Business Model Strategy During Covid-19
In January 2020, the world’s economy was humming, and most businesses were operating as normal — following their strategies and budgets. Products were being launched, investments being made, and leaders were tracking to their monthly targets. Only China and a few neighbouring countries had been affected by the pandemic at that point.
DISRUPTED GLOBAL ECONOMY
Now, we find ourselves in a disrupted global economy. The path we were on in January now seems like a distant memory. For many businesses, their strategies and budgets are irrelevant as they face this very different world.
As Covid-19 made its way around the globe, many businesses realised right away that their business models were being challenged, and they swiftly pivoted. Many others were paralysed with uncertainty, and they waited to make changes.
If your business hasn’t done so, it’s not too late to assess how well your products and services fit into this covid-19 world.
Even if you are confident that your organisation has moved through this difficult time, we propose that now is an excellent time to review your company’s business model strategy to uncover ways to improve your offering and your organisation.
WHY BUSINESS MODEL STRATEGY?
The Strategy Group has been focusing on business model strategy because we believe it provides a framework that encourages flexibility. It encourages both quick analysis as well as lengthy, deep analysis. The tools can be tweaked to cater to every business’s unique situation.
At a micro level, it starts with your customer and then transitions to help your business assess if its value proposition is aligned to its target customer. From there, your company can assess the individual elements of its business model that are needed to deliver the value proposition. At a macro level, business model strategy can help companies assess their pipeline of products and services and can help companies understand their offerings at a portfolio level.
To help our clients and the Australian business community, The Strategy Group has presented a series of webinars focused on business model strategy.
The first webinar was on Customer Value Proposition Design and the second was about Finding Fresh Opportunities During Covid-19 and Beyond.
The goal of these was to inspire action and start to encourage companies to assess how they might change their businesses to succeed now, during Covid-19, and in the future.
Business model strategy provides some easy to use tools that companies and organisations will find valuable. In this article, we are focusing on improving product market fit through our Customer Value Proposition Design Tool. This is arguably the most important aspect of business model strategy.
The process starts with your customer and then facilitates a series of activities that lead to aligning your offerings to your customers – increasing its value in the eyes of your customer. To do this we use the Value Proposition Design Tool
HOW TO USE THE VALUE PROPOSITION DESIGN TOOL?
On the right side of the tool, the focus is on the customer. Identify the needs of your customer – what they want to achieve. Look to understand your customer’s desired positive experiences they would like to attain and identify the desired negative experiences that they would like to overcome or remove.
In addition, using the right side, assess your customer’s emotional journey throughout the process. Get an idea of the journey that they go through and identify those key “moments that matter”. A simplified journey map can be used to understand the ups and downs of the customer’s emotional journey. During this process, identify and label those emotions that are experienced.
Once the organisaion side is finished, review the left side of the tool – the product and service side. Identify the positives that your offering is meant to provide to the customer and assess the negative experiences that it’s meant to reduce. Assess the emotional journey from the product perspective to understand what emotions are felt while using this product or service?
This tool is meant to assist companies in building products and services that speak directly to customer. It will allow someone to quickly assess their product market fit or if desired, it can provide a framework for a more robust piece of work within a company’s business model strategy.
WHERE TO START WITH BUSINESS MODEL STRATEGY?
- Empathise with your customers: In order to design a product, service or experience for your customer, it is imperative that a company understands its customer’s life and can empathise with their desires, frustration, needs and wants.
Some companies will feel close to their customers and will not need to conduct additional research to get to know them. Other companies will need to conduct research such as interviews or surveys to better understand their customer. If you decide that you want to speak to your customers, frame your questions to align with the boxes of the right side of the tool.
We strongly encourage you to assume that you understand your customers far less than you might think. It’s best to assume that more research is needed rather than making incorrect assumptions. As you learn and compile customer information, fill in the right side of the canvas using this information. This should be done separately for each target customer segment.
- Assess current product market fit: On the left side of the canvas, fill out the boxes using your current products and services. This should be done for each separate product, service and experience. Speak to those close to the offering but don’t get too bogged down in the details. The goal is that we want this to be factual and reflect what the product and service is actually providing.
After you have filled out both sides of the tool, compare the customer side (right side) to the product side (left side). You want to be comparing what a product offers to what the intended target customer segment wants. Identify if there are gaps in your offering. Where is the product or service not adequately addressing the customer’s needs?
- Change your product, services and experiences: Your goal is to find the perfect fit between your offering and your target customer. If you are no longer optimising value in the eyes of the customer, it makes sense to explore ways to alter the product, service or experience to better match your customer.
For each gap, come up with some ideas to improve the offering and hold an ideation session to discover ways to add more value. Prioritise these ideas and plan some tests to validate your ideas.
- Testing before scaling: Prior to changing your offering, look for ways to test the changes with your customers. For some companies, it may work best to talk through the concept over with a few customers to verify that the changes will create a better market fit.
Other firms may require high-fidelity prototype testing prior to feeling confident that the changes will add sufficient value to justify the change. The main objective is to get the ideas in front of your customers and gain confidence that you are on the right path with these changes.
This article is meant to provide a simplified outline of the foundation of business model strategy with a focus on customer value proposition. It’s common that changes to the value proposition will result in changes to other parts of the business model. This then brings us to the business model canvas.
We have previously written in detail about the business model canvas, and we will write more about it in the future, sharing examples of how companies have changed their business models as part of their covid-19 pivot.
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