Companies responded to a variety of COVID-19-related adjustments considerably faster than they ever imagined feasible before the crisis, according to McKinsey research.
Most of the changes brought on by the coronavirus have entailed enhanced digitalization. In fact a recent study has shown that over 50% of companies are currently investing in technology to gain a competitive advantage or refocusing their entire operation on digital technologies.
How should it be utilised?
During a webinar on the subject, Dr Sergio Costa, lecturer from the University of Bath's Entrepreneurship Management and Innovation online MSc. explains "A business model is a fantastic planning and testing tool because it allows you to think about the future without investing too much time and money. You may also use it to convey the notion to others and get comments from them. On paper, it's a lot easier to make changes than it is in a live business."
Business models can also be used for 'understanding, communicating, analysing, managing, simulating, and patenting the business logic of a firm,' according to eminent business theorist Alexander Osterwalder.
Dr. Costa adds, "A standard business model canvas comprises nine pieces that can be divided into three divisions." "First, there are financial components, such as income streams and cost structure - essentially money in and money out." Then there are those that are supply-related, such as our main resources, suppliers, and activities. Finally, we have the demand-related aspects of the business model, which are your consumers. Your value proposition, customer segments, channels, and customer connections are all included in this area. "They all have to work together as a team."
What has been the reaction of businesses to COVID-19?
Consumers quickly shifted to online channels during the pandemic, and businesses and industries responded. According to research, COVID-19 has accelerated the digitalization of firms' supply chains, customer contacts, and internal operations by three to four years. According to reports, the percentage of items and services in corporate portfolios that may be accessed or purchased online has increased by seven years.
During the lockdown, a fifth of micro-businesses established an online presence for the first time, and more than half of those who already had a website bolstered it with new content, social media posting, or the addition of an online store.
"Organisations are presenting the same value proposition with a more digital flavour," Dr Costa explains. "As a result of the COVID-19 problem, businesses are looking for digital substitutes for their products and services, as well as ways to provide them with little physical contact and better safety."
So, how can companies change their business strategies to make this transition?
"Firms must be imaginative in revamping current products, rethinking product distribution routes and procedures, and seeking strategic positions and partners that may assist them in achieving their goals," Dr. Costa recommends.
Dr. Costa also gives the example of an online clothing business who expanded their digital marketing activity while closing their physical store during the pandemic.
As a result of the pandemic, this company changed its business model from being primarily retail-based to being entirely online. They shut down their physical store and poured more money into digital marketing, which included social media, Amazon, and their own website. As a result, despite the epidemic, online sales skyrocketed, resulting in only a 7% decline in overall sales. This was a quick turnaround for the company, as their previous intentions for 2020 were to upgrade the physical store, but they ultimately had to go in a different way.
Many firms have survived the pandemic by modifying - and in some cases entirely revamping - their business models.
"This crisis has demonstrated that firms must allow for variability- they must include a level of flexibility and slack into how they function, and engage with their workers to manage hard times," says entrepreneur and business director Hanna VanKuiken.
Will the pandemic, then, result in a lasting shift toward internet business models?
According to Deloitte, "the pandemic is fast altering human behaviour toward online platforms, and the modifications are likely to persist post-pandemic." "While many businesses are struggling to stay afloat in the short term, the crisis also presents an opportunity; daring businesses who invest aggressively and promptly in their online operations are likely to become market leaders." Dr. Costa concurs. "I don't believe we'll return to where we were before." We're shifting to more online services and products, and the longer the crisis lasts, the more noticeable these shifts will be."
Understanding the role of business models and how they can adapt is critical to a successful entrepreneurial strategy. They can assist you in ensuring that you are establishing a successful business with all the necessary components, as well as allowing you to create and test different business models before committing to a final strategy. They can also provide the foundation for making daring and innovative business decisions.
