Change is inevitable and unavoidable. How you embrace and adapt to change could mean the difference between success and failure in business. Some businesses do it much better than others and the results are obvious.
One classic failure is the Eastman Kodak Company. In 1976, it virtually controlled the photographic market in the United States, making 90% of the film and 85% of the cameras sold. Just a year earlier, a company engineer had devised a camera with electronic circuits that could save and transfer images to a cassette tape. The saved images were viewable on a television screen.
The company had invented the first “digital” camera, but knew that pursuing this technology would blow up its existing business model that was reaping massive profits. As a result, company executives consigned the project to the dust bin of history. By the time Kodak realized its critical error, it was too late. Competition had swarmed in to capture the market that Kodak created long before digital cameras exploded onto the scene.
While the moral of this story is obvious, it’s not uncommon for small businesses to believe they’re immune from the same fate that befell Kodak. After all, they’re small and nimble enough to make the kind of changes that big companies take years to accomplish. Don’t fall into that trap. Technology and consumer tastes are changing more rapidly than ever. The survivors will be those companies that capitalize and prosper by staying ahead of those changes.Planning
It’s a challenge to think far ahead, but it’s the only way you can prepare your company to be competitive in a dynamic marketplace. One of the ways to do this is to maintain and update a list of questions and answers about your current operating model. The idea is to identify market fluctuations and technological changes that are causing and reacting to a fundamental shift in consumer tastes and expectations.
- What are social media and advertising trends telling you?
- What are your competitors doing to adapt to the shifting landscape?
- What are the risks associated with transforming your model and what can you do to minimize or eliminate them?
- What will it take for you to develop and execute the changes necessary to maximize future growth and profits?
- When is the best time to initiate change?
- What are the productivity and monetary costs associated with making such changes?
The first step is to define your goals and align your strategies for achieving them. This will form the basis for a new business plan that clearly defines the tactics and milestones for achieving your objectives. It should include specific metrics you can use to measure progress toward successful completion of those goals. They might include financial benchmarks such as sales volume, gross income, or number of new customers. Focusing on key metrics will keep your plans on track and provide motivation for achieving performance expectations.
Evaluate the likely positive and negative impacts of implementing a new business model, isolating them into short-term and long-term impacts. List your ideas for minimizing or eliminating the negative impacts, and try to estimate the associated costs. You want your business to be in the best position possible to effectively deal with potential outcomes to whatever changes you make.
Analyze the amount and array of financial and human resources you’ll need to successfully carry out your plan. Do this well in advance to ensure that access to what you’ll need will be available when you need it. Inadequate capital is a major cause of business failure, so have a line of credit established at the outset.Risk Assessment
Any change invites risk. The degree of risk you’re willing to accept is an important parameter for the decision-making process. When it comes to investing or betting your money, there’s an old saying that you should never risk money that you can’t afford to lose. Applying that logic to changing your business model requires a comprehensive assessment of the factors driving your risk. If you’re transitioning into a new market or completely changing your sales platform, those are seismic shifts that will trigger major changes to the way you operate.
One of the biggest business model changes in recent times has been the movement to online sales. The vast majority of brick-and-mortar businesses also operate online stores, while many newer stores operate only online. Smaller changes usually mean less risk, but even they must be evaluated. Changes to how you deliver products or the terms of warranties you offer carry their share of risks that could impact your bottom line.Test the Water
Before instituting a seismic shift, it’s a good idea to survey your customers and suppliers. They might offer valuable suggestions and make contributions to the process that you never considered. This is especially important if the changes might affect them in ways that never occurred to
you. If possible, give your changes a limited trial run and solicit immediate feedback.
Coca-Cola would have been wise to do exactly that before launching its “New Coke” on April 23, 1985. The company may have taken the biggest risk in consumer product history when it changed the 99 year-old formula for the world’s top-selling soft drink. While the goal was to reenergize a global brand that had slowly begun to tire, the outcry that followed was unprecedented. The company got the message and less than three months later, it began offering “Classic Coke” with the original formula. Lesson learned.Summary
Small business owners should not fear change. It’s going to happen with or without you, so buckle up and capitalize on it by staying ahead of trends and the competition. Theoretically, offering the best product at the best price should guarantee success, but that’s not always the case. Your company’s image and how you’re perceived by the marketplace play a critical role in attracting customers who have thousands of other choices. Changing your business model is a big deal, but it can be done if you plan ahead and act with knowledge and confidence.