As we have mentioned it in a previous posts, the side effects of the pandemic are yet to be seen and digested. Nothing has been said, speculation and educated guesses are the theme of the day’s conversation
Paradigm shift ? What is it and why should be concerned about it.
A paradigm shift is a major change in the concepts and practices of how something works or is accomplished. A paradigm shift can happen within a wide variety of contexts. They very often happen when new technology is introduced that radically alters the production process of a good or service. For example, the assembly line created a substantial paradigm shift, not only in the auto industry but in all other areas of manufacturing as well.
A paradigm shift can require that entire departments be eliminated or created in some cases, and millions or even billions of dollars of new equipment purchased while the old equipment is sold or recycled. Paradigm shifts have become much more frequent in the past hundred years, as the industrial revolution has transformed many social and industrial processes. This process is in vogue, as ongoing businesses have been forced to adapt to a new way of living and changed consumer preferences.
Paradigm shifts happen in a wide range of other contexts to describe a profound change in model, modality, or perception. While not instantly accepted, if a fringe science is proven to rest on sound footing, momentum slowly builds against the established paradigm. Paradigms are important because they define how we perceive reality. As such, everyone is subject to the limitations and distortions produced by their socially conditioned nature.
In the business world, a paradigm shift is often a change in the perception of how things should be done, made, or thought about. Reacting well to key paradigm shifts have a lot to do with the long-term success of a business. Hence, under present circumstances, there is an urge to change or at least review current Business Models.
Business model innovation is hardly new. When the founders of Diners Club introduced the credit card in 1950, they were practicing business model innovation. The same goes for Xerox, when it introduced photocopier leasing and the per-copy payment system in 1959. In fact, we might trace business model innovation all the way back to the fifteenth century, when Johannes Gutenberg sought applications for the mechanical printing device he had invented. But the scale and speed at which innovative business models are transforming industry landscapes today is unprecedented. For entrepreneurs, executives, consultants, and academics, it is high time to understand the impact of this extraordinary evolution. Now is the time to understand and to methodically address the challenge of business model innovation, given the tremendous catastrophic pressure and disruption CORVID-19 has exerted on present ongoing businesses.
Ultimately, business model innovation is about creating value, for companies, customers, and society. It is about replacing outdated models that are not responding to customer needs.
A business model describes the rationale of how an organization creates, delivers, and captures value under given conditions.
This concept allows you to easily describe and manipulate business models to create new strategic alternatives. Without such, it is difficult to systematically challenge assumptions about one’s business model and innovate successfully. I believe a business model can best be described through seven key areas that show the logic of how a company intends to be efficient and profitably sustainable. The seven key areas cover the four main categories in a business: customers, offer, infrastructure, and financial viability. The business model is like a blueprint for a strategy to be implemented through organizational structures, processes, and systems.
The seven key areas are:
- Value Proposition
- Target Market Segmentation
- Strategic Resources and activities
- Strategic Alliances
- Financial Structure
- Distribution Channels
- Customer Experience
When rethinking your business model, you must consider the following general concepts:
A) Business model innovation results from one of four objectives: (1) to satisfy existing but unanswered market needs, (2) to bring new technologies, products, or services to market, (3) to improve, disrupt, or transform an existing market with a better business model, or (4) to create an entirely new market.
B) In longstanding enterprises, business model innovation efforts typically reflect the existing model and organizational structure. The effort usually has one of four motivations: (1) a crisis with the existing business model (in some cases a “near death” experience), (2) adjusting, improving, or defending the existing model to adapt to a changing environment, (3) bringing new technologies, products, or services to market, or (4) preparing for the future by exploring and testing completely new business models that might eventually replace existing ones.
Thus, as a result of the pandemic and health emergency experienced in the entire world, we must take into account the external forces affecting the business cycles, and the adopted preventive practices, some of them destined to stay.
Social distancing, interruption of the world supply chain, broken global chain of payments, health practices, physical currency usage, among the most notorious change igniters, must be considered in your new Business Model.
Final advise: If you want your business to survive, urgently revise your current business model.
Just remember a popular saying: “If life gives you lemons, learn how to make lemonade”.
El Economista Digital 