Crisis or breakdown fuels Business Model enquiry
Whenever I have reviewed an organisation's business model, it has usually been in times of crisis, sales decline or client or customer loss. For instance, if a competitor decides to review and revise their product or service and develop a new version, it wisely does so by playing to its existing strengths and creating strategies to weaken others' position in its market.
Lowest cost producer
So, it's no surprise that many organisations decide their business model is founded on being the lowest cost producer in a marketplace. To maintain and capture market share from competitors, it may be wise to review supply chain issues and resource costs and do a special deal with their suppliers.
Increasing Profitability & Sales
Likewise, suppose an organisation decides to develop their profitability. In that case, it may do so by introducing niche or unique products or services that perform better for its clients and its customers.
Likewise, a sales-driven business model will focus on equipping sales staff with superior marketing and sales training and developing a business model which focuses on winning more new customers and retaining the percentage of those migrating to other providers.
Business Models and the Charity Sector
There are many business models out there that can be accommodated, but what about the charity sector?
When discussing the charity sector, we may wish to consider the business models that typical charities employ if they do not get funding from central or local Government, or they may have to rely on winning key sources of finance.
Usually, a charity will have developed a business model which relies on managing through a donor network or employing a subscription or membership model.
The vital issue is that the senior management team (SMT) of the charity has to explore the assumptions being made about the business model they employ
Is the business model still relevant to their critical sources of funding?
Is their role and mission still relevant to those who depend upon them?
How are they doing compared to others who are competing for donors or subscribers or members?
What assumptions are the SMT making about significant changes in the marketplace?
Are there new entrants to the marketplace which are distorting the contributions from donors?
Is another organisation providing better quality service to end users or clients?
How do users and clients view the quality of your existing services?
Have there been any significant changes in tastes and habits, the cost of living and other critical financial data that impact the decisions of funders and donors?
Case Study in Ecology
I recall working with a worldwide ecological charity several years ago. Their donor or subscriber income was around £100m per year – then they found a significant hole in their operating finances. It was down simply to the Tsusmani, which had taken place in Japan in 2011.
People who would typically donate or renew their membership to this organisation were shocked by the enormity and the consequences of the 2011 Tohoku earthquake and tsunami and transferred their loyalty temporarily from their existing favoured charity to the international relief effort in Japan and the surrounding countries.
New Issues for Consideration
For instance, how has the Ukraine crisis impacted your funding?
How will the cost of living and the energy crisis affect your income in 2023 and 2024?
How will the reduction in Government spending and those in institutions such as the NHS impact the services you currently provide?
You have to be able to re-appraise your business model and even borrow from innovative businesses in the commercial sectors.
You may want to consider where you are most at risk currently in your existing business model and commission a short analysis of how best you could incorporate new thinking into your model or how you transact business.