When a crisis like a coronavirus pandemic affects an organization, its executives need to assess the immediate and long-term impact on their business setup and ideas. The framework we developed over a decade helps executives identify business model risks and opportunities that create crises.
To start, you'll look at four main dimensions of your business model: users, value propositions, performance value, and capabilities. Second, it will analyze the links between these dimensions. Third, you define the true goals of your organization during and after the crisis. (You may want to think of different goals during different periods of crisis, such as rapid crisis recovery versus a long, locked-down period.)
First, you need to assess what the crisis means to consumer demand. Will aggregate demand rise or fall? How will spending patterns change (for example, spending more on broadcast and less in movie theaters)? Do you need to consider new delivery channels (for example, switching from brick and mortar to the Internet)? Are there any new consumer groups to consider (such as government or home office customers)? Finally, does the virus cause security concerns (for example if you are selling face-to-face services)?
You also need to think about how a crisis will affect your assessment. For example, let's take a look at our higher education industry. Consumer demand has not changed due to the coronavirus crisis - students still want an education. If the campus is closed for long periods of time, colleges and universities need to rethink how they create value as an online institution that is different from its competitors. (The crisis will accelerate the widespread acceptance and blended learning of MOOCs.)
We use the value proposition to describe an organization's sales and marketing channels. The current crisis has closed shared value proposition channels such as consumer meetings, trade fairs, and industry gatherings, and restricted personal interactions and travel. Need to find new ways to prove value? Some companies are using the crisis as a rationale for the rapid adoption of video conferencing software, sales, and Internet marketing materials.
Finally, enterprise capabilities are the fuel that drives the engine, which allows your organization to create value for users. The crisis may be affecting your capabilities - and you need to prioritize capabilities that are different from normal. Facility management may take some time, but IT support for devices such as video conferencing may take longer. The supply chain and production capacity will be more resourceful than usual in many organizations due to the breakdown of international supply chains. Moving to home offices, travel restrictions, and illness can affect normal performance and employee productivity.
How can crisis projects change the business model?
After assessing your position on the four levels of your business model, you can think about how to spread the set of potential changes with others. What customer segments value your offer, and will it change due to the crisis? Customers who normally want to dine at a restaurant may be willing to switch to takeaway purchases, for example. Or, food delivery companies may find their home office employees a new class of customers. Likewise, users can switch from one valuable display channel to another - for example, from on-site meetings to online meetings, from corner store to web store, and from personal advice to YouTube videos. Likewise, due to lack of capacity (such as production in Asia), local productive capacity may be activated to support value propositions. Instead of convincing new customers, organizations may shift their skills from performance to value proposition.
In short, the crisis not only challenges the four dimensions of the business model, but it also creates opportunities to modify each dimension and how it relates to each other. Before making any important changes to your business model, you should think about how the crisis will affect your current levels of performance. You need a plan to take advantage of the opportunities these analyzes reveal and deal with the damage. Contact us.