The world seems a lot different today than just 30 days ago.
Global markets have taken a massive plunge, schools have shut down globally, shopping malls have closed, the NBA has suspended its season, the Tokyo Olympics have been moved 2021, almost everybody who can manage it is working from home (that’s if they haven’t been let go), and public gatherings have been outlawed — it’s like nothing we’ve seen since perhaps World War 2.
I spoke business survival strategies with Steve Blank for an episode of the Future Squared podcast today. In response to the crisis, he urged leaders to first take stock of their runway, then ask themselves if this crisis is a three-month, one-year, or three-year problem, and adapt accordingly.
The shorter the runway and/or the longer the problem, the more drastic the action that leaders need to take.
Read Steve Blank’s ‘Virus Survival Strategy For Your Startup’
“Winter is coming.” This is the one blog post that I hope I’m completely wrong about. With the Covid-19 virus a…
One should not make the mistake of assuming that what was true 30 days ago is still true today.
A Longterm Problem Looks Likely
Even if we successfully flatten the curve in the next few months, and the number of new COVID19 cases grinds to a halt, it is unlikely that the economy will bounce back overnight.
Mass layoffs — such as the standing down of two-thirds of Qantas’ staff — will result in unemployment numbers skyrocketing, with some pundits projecting unemployment in the US will surpass 20% — something we’ve not seen since the Great Depression. If this eventuates, it’s likely to create a ripple effect on supply and demand that we won’t bounce back from in a hurry, and will send economies into recession.
In the United States, the average recession has historically lasted 22 months.
Given all of this — it’s not a stretch to conclude that we’re dealing with a longterm problem — a much longer one than many leaders had hoped for just a few short weeks ago.
The Emergence of New Markets
Given the emerging long-term nature of the problem, in order to survive the crisis businesses might require an entirely new business model — preferably one that makes the best use of existing current resources; people, intellectual property, systems and technology, or capital.
However, while it might seem like nothing but doom and gloom for many companies, the crisis has created not just losers, but also winners and new business model opportunities — should we look for them.
In his landmark theory of disruption, the late Clayton Christensen found that :
- disruptors either come in at the bottom of the market before moving upmarket and attacking large incumbents (think discount retailers moving upmarket to disrupt traditional retailers); or
- disruptors create new markets where they take hold in a completely new value network and appeal to customers who have previously gone without the product.
For example, mobile games not only appealed to existing gamers when they made their debut, but also tapped into a massive new market in women who had largely ignored video-game consoles. In fact, women were found to be a larger market than men when it came to mobile games in 2018.
And this is precisely what we’re seeing now — the emergence of new markets.
Zoom — one of the world’s leading video-conferencing platforms— is tapping into a new market of people who previously went without their product. This includes Gen-Xers and older who work for large organisations and had always optimised for face-to-face meetings before they were forced to work from home.
This, coupled with the fact that almost everybody ‘white-collar’ is now working from home has sent Zoom’s stocks soaring by 50% in the past 30 days alone.
Source: Google Finance
It’s always darkest before the dawn
Oftentimes, when people go through a devastating life event — be it a cancer scare, or say a divorce —they look back on the experience and insist that they wouldn’t change anything. This is because it is in times of adversity that we are more likely to ask the big questions, answer them and make some profoundly positive changes in our lives.
COVID19 might just have the capacity to do the same for a lot of entrepreneurs, small businesses and startups who might need to ask the big questions themselves, only in this case, about their business models.
Where to from here?
If we’re looking to navigate new territories, it’s helpful to have something representing a map — a map that will empower leaders to identify new markets, and new business model opportunities.
I conducted the following non-exhaustive stocktake of short-term winners and losers below — a map of sorts. And when I say ‘losers’, I‘m’ strictly referring to their pre-COVID19 business models — they can become winners by adapting.
Note: some of these might be winners or losers, depending on how you look at them (liquor stores might actually be losers if people aren’t allowed to host parties)
I conducted a number of Google Trends searches to validate whether my thinking on some of the above-mentioned ‘winners and losers’ was accurate — and here’s what I found.
Health Supplements (“Vitamin C”)
Encouragingly, the following might suggest that people now value their health more than Kim Kardashian’s movements!
Source: Google Trends
Fitness equipment (“Kettlebell)”
Source: Google Trends
e-Learning (“Distance Education”)
Source: Google Trends
In all of the above, you’ll note that a sharp spike in demand kicked off around February 23 as the severity of the crisis started to truly break into the public’s consciousness.
Avoid red oceans — look for blue ones instead
Interestingly, if we’re looking for obvious opportunities to explore, or for business model reinvention, then it strikes me that we might be better off looking at the losers instead of the winners.
Why? Because the winners column is for the most part populated by companies who are already in this space, and already have business models in place to capitalise if they’re not doing so already.
Entering this space would mean jumping into what INSEAD professors W. Chan Kim and Renée Mauborgne call a blood red ocean — characterised by vicious competition and a race to the bottom. It’s not that you won’t find opportunities in the winners column, just that you should be more prepared for a serious fight!
It’s in the losers column we will find trillions upon trillions of dollars of needs that were previously met by companies who are either a) currently unable to operate as they did before — restaurants, bars, airlines, gyms, concert promoters — or b) have taken a massive revenue ‘haircut’.
Identifying new business model opportunities
When it comes to identifying opportunities in the loser column, ask yourself:
How might we satisfy needs previous customers still have, but losing business models cannot provide?
Think comedy clubs — people still want to enjoy a shared, visceral experience of seeing standup comics perform live. The same goes for live music.
Think conferences — people still have a desire to network and connect with people that they can learn from and/or work with to move their careers forward.
Think tourism — people still want the enriching experience that comes with exploring new places and people.
How might we satisfy the needs of concert-goers?
Hypothetically speaking, you might provide the technology infrastructure and marketing for a world-wide concert streamed to monitors from the isolation bunker of a popular band.
Instead of charging $200 for a ticket — as you would devilishly do for a normal concert — you might charge just $10, but reap the rewards of a much larger audience than you can fit into Madison Square Garden, sans the costs that come with a touring band.
And while the band is streaming live to hundreds of thousands, if not millions of people, perhaps you can offer real-time up-sells of band merchandise (which may or may not include branded face-masks. Update: They did)!
Of course, this is just me riffing here — but you get the idea!
Business model reinvention
To help you envisage new business model opportunities like this one, it would be worthwhile observing the typical pre-COVID19 business model in the industries or areas you’re looking at, determine what no longer applies, and what you might replace it with given the new realities.
At a minimum you’ll want to consider:
- Problem Solution Fit
- Distribution channel
- Customer segment(s)
- Revenue model
- Cost structure
- Marketing channels
To assist in choosing between different business model building blocks, I’ve found Doblin’s Ten Types of Innovation, below, to be a very useful guide.
Once you’ve got a handful of potential business models worth tackling, it’s imperative to determine which is best suited to your existing resources and/or value chain, and which you think your company is likely to succeed at with the least effort.
Once you‘ve landed on a business model, it’s time to execute, learn and adapt…fast.
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Steve Glaveski is the co-founder of Collective Campus, author of Time Rich, Employee to Entrepreneur and host of the Future Squared podcast. He’s a chronic autodidact, and he’s into everything from 80s metal and high-intensity workouts to attempting to surf and do standup comedy.