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Brandwave-logo-6.png |THE BUSINESS MODEL PIVOT | AUG '20
20.08.2020
Along with the severe health and humanitarian crisis caused by the coronavirus pandemic, executives around the world face enormous business challenges: the collapse of customer demand, significant regulatory modifications, supply chain interruptions, unemployment, economic recession, and increased uncertainty. And like the health and humanitarian sides of the crisis, the business side needs ways to recover. Ad hoc responses won’t work; organizations must lay the groundwork for their recoveries now.

The management theorist Henry Mintzberg famously defined strategy as 5 Ps: plan, ploy, pattern, position, and perspective. We have adapted his framework to propose our own 5 Ps: position, plan, perspective, projects, and preparedness. The following questions can guide you as you work to bounce back from the crisis.


1. What position can you attain during and after the pandemic?

To make smart strategic decisions, you must understand your organization’s position in your environment. Who are you in your market, what role do you play in your ecosystem, and who are your main competitors? You must also understand where you are headed. Can you shut down your operations and reopen unchanged after the pandemic? Can you regain lost ground? Will you be bankrupt, or can you emerge as a market leader fueled by developments during the lockdown?

We hear of many firms that are questioning their viability post-pandemic, including those in the travel, hospitality, and events industries. We also hear of firms accelerating their growth because their value propositions are in high demand; think of home office equipment, internet-enabled communication and collaboration tools, and home delivery services. Because of such factors, firms will differ in their resilience. You should take steps now to map your probable position when the pandemic eases.

2. What is your plan for bouncing back?

A plan is a course of action pointing the way to the position you hope to attain. It should explicate what you need to do today to achieve your objectives tomorrow. In the current context, the question is what you must do to get through the crisis and go back to business when it ends.

The lack of a plan only exacerbates disorientation in an already confusing situation. When drawing up the steps you intend to take, think broadly and deeply, and take a long view.


3. How will your culture and identity change?

Perspective means the way an organization sees the world and itself. In all likelihood, your culture and identity will change as a result of the pandemic. A crisis can bring people together and facilitate a collective spirit of endurance — but it can also push people apart, with individuals distrusting one another and predominantly looking after themselves. It’s crucial to consider how your perspective might evolve. How prepared was your organization culturally to deal with the crisis? Will the ongoing situation bring your employees together or drive them apart? Will they see the organization differently when this is over? Your answers will inform what you can achieve when the pandemic ends.


4. What new projects do you need to launch, run, and coordinate?

Your answers to the questions above should point you to a set of projects for tackling your coronavirus-related problems. The challenge is to prioritize and coordinate initiatives that will future-proof the organization. Beware of starting numerous projects that all depend on the same critical resources, which might be specific individuals, such as top managers, or specific departments, such as IT. With too many new initiatives, you could end up with a war over resources that delays or derails your strategic response.


5. How prepared are you to execute your plans and projects?

Finally, you need to assess your organization’s preparedness. Are you ready and able to accomplish the projects you’ve outlined, particularly if much of your organization has shifted to remote work? We see big differences in preparedness at the individual, team, organization, and national levels. The resources at hand, along with the speed and quality of decision-making processes, vary greatly, and the differences will determine who achieves and who falls short of success.

We have created a worksheet around the five strategic questions. It can help you plot your current and future moves. Be aware that consumers will remember how you reacted during the crisis. Raising prices during a shortage, for example, could have a significant effect on your customer relationships going forward.

The coronavirus has had unprecedented impacts on the world — and the worst is yet to come. Companies must act today if they are to bounce back in the future. Doing so will help the world as a whole recover — and, we hope, become more resilient in the process.

 

 

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20.08.2020
The reality of how companies are dealing with the crisis and preparing for the recovery tells a very different story, one of pivoting to business models conducive to short-term survival along with long-term resilience and growth. Pivoting is a lateral move that creates enough value for the customer and the firm to share. 
Consider Spotify, the global leader in music streaming. In principle, this type of platform has all the ingredients for success in the lockdown economy: customers trapped in their homes who would like to escape from a depressing reality by listening to songs seamlessly streamed to a playback device without any need for physical distribution.

And yet the Swedish company struggled to find a pivot that would enable it to overcome a basic issue: Unlike Apple Music, Spotify disproportionately relies on free users who must listen to advertisements. Before the pandemic, the company figured that advertising revenue would grow even faster than the free user base, thus making a key contribution to the bottom line. Although the model was already showing some signs of maturity, its limitations did not become readily apparent until the pandemic hit and advertisers cut their budgets.

One pivot Spotify made in response was to offer original content, in the form of podcasts. The platform saw artists and users upload more than 150,000 podcasts in just one month, and it has signed exclusive podcast deals with celebrities and started to curate playlists. The shift in strategy means that Spotify could become more of a tastemaker. At long last, the company is doubling down on Netflix’s not-so-secret recipe for success in a business in which copyright owners enjoy healthy margins while pure-play streamers struggle to become profitable.

Pivoting definitely works for digital platforms, but does it help traditional businesses? Let’s examine the world of restaurants. They have been battered by the lockdown, with many owners pondering whether to close for good. The usual way to think about restaurants includes envisioning a seating area next to a kitchen. However, restaurants are kitchens whose output can be delivered to customers in a number of ways and using various kinds of business models. Eat-in, take-out, delivery, and catering are just the tip of the iceberg.

One pivot would be to offer a flat rate for a set number of meals per week or per month, with limited menu choices. Restaurants could increase their margins as they learned how to manage captive demand. Another pivot would be to offer a combination of precooked dishes with sides or additions that could be prepared at home using ingredients supplied by the restaurant. The restaurant could send a link to a video that walks the customer through preparation, thus incorporating an experiential and learning element. Deliveries could be in amounts large enough for several meals in a given week. Both pivots would lead to a greater variety of business models, which could become a permanent feature of the restaurant landscape, especially if the trend toward remote work from home consolidates over the long run.

The crisis has also led to broken supply chains, as reflected in the ominous images of empty supermarket shelves — a void that presented small farmers with a unique opening. After seeing their sales to restaurants and specialty stores plummet during the lockdown, many small-scale farms have set their sights on the needs of the homebound consumer. This pivot requires investments in information technology, marketing, and logistics that could prove profitable over the long run if the trend toward shorter supply chains gains momentum. Alternatively, some farmers and local stores are flocking to Shopify, the Canadian e-commerce platform, which has seen a boom in e-commerce activity at distances of less than 15 miles between sellers and buyers — a segment of the online market that behemoths like Amazon have traditionally neglected. Shopify’s key pivot has been to offer a comprehensive cloud-based bundle of services that help vendors manage expenses, pay bills, anticipate cash-flow problems, and optimize deliveries.

We’ve also seen large incumbent companies pivot during the crisis. As demand has soared for essential products, consumer-goods powerhouse Unilever has pivoted to prioritize its packaged food, surface cleaners, and personal hygiene product brands over other products, such as skin care, where demand has fallen. The company does not yet know which changes might become permanent. If the upswing in remote work endures, Unilever might find that some of its pivots will remain in place. In fact, the move toward in-home consumption might require a repositioning of not only food brands but also personal care offerings.

An even bigger threat to established brands is consumers’ increased willingness to experiment with different offerings during the crisis. Consumers are holding brands and companies to a higher standard than previously, favoring those perceived as doing more for society. Companies like Unilever and Procter & Gamble, whose portfolios include hundreds of brands, have no choice but to pivot in response. Brand loyalty can no longer be taken for granted, and brand repositioning may be necessary in many cases. But brand purpose and messaging will need to be laterally tweaked, not overhauled, because consumers are becoming more interested in safety, experience, and comfort as a result of the pandemic.

Not all pivots result in good business performance. Three conditions are necessary for such lateral moves to work. First, a pivot must align the firm with one or more of the long-term trends created or intensified by the pandemic, including remote work, shorter supply chains, social distancing, consumer introspection, and enhanced use of technology. For instance, if social distancing remains the rule for the near future, the casual dating platform Tinder will need to follow competitors Bumble and Facebook Dating in offering video dating.

Second, a pivot must be a lateral extension of the firm’s existing capabilities, cementing — not undermining — its strategic intent. Faced by the sudden collapse in travel, Airbnb moved swiftly to help hosts financially and connect them with potential guests. Hosts can now offer online events focused on cooking, meditation, art therapy, magic, songwriting, virtual tours, and many other activities, with users joining for a modest fee. This pivot represents one more step in Airbnb’s evolving approach from its traditional business model of facilitating matches between hosts and guests to its move to become a full-range lifestyle platform. In the future, online experiences could help travelers discover new destinations and on-site activities and help hosts offer better service. Airbnb could become a platform that people use not just to arrange their next vacation but to develop a cosmopolitan mindset throughout the year, learning about other cultures from a distance and celebrating the diversity of the world on a daily basis.

Third, pivots must offer a sustainable path to profitability, one that preserves and enhances brand value in the minds of consumers. The economic crisis triggered by the pandemic does not necessarily spell the end of entire industries or companies. It does weed out business models that fail to pivot toward the new reality characterized by shorter value chains, remote work, social distancing, consumer introspection, and enhanced technology use.
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20.08.2020
The new business as usual is adaptability. Here are 5 examples of how business are pivoting to survive Covid 19.
Everything has gone out of the window – major spending holidays, seasonal planning, store expansions and so on. Physical stores are closed. E-commerce operations are struggling with demand or on pause. Factor in that we don’t yet know when this all might end, and it can all feel a bit paralyzing. Inaction isn’t going to help though. What retailers need is to pivot and adapt their business to the new situation – and to keep an eye on what is happening so they can keep adapting as things change.

Not sure how to do that? Here are five great examples of how businesses are pivoting to survive Covid-19.


Grocery brands turning stores into dark stores

Retailers with physical stores are seeing an interesting challenge right now. They’ve got all these brick and mortar assets that they can’t make use of because of social distancing restrictions.

Some are now pivoting though to turn those shut spaces into dark stores. This means they can use them to fulfil online orders instead.

The trend is strongest in the grocery sector, which makes sense given the huge demand for online food shopping right now. Equally though, grocery is one category where physical stores are still open and operational because of their essential nature. As such, you could question the decision to shut off those spaces in favour of operating them as dark stores.

It’s happening though. Whole Foods has closed its Manhattan Bryant Park store in NYC and Woodland Hills in California to make them dark stores. Sainsbury’s is doing the same thing in the UK with certain spaces in London.

The thing is these store pivots are carefully considered. City centre locations are favoured because they tend to be more densely populated which means greater demand for online services. By turning the local store into the online fulfilment centre you can serve more people faster because the distance from where the order is picked and packed and where it needs to go is way shorter.

In addition, these spaces can serve more customers overall as dark stores than if they continued to operate conventionally. This is because they can deliver to a wider area compared to their normal catchment of people living in walking distance of the store.


Uber starting on-demand retail delivery

Uber is a hugely successful business. It also relies on the movement of people.

So, at a time when people aren’t able to move around and social distancing is the order of the day, it makes sense for the company to pivot its model to transport other things rather than leave its drivers without any work. Those things now include ecommerce orders.

There are two strands to the new offering. Uber Direct offers retailers an on-demand delivery service to quickly get orders to customers at home. So far, products being carried range from pet food to medicine and even postal surplus.

Uber Connect is aimed at the individual customer letting them send items to another address in their city. For example, it might be food or care packages being sent to relatives, or even items sold online via local marketplaces. The service is being tested in 25 cities in the US, Mexico and Australia.

What’s interesting about this pivot is that Uber is looking to capture as much of the market as possible.

It’s not just going for the ecommerce retailers, which would make sense given that ecommerce’s biggest challenge right now is keeping up with demand. It certainly seems like the most profitable option for the business.

Instead, Uber is considering its true audience – human beings looking for convenience. By offering a service to move things on their behalf, Uber is ensuring that its customers don’t forget about it when travel is the furthest thing from their minds.


John Lewis adapting in-store advice services to be online

It’s one thing to pivot your business to sell online, but it’s another to take other in-person interactions and make them digital.

John Lewis offers a wide array of in-store advice and support services in its stores. With customers unable to visit it currently, the brand is pivoting to make these same services available online via video.

The appointments are free, and customers can talk to experts from different departments about things like home design, personal styling and setting up a nursery. After the appointment the customer is emailed further advice, mood boards and a personal shopping list – depending on the service used.

John Lewis is also leaning into the strengths of different communication channels. For example, the personal stylist appointments are booked via its Instagram page where stylists are also sharing tips and answering questions.

We love how personal the experience still feels. By using video, rather than audio only calls or a chatbot, customers can build a real connection with the expert – and therefore John Lewis. The virtual offering is also a great pivot given that – despite current global circumstances – some customers will still be experiencing major milestones, such as having a baby, and need expert advice.

Likewise, other customers may have extra time at the moment to tackle projects around the home or to clear out their wardrobe. Again, John Lewis is making sure that it is a port of call for them. Customers may not be able to visit its stores, but the brand is staying front of mind through virtual connections.


Secret Cinema at home

Secret Cinema is globally known for its go-all-out immersive cinema experiences where participants get to live and breathe the world of the film they’re going to see.

As such, social distancing and new rules preventing mass gatherings have put the brakes on the company’s business.

But instead Secret Cinema has pivoted to bring some of its magic to people at home via Secret Sofa. A different film is the focus of each week with participants signing up to the Secret Sofa newsletter to be part of the fun.

As well as finding out what the film chosen is (with info on which streaming platforms carry it), the email provides the usual Secret Cinema suggestions of costumes and characters to make viewers to feel part of that world. There are also playlists, food recommendations and more, and a different flavour of Haagen-Dazs can be ordered each week from Amazon Prime.

Look, this isn’t the same as a full-on Secret Cinema experience. But we have to applaud the brand for finding new ways to engage with their audience when they’re unable to leave the house.

Secret Sofa retains a social element as everyone starts watching the film at the same time on the same day. There is also a private Facebook group which invites people to chat before, during and after the film. This helps to get people into the spirit and to make the effort to participate fully rather than just watching the film in their pyjamas.


Restaurants becoming wine shops and takeaways

All around the world restaurants are having to close doors. While the need is understandable in helping prevent the spread of Covid-19, there’s no doubt that for many there’s a question of whether they’ll be able to reopen again.

Some, however, are pivoting to find new ways of serving customers at home. The Alinea Group has turned all five of its restaurants into takeout spaces. What’s more though, it has deliberately scaled down and changed the menu to make it simpler and more affordable recognising that most people won’t be dropping a few hundred dollars on one meal right now.

It’s not the only one doing the same thing. What sets Alinea apart though is that it also operates a restaurant reservation app called Tock. It has now pivoted this into Tock to Go allowing restaurants to take orders for collection or delivery.

Meanwhile, in NYC top restaurants are using their expertise and impressive wine collections into wine clubs and bottle shops. Their websites have now become wine shops with good quality wines being sold for a lower price than normal, but still a decent price compared to a convenience store ($20-40 on average).

Others are selling high-end and rare bottles to those with more money to spend as a way of adding a little luxury to quarantine life. Curated wine packages of multiple bottles are also being offered in the style of online wine clubs.

There are some hoops – licensing laws mean that food and snacks have to be sold with the alcohol – but it’s a great example of how businesses can pivot their model to make use of the valuable assets and knowledge they already possess.


 
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TIPS-copy-copy.jpg
1. Communicate: Let your customers know that you're still there to serve them

2. Modify your business hours:  shorter business hours may be necessary.

3. Adapt to meet new demands and needs: Be creative about serving customers who are staying at home. 

4. Update your website: Now may be a good time for a complete overhaul of your website.

5. Monitor your pivot strategy regularly: Don't rely on gut instinct or quarterly financial statements to monitor your company's performance. 



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