RSM Revisione e Organizzazione Contabile
Languages

Languages

New Normal Business Model #3 – Key activities and key resources, are they equally important factors?

If you remember, in episode #2, I focused on the magic of jazz and of the extraordinary quality of jazz player vis a vis improvisation, a rare and very important quality in a company.

The motto could currently be: “It takes courage to go against the status quo!”. Be strong enough to reset everything and redesign new scenarios, new challenges, new solutions.

It takes courage and a little bit of boldness to try and question and work on one’s own business model and define a new value proposition.

Many companies are shifting their focus towards a new Low Touch Economy, i.e. an economy based on safety, health and distancing. Several organizations have somehow changed their business model because of Covid-19.

Companies are creating opportunities in a virtual working environment, not obstacles. The way we work remotely is supported by a set of digital tools accurately utilised and continuously evolving from communication to cooperation to create impact.

Companies make temporary changes to business, called “incremental switches” to fight current health and economic crisis.

For example, the fashion sector, packing companies, alcoholic producers are providing masks, garments or disinfectants. Such new product lines are frequently provided with minimum costs or margins.

Once health emergency is over, many will eliminate such products from their portfolio.

In other sectors, instead, companies are fighting for survival. They need to find completely new products and/or services as well as new customers.

Demand has dropped in some sectors and it equals zero. Companies now need to be creative, possibly leading to re-planning a new business model.

The switches easier to manage are those where companies can more or less keep their existing product, keeping their customer base and they only need to rethink their distribution channel and the way they interact with their clients (respectively “channels” and “relationships” in the Business Model Canvas). But this can be a huge challenge.

Unluckily, some companies need to start from scratch. Hopefully they can keep some of their assets (“resources” in the Business Model Canvas), for example their top managers or a license. But they probably need to switch to a new product and to a new segment of clients. Many companies in hospitality, events or travel sectors find themselves in this situation.

We no longer speak of EBITDA for companies. A new term has been found, a new indicator: EBITDAC: Earning Before Interests, Taxation, Depreciations, Amortizations and Coronavirus. This all proves that coronavirus impact will show its effect in a medium and long term.

Some companies are looking for new emerging needs and are very opportunist. Their current business model is mostly unchanged, but they only find another client’s problem they can solve. Low Touch Economy will need new logistic solutions, better solutions in terms of cleaning/hygiene and new communication tools etc.

Large companies with solid liquidity reserves have some more time to rethink which their role will be in Low Touch Economy. Because of the various client portfolios, they hardly have to do a complete renovation. But it might be necessary to cut some business lines and build new service models.

New normal business model

Questioning things may provide alternatives. We need to question the way companies have been created.

Could there be a better way to structure things? I know no other way but “changing” the business model for its re-design.

Failure can be great opportunity. When I look back, some of the failure in my life has helped me to take a new positive direction. This is especially true in a company.

Managing the present and inventing the future should be equally important. Therefore, accompanying the capacity of redefining positioning in the value chain of one’s own industry and reorganizing relations with suppliers, clients and partners, so as to generate profits, searching for an immediate liquidity, might be vital.

Innovation should be assessed as an absolute priority for companies. So, entrepreneurs might need a new team helping them with innovation.

Working only with the right side of the Business Model Canvas, the topic of the two previous episodes, that is finding a new definition of value and therefore using the right hemisphere of our brain characterizing the emotional side, is not enough. It is also necessary to work with the left side of the model, the one allowing us to reach efficiency and therefore fully exploit the left hemisphere of our brain, characterized by logics.

For example, Netflix’s capacity to look forward and define new business models, should be an example for all.

So, let’s understand the importance of key resources in defining or (revisiting) the business model.

The basic element is defining the most important and necessary assets in order for a business model to work. Each business model requires key resources. Such resources allow the company to create its own value proposal, to reach markets, to keep relations with clients and to obtain revenue.

The key resources are not just physical and financial but also intellectual and human (especially now).

Developing intellectual resources is difficult, but once they have been successfully created, they can provide a substantial value.

We need to start developing business models with a high knowledge intensity. This goes through corporate culture and leadership.

Business models by now require people with a certain mental attitude, which means hiring free thinkers, proactive but reliable. This means hiring “jazz players”.

“The only sustainable competitive advantage is the capacity to learn and to change more quickly than the others”, said Philip Kotler (management guru). This means changing one’s own business model and making one’s own organization flexible and reactive.

Actually, if you don’t know where you are going, you might not get there.

This will be the true great challenge for the future, in all those economies, like ours, where you are not used and trained to defining business models and develop them.

Solving the key issues of our generation requires new courageous business models. This all goes through the two basic boxes of the Business Model Canvas: key activities and key resources.

 

Read New Normal Business Model #1 - How to become or create an invincible company?

Read New Normal Business Model #2 - Canali e relazione con il cliente

 

Luca Pulli - Partner RSM - Business designer

Author(s)

Luca Pulli
Partner

How can we help you?

Contact us by phone +39 02 8342 1490 or submit your questions, comments, or proposal requests.

Email us