Magazine: Bigger, better, stronger – December 2023
All companies, regardless of size, sector or origin, have one thing in common: if they want to be successful in the market then they need a functioning business model. When it comes to sustainable growth however, business models need to be rethought.
It always starts with an idea. However, it often takes a long time before this idea becomes a functioning business. Anyone who wants to sell products or services needs to develop a precise idea of how, and according to which rules, their business should function and grow. The business model describes the structure and functioning of a company by setting out the various elements and aspects of the business and how they relate to one another. At the core of it all are four key questions:
This system – summarised here in simplified form – will continue to apply in the future. However, the foundations upon which business models are based are undergoing a huge transformation, with the most comprehensive change for companies being digitalisation -– because it has an impact on everything else. The Frankfurt Future Institute defines connectivity as one of the 12 megatrends of our time: “The spread of digital technologies and services across society marks the beginning of a new era. The emerging network society is fundamentally changing the framework conditions for success in business – and calls for new skills from both individuals and companies.”
“Having a holistic understanding of digital technology forms the basis for future-proof business strategies.”
Future Institute Frankfurt
Future-proof business models need to anticipate all these developments, or at least be designed in such a way that they allow a certain flexibility and can be expanded upon. This requires a rethink, especially with regard to the target groups. After all, the customer is at the core of any kind of business, and the value proposition, the value chain and the revenue model must relate to him or her. A functioning model manages to identify the customer’s problems, solve them and generate profit from them. However, even today too many companies are still going straight to the product development stage. When it comes to products, this way of thinking leads to the customer only being involved at a very late stage. The risks of this approach are obvious. The Zukunftsinstitut therefore claims: “As everything becomes more interconnected, basic human needs such as trust and security as well as cultural and social aspects are becoming increasingly relevant for digital business models and the design of products and services.”
Satisfied customers form the basis of any successful business.Therefore, if they don’t see their needs for a seamless, rewarding and results-driven experience being met, there are massive implications for the business. Most companies are aware of this. In the Swiss edition of the 26th Annual Global CEO Survey , PwC looked at the responses from 95 CEOs of Swiss companies from different industries in the chapters of Growth, Transformation and collaboration, Workforce and Sustainability. 55% of the CEOs surveyed believe that changing customer needs and preferences will have a strong to extremely strong impact on the profitability of their companies in the next ten years. Only 3% believe that this will have no impact. Advances in digitalisation also come with a wide range of opportunities in this area, such as offering digital value propositions that are individually tailored to customer requirements as well as being scalable. This usually requires further components of the existing business model to be adapted. Such complexity poses big challenges for many companies.
“As everything becomes more interconnected, basic human needs such as trust and security as well as cultural and social aspects are growing increasingly relevant for digital business models and the design of products and services.”
Future Institute Frankfurt
So how can companies transform their business model to remain competitive in the future? At the BMI Lab, a spin-off of the University of St. Gallen, companies are advised on how to develop their business models and how they can evolve. The focus here when it comes to business model innovation is on a policy of taking small steps. One key aspect of this involves carrying out extensive market research, including outside the company’s own industry. Companies would therefore do well to take inspiration from existing concepts in other industries and adapt them to their own needs. However, they must be careful. The increasingly dynamic market situation requires business models to be continuously updated and reviewed. In summary, the BMI Lab gives three recommendations for innovating a business model:
