When To Change The Business Model

So, when should a senior leader consider changing their business model? Obvious answer: before it’s too late. See Blockbuster, Circuit City, Hostess and scores of others in the past few years. More realistic answer: it depends. The business model is the integrated system of people, process and resources all designed to create and deliver value for your customers and your business. Here are three things leaders need to look for to determine if the business model, or a part of the business model, needs change.

Your Business Is “Competing To Be The Best”

As business strategy guru Michael Porter would say, competing to be the best leads to competitive convergence. No differentiation. You all end up looking the same. You become a commodity and only price matters anymore to customers. When you find your business is more focused on ‘beating the competition’ than on ‘being different from the competition’, it’s time to change the business model.

Your Results Have Reached A Plateau Or Are In Decline

Everything has a life cycle; plants, animals, products, businesses, methods, you name it. And life cycle stages are similar for all: introduction, growth, maturity, decline. So, if performance has reached a plateau, it means you’re probably in the maturity stage. While it’s true you could be in this stage for long periods of time, it’s also true life cycles are getting shorter… meaning you may reach the decline stage much sooner than expected. The name of the game is growth. So, when results plateau or begin to decline, it’s time to change the business model.

Your Employees Speak More Favorably of The Past Than the Future

It’s unfortunate when it happens but it happens all too frequently. Employees talk longingly of the way things used to be in the past, the good old days. That’s a clue that employees haven’t bought in to what’s happening. In other words, you’re not getting their best. When talk around the water cooler is more about a ‘longing for the past’ rather than ‘excitement for the future’, it’s time to change the business model.

Whether it’s hubris or fear, many leaders don’t face into the challenge of change. But when they sense their business is no longer differentiated, they’ve reached a performance plateau or employees aren’t excited about the future, it’s time to change the business model.