In the current scenario, pivoting is becoming a necessity for many startups. There are many people who have strategized without anticipating the extraordinary circumstances that we have just come across and experienced and we are experiencing.
It is always difficult to question this, especially since most of the time the business model represents many years of intense work and investments both financial and personal. The essence of entrepreneurship is to be an adventure with a thousand turns of decisions, tough competition, perseverance… so much pivot, isn’t it obvious?
To start a start-up, the “business model” is an essential starting point. What is this about? What is its role in the success of the company? Can we deviate from this and propose an innovative business model?
What is Business Model?
It goes without saying that the basic objective of a business is material profit. For this reason, it has been agreed to define an action plan, also known as a “business model”, to visualize the attractive scope of a company. In other words, the business model shows how the company plans to make money. For this, it is important to understand the economic activity of the business in question, an activity that includes:
– Company’s business activity: the product or service to be sold, the profile of the potential customer, the way the product is marketed, etc.
– Internal organization of the company: legal framework, required skills, team, etc.
– Business Management: Expenses, Profit Margin, etc.
know : After establishing a business model, the company must know the characteristics of the market as well as the added value that it proposes to offer.
business model limitations
Up to a certain period, the business model was an effective strategy that guaranteed the success of a company. But the data has changed substantially since the opening of economic borders. Several players then operate in the same market. For this, even with a perfect business model, additional factors must be taken into account that can change the whole situation:
– Geographical location of the company
– tax regime
– Regulations for which the company is eligible.
Thus, companies are increasingly deviating from the initial business model to respond to market developments. Since supply exceeds demand, it becomes difficult to stick to a predetermined price or profit margin. In order to continue to exist, companies are forced to create new products. The number of patent filings continues to increase.
Yes, pivoting is now a necessary step for any start-up
Far from saying that sticking to the business model has not become an obligation, it is now highly recommended to consider it, especially for start-ups. In other words, you can define a business model leaving room for innovation and flexibility to adapt your business to market demands.
IBM is always taken as an example to illustrate the effectiveness of changing business models. After losing $15 billion in one quarter in 1992, IBM decided to change its business plan. The company then launched 4 pivotal action plans:
1-changing its activities according to the skills it possesses
2-Redefinition of additional value brought to the consumer
3-sale of microcomputer part
4-Specialize and focus its efforts on software design and maintenance
Environmental and market requirements are greater than ever in sustainable development. A change of business model for Kodak and many others is then necessary to stay up to date and avoid sudden failure. Thus, for a budding start-up, it is important to start with a business model, but still maintain a certain flexibility that allows it to “pivot” and adapt to the reality of the market.