Developing new business models

It's essential to adapt to new business models and ways of selling to increase profit and remain competitive. Find out if there is an opportunity in your business to adopt a new business model.

4min

Productivity business models to maximise productivity explained
 

Business models are a revenue collection strategy, often determined by the nature of your business and by your own choices. For example, the key business model components for a construction business could be tendering for work, limited to the capacity of their current equipment and staff expertise. Adding a productivity layer such as leasing or buying faster, more efficient machinery or joint venturing with complementary companies can improve significantly revenue and profit.
 

Different business models exist, with most companies choosing to generate revenue from models that fall under one of these categories:
 

  • Tech companies that allow access to software or services in exchange for a recurring fee (ordinarily monthly or annual subscriptions).
  • Online businesses that sell products and consumables without a physical presence.
  • Online marketplaces where businesses post products for sale, reaching new audiences efficiently and at a low cost. Trade Me and Amazon are good examples of a low touch business model which requires minimal human intervention.
  • The demand and supply business model is prevalent in agriculture and fishing, where primary produce is bought and sold in markets.
  • Delivering services with fixed-price contracting, often in building and construction.
  • Direct sales at a brick-and-mortar location.
  • Manufacturers that utilise raw materials to create products to sell through the wholesaling distribution channel.
  • Providing services and charging an hourly rate, most often with professionals or trades.
     

While you'll find several business model variations and examples, the common business model will likely fall under one of the above categories. And, depending on your recent success, it's often prudent to stick with the business model that works.
 

But, if you want to gain a productivity edge, chances are you'll want to have more than one way to reach your target market and delivery the product or service.

First, conduct a business model audit 
 

To improve productivity, identify how you can change the way you sell to grow revenue, without adding headcount. Start by understanding your current business model, key value proposition, customer segments, revenue streams, core competencies and cost structures. Dedicate a number of hours each month to research and discover new trends. Keep your company's business model up-to-date with the best new industry apps, and make an effort to attend industry events, webinars and conferences to find out what's happening in your marketplace. In addition, connect with other business owners to learn how they're solving issues and keeping ahead of the technology curve. One way is to check out any apps that might apply to your company from the Xero or MYOB online marketplaces to see what technology is introduced to your industry.
 

Then see if you can:
 

  • Leverage technology to automate which could include using software for customer relationship management, supply chain, and data analytics to make informed decisions.
  • Invest in faster or more efficient equipment. Conduct a cost/value analysis to calculate the long-term savings available from upgrading. Don’t forget improving your capital equipment may unlock opportunities for larger contracts or tenders.
  • Explore partnerships to share resources, expanded networks, and increase productivity through collaborative efforts.
  • Take advantage of any new trends, for example the use of AI and robotics that is transforming some sectors.
     

Regularly monitor your key performance indicators (KPIs) to evaluate the effectiveness of your business model and make data-driven adjustments to enhance productivity. 

New ways of selling 
 

Consumers have been moving more and more of their lives online. This, combined with the ease and low cost of technology, has led to business model productivity innovation, such as:
 

  • Drop shipping, where you on-sell someone else's products without having to buy or hold the stock. The simplest example is creating an online store, then when a customer buys a product, you as the owner instruct a third party to ship it to the customer. This opens almost unlimited opportunities to widen your product list. Due to the absence of intermediaries in the supply chain, you can have thousands of products for sale and never have to buy, store or ship them. 
  • On-demand business model companies like Uber or Lime Scooters charge customers for a product or service only when they need it. So, for example, instead of owning a scooter, a customer pays for usage only.
  • Sharing business models like Airbnb, where the business relies on the sharing, reusing, or rotating resources between individuals or other companies.
  • Online advertising models where you might give away information or services for free in anticipation of converting free users into paying customers or picking up online advertising revenue. It's increasingly popular with activity apps like TikTok, Snapchat, WeChat and social media platforms (Facebook, Instagram etc.). 

When to change your business model 
 

New business modelling can be challenging to implement. See if or how your competitors (or similar established businesses in other countries) are shifting their business processes. It may be a sign it's time for you to consider adapting your business model, also. Then, check if your target customers change how they prefer to buy, so you time it with demand and supply. If they both line-up, you may need to create a new value proposition and invest in operating infrastructure.
 

Of course, before you make the shift, it's always a good idea to test a new business model first. Then, start implementing your business strategy slowly to try and amend cost structure and revenue streams before you rely on a brand-new model to drive your business forward.

Taking the plunge
 

Many companies are constantly implementing new and improved business models using data-driven decisions. So if your key customers start to show they too want to change how they buy, you should adapt as fast as you can.

Next steps 

  • Start investigating which other business models could benefit your productivity, then test and iterate as you go.
  • Collect evidence or proof of demand before you switch entirely to a different business model. Remember, it's most likely you'll keep your existing model, at least for a time.
  • Look at other industries to identify anything you can adapt.
  • If you need finance, ASB has a Productivity Grant to help improve productivity across a range of business activities - apply before 30 June. Enquire online, visit a branch call 0800 272 222 or contact your ASB Banker. 

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