LEO HOPF

Author

www.teamhopf.com

Mr. Hopf works with senior executive teams and Boards to bring clarity and alignment to their most pressing strategic issues.  He is the author of “Rethink, Reinvent, Reposition:  12 Strategies to Renew Your Business and Boost Your Bottom Line” which was named the book of the month for July, 2010 by the Institute for Management Studies.
 
He lectures on strategy and decision making to graduate students in Stanford University’sManagement Science and Engineering department.  He also teaches at the University of Minnesota’s Carlson School of Business where he has been named a Fellow of Executive Education. 

While your business may have been running successfully for years, progress in technology may have changed the needs of your market in ways that may leave you scrambling to keep up. With so much change in the marketplace, some business models are simply going extinct. But, how do you recognize when your business model has become a dinosaur?  There are many well-known examples of big-name businesses that have turned their businesses around as a result of reforming or reinventing their business models including Facebook, You Tube, Apple, Google and PayPal, but success did not come easily. Constructing a business model is a key element in long term strategic business planning. Early 20th century business models used the “bait and hook” concept where customers were enticed with a cheap teaser product which relied on more expensive components to fully operate the product; for example, razors and blades. Many of today’s new business models are heavily dependent on technology and social media and a lot of trial and error. PayPal started out in cryptography but made its fortune after a dramatic change in direction to become an online payment system. Apple had great products but didn’t become successful until it made downloading of digital music a cheap and simple process. As noted in a 2008 article from Harvard Business School Publishing, “It took a good technology and wrapped it in a great business model.” Change is always difficult to accept especially when an organization has already achieved success; it takes bold innovation to get people out of their comfort zones to look at new ideas. The Boston Consulting Group determined that, “Two or more elements of a business model need to be changed to deliver value in a new way.” Most experts agree that value is the most important part of a business model. The other key elements are a profit formula that incorporates revenue, costs, margins and resource velocity, together with key resources and key processes. Whether you are looking at a process or a product, you need to determine your market’s needs and decide how you can satisfy those needs. You may not have to give up on your existing core model. A new model may be created in isolation but it may also complement and reinforce your core business. To turn this trend into a strategic advantage, consider the following. Recognize when your business model is outdated. Rethink your business model regularly. Innovate new potential business models. Move quickly to refresh or end your current business model. Lastly, use digital strategies to test innovative business models.