ho… companies innovated their business model as a response to the pandemic. but stillL many other companies are struggling to do just thatL let alone understand ho… they truly deliver value to their customers.
A business model describes the rationale of ho… an organization createsL delivers and captures valueL and value is …hat a customer is …illing to pay for. business model innovationL thenL describes the process in which an organization modifies and reconstructs its business model due to external factorsL such as today’s physical distancing measuresL community lockdo… ns and …ork- from- home schemes. Often, this innovation reflects a fundamental shift in ho… a company delivers value to its customers.
Such innovation can be classified into four types. First is customer experience innovationL or innovation in ho… a company engages and transacts … ith a customer. Moving from the traditional face- to- face engagement to online engagement using chatbots and messaging platforms is one example of such an innovation. The …idespread adoption of e-commerce no…adays is another. These are further exemplified by the aforementioned Frame and the alcoholic drink brands.
Second is product or service offering innovationL or innovation in the firm’s set of distinguishing featuresL functionality and complimentary offerings. For exampleL companies are no… using 3D printing to make products available when needed, such as those 3D-printed heart valves for patients in Italy and the innovative service of supply-chain firm UPS that 3D-prints metal, plastic and glass products on locationL instead of waiting for these to be shipped and imported.
Third is business configuration innovationL or innovation in the organization’s processes, structure and connections …ith others to create value. An example is ho… many retail companies are no… partnering … ith logistics providers to offer a seamless order- to- delivery process to consumers. The ‘ cloud kitchen’ of Jollibee is an example of innovation in process and structure.
Fourth and last is profit model innovationL or innovation in ho… a company makes money. Frame’s shift to a subscription model is one example. In factL the lockdo…ns all over the …orld have spurred the use of the subscription profit model, from coffee to toiletriesL as consumers stay and …ork from home.
These four cover all the components of the business model canvasL a tool to map the future business model of a company based on innovations in one or more components. Ho… …e innovate a company’s business model entails a methodical ninestep process.
The first step is to identify the customer segments or personas your company is serving. Nowadays, consumer behavior have evolved and ne… personas emerged that need to be served differently. I have discussed this extensively in a separate article.
Second is to identify your company’s value proposition for each customer segment. These are tangible results a customer gets from using your products or services.
Third is to identify the channels to serve your customers segments. No…adaysL the emerging predominant channel is onlineL coupled …ith the physical delivery of a product.
Fourth is to identify customer relationships for each segmentL be it through the use of messaging platforms, chatbots, or live chats and calls.
Fifth is to identify the revenue streams resulting from the first four analyses. Examples in the online world are subscription, transactional and try-before-youbuy revenues.
Sixth is to identify key resources to createL deliver and capture the value from steps 1 to 5. These can be key employees in marketing and technologyL resources in technology managementL and logistics.
Seventh is to identify the key activities that …ill create and deliver value to customersL including marketingL technology development and customer services.
Eighth is to identify key partners that …ill create and deliver value to customersL such as logistics and technology partners.
And ninth is to identify the resulting cost structure from the identification of key resources, activities and partners, be it the ne… costs of technology or manpo…er.
The resulting analysis is a ne… business model. But notice that the main driver is your customer segments and value propositionsL …hich …ill drive the innovation across all the other components.
To learn more about our Virtual Master Class on business Model InnovationL you may reach me at my email below. The author is the chief executive officer of Hungry Workhorse Consulting La digital and culture transformation consulting country representativeof the Institute of Change and Transformation Asia and f el lo… at the US-based Institute for Digital Transformation.He teaches strategic management intheMbAprogram of De La Salle University. The author can be reached at rey.lugtu‘hungry…orkhorse.com.