Rethinking your business model: Where to start?

18 March 2024 by National Bank
A team rethinking their business model

Advances in technology, the arrival of new competitors and the economic crisis are all situations that might lead a company to rethink their business model. Is it time to review yours? Follow the steps below to make the process easier. 

What is a business model?

A business model describes how an organization creates value. In other words, it outlines the way a company intends to achieve its objectives and meet the needs of its customers. A good business model can be a competitive advantage. It’s also a good tool for convincing your bank or potential investors to finance your organization or project.

To build your business model, you need to identify nine elements:

  • Your customer segments (who is your project aimed at?) 
  • Your value proposition (what problem does your offer address?)
  • Your distribution channels (where and how do you reach your customers?) 
  • Your relationship with your existing clientele (how do you interact with them?) 
  • Your sources of revenue
  • Your key resources (who and what do you need to make your project a success?) 
  • Your core activities 
  • Your strategic partners  
  • Your cost structure (what are your fixed and variable costs?)

Need help drawing up your model? Take a look at our tool. It contains key questions to help you better define each of the elements listed above. The Business Model Canvas is easy to use and can be applied at different stages in a company’s life, from the ideation and startup phases to growth and strategic repositioning. It can help you structure your thinking and achieve your goals.

What’s the difference between a business model and a business plan?

You may be wondering what the difference is between a business model and a business plan. The former details how a company creates value (the what) while the latter is a document that explains how that value will be generated on a practical and operational level (the how). A solid business model often serves as the basis for a business plan.

Have you already put together your business model? Here are a few steps you can take to improve or update it and take your ideas one step further.

Step 1: Assess your current situation 

Start by taking stock of your current situation by “mapping out” your existing business model. To do this, clearly identify your products or services, target market, distribution channels, partnerships, revenues and costs. Determine what’s working well and what isn’t.

Take the opportunity to analyze your internal and external resources, their skills and your company’s internal processes. This exercise will help you identify the strengths you can capitalize on as well as areas for improvement.

Step 2: Analyze the competition and market

Before making any major changes, analyze the environment in which you operate. How well do you know your competitors? Identify major market trends, the needs of new customers, and business opportunities you could explore. This is also a good time to keep an eye on companies that have had success in your industry.

This step will help you determine where you stand in relation to the competition. It can also help you identify quick areas for improvement. For example, if all your competitors have implemented a text message loyalty strategy, but you haven’t, now might be a good time to adopt it and increase customer engagement – and your profits.

Another area to consider is the different stages of your customer’s digital journey. If you’re a retail business, analyze your transactional website, online payment, delivery and returns system, AI-assisted exchange process, and anything else you deem relevant. A simple, robust and effective online presence can literally change the trajectory of your business.

Step 3: Listen to your customers

Everyone knows that a business is nothing without its customers. That’s why it’s essential to listen to them and understand their expectations and preferences to ensure the best possible customer experience. 

To make this happen, you need to gather their feedback – and this means investing time and taking every measure necessary to do so. After all, your customers can give you valuable pointers as to the direction your business model should take or where you can make improvements to better meet their needs. For example, based on their feedback regarding your hours of operation, you might decide to offer your services in the evenings.

Step 4: Explore new opportunities

Once you’ve clearly defined the core of your business, including your mission, vision, and strategy for making it a reality, it’s easier to assess whether a particular business practice might be of interest to you. Don’t hesitate to explore growth opportunities, whether by integrating technologies, branching out into new markets, or creating strategic partnerships.

Promoting and encouraging innovation among your employees is also a wise approach. They understand your customers’ concerns and expectations, and their suggestions could lead to innovative products or services, improvements in operations, or a way of rethinking sales strategies.

A word of advice; be open to out-of-the-box ideas. They may just transform the way you create value.

The automation of certain business tasks using digital and technological tools is also an avenue worth considering. It can free up time and allow employees to redirect their skills to more complex tasks.

If several interesting options are open to you and you don’t know which one to choose, scenario modelling can be a useful tool. This involves considering the benefits, risks, and financial implications of each option. With this technique in hand, you’ll be able to make more informed decisions.

Step 5: Measure the impact of your initiatives

Have you identified several potential improvements to your business model? Well done! When it’s time to put it into action, don’t forget to establish key performance indicators (KPIs) to measure the effectiveness of this new business model.

Keep a close eye on these indicators to make sure any changes are generating the desired results.

Step 6: Develop your agility and adaptability

Be flexible and open to adjusting your business model in response to new information, changes in the market or internal developments. Ongoing adaptability is essential for navigating an ever-changing business environment and developing expertise.

But adjusting your business model doesn’t mean radically changing everything you do. You can implement changes gradually, which can reduce risks and help your company more easily adjust to new dynamics. 

Remember that a business model isn’t set in stone: it’s a strategic process that’s constantly evolving. It requires creative thinking, a thorough understanding of the market and a willingness to innovate. And by involving all key parties, both internal and external, you’ll increase your chances of a successful transformation.

Are you thinking of updating your business model? Consult our tool and learn more about how National Bank can support you in this important step.

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