Dr Roy Stanley on the Black Swan Event of Covid-19: Innovation and Business Models
In the first of a week-long series of articles, Bdaily chairman and entrepreneur Dr Roy Stanley looks at how the COVID-19 crisis presents an opportunity for firms to re-examine their business models.
“The coronavirus is causing us to question business models that were thought to be robust, fit for purpose and reliable. A business model is how firms capture and deliver value.
“The government is learning in trying to deal with the pandemic issues that some structures are just not working. Good businesses often develop innovative simple solutions to market issues, new distribution models, ownership models, sales models, etc.
“Establishing a business model for growth depends on the inherent skills within the business which is dependent upon the recruitment of people with management capability or some distinctive capability that the firm values.
“Why is an articulated business model important? Because it describes the direction that the business is headed, how it will get there, it is the core of the business’s strategy. In simple terms it describes “what business we are in”.
“A business model is like a load stone, it keeps the firm facing magnetic north even when there is a temptation to deviate. It focuses people on the way resources should be allocated and how their time is spent. If we are not adding value, then we are wasting time and resources adding cost.
“During my research into how Black Swan Events trigger rapid profitable growth in small firms I studied a number of successful scaleup businesses and the people that ran them.
“The most important aspects of these scaleup stories was a strong growth mindset, a self-belief in their own capabilities and a strong desire to innovate. They developed business models that had a strong emphasis on growing sales.
“Sales growth and profitability was considered to be a way of validating the business model and created a feeling of wellbeing in terms of ongoing success. The profitability derived from the sales also allowed for further growth which was self-funded from positive cash flow generated by profitable sales.
“My business experience indicates that the formation of a business model is often eclectic and a consequence of serendipity. Being in the right place at the right time. it evolves over time as circumstances change.
When examining its business model, firms should think about the following questions:
What business are we in?
What is the current business model?
Where does the value occur (sit) within the current business model?
What is the process of planning the business model?
How do we share the business model with our stakeholders?
Is everyone in the firm aligned with the business model?
Is it an inspirational model and does it excite people?“
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