I have finally nailed it. I have been working on my business model for years and I finally have the model just right. Now I can freeze my business in its current state and sit back and watch the money roll in.
I am, of course, living in a fantasy world. Unfortunately, there are many examples of businesses that behave just like this. A business is a living, breathing, changing beast. The day you think you have the model ‘just right’ is probably the day you start the downhill trend towards oblivion. What worked brilliantly today is often the path to ruin tomorrow. This isn’t to say your model is wrong – but the world changes.
Have a look at a couple of examples. If I had 74 percent market share of any reasonable-sized market, I would think my organisation was doing very well. Think back to Kodak. The company was founded by George Eastman in 1888. In 1976, it had an 89 percent market share of photographic film sales. Even in 1999, with increasing competition, it still maintained a 74 percent market share of film sales – a market that saw 800 million rolls of film sold in the US alone. Its revenue was still in the vicinity of $14 billion.
The world started to change for Kodak with the introduction of a few clunky and cumbersome digital cameras. The models were quickly refined and, by 2006, the overall film market had shrunk to 200 million rolls of film. A reduction of 75 percent in just seven years.
By 2012, Kodak filed for Chapter 11 bankruptcy protection. Kodak kept doing what it had always done. Its business model wasn’t broken. It didn’t suddenly change the way it did things. What the company forgot to do was look at what was happening outside the organisation. Look at the market. Look at the needs of its clients. It needed to innovate and continually fine-tune its business model.
In a Harvard Business School case study, it was hypothesised that this seemingly unassailable competitive position of the late ’90s created a complacent and unimaginative corporate culture. I don’t need to read a Harvard case study to tell me the broad facts of what occurred. Kodak had a great business model and was a very profitable business. With a simple “If it ain’t broke, don’t fix it” attitude, it continued on its business. Unfortunately, the world moved on.
Internet killed the video star
Two other industry examples demonstrate the same market changes. Think of the video rental business – in particular as faster internet speeds become available. Blockbuster was the largest video rental company in the US. In 2004, it was at the top of its game and was the envied model of all other video rental companies. In the US, it had more than 9,000 stores and employed more than 60,000 people. That is more than Microsoft employs in the US.
Blockbuster didn’t see the changing face of video rentals and by 2010 was down to 450 stores and was declared bankrupt.
The last example is the tobacco industry. At the end of WWII, 72 percent of the Australian population smoked. Opening up a tobacconist at the time gave you access to almost three-quarters of the population as potential clients. By 1980, only 34 percent of adults smoked and now it is down to 17 percent. If you had a tobacconist business that relied just on selling smokes, you would find a fast-dwindling sales graph as your potential clients, excuse the pun, quickly died off.
Everyone in IT is now talking about the cloud. Resellers are trying to change their business model to take advantage of the cloud. Their vendors are telling them to transform their business model to sell cloud-based solutions.
Forget the cloud
I say forget the cloud. Don’t focus on the cloud too heavily because you then become like Kodak and focus on selling rolls of film. Instead, focus on selling what your clients want.
The best IT resellers know what their clients want before the clients know themselves. Think of Microsoft pushing the concept of a GUI OS called Windows back in 1985. Who thought there was something better than a command prompt? Think of Friedhelm Hillebrand and Bernard Ghillebaert proposing SMS texting to the Global System for Mobile Communications in 1993. I am not sure even they realised that one day over 200,000 messages would be sent per second only 20 years later. Think of Apple with the unbelievable success of iTunes and the ease of purchasing music introduced in 2003. The real success of the iPod and iPhone is actually based on the easy process of purchasing music that iTunes introduced.
You don’t need to invent something that will need 17 patents and change the world of technology, but there is nothing stopping you from planning for the future needs of your clients. Today that might be the cloud. Tomorrow it might be a focus on how to create a safe and flexible BYOD policy for your clients. Or IaaS may be the focus. A business model is not something you set and forget. Transformation is ongoing.
Mathew Dickerson has started a total of six small businesses