By Alan D Walker
The experiences of COVID-19 are likely to drive significant long-term changes in company business models. Executives should already be considering how they could, or should, make changes to their business model in five key areas: Products and Services, Channels, Workforce, Supply Chains, and Internal Priorities.
COVID-19 temporarily interrupted many companies’ business models. But executives should now be considering how they could, or should, make lasting changes, given their recent experiences.
These are the key business model questions I believe executives should be asking both themselves and their colleagues, grouped under five headings:
1. Products and Services
In the early weeks of the COVID-19 economic downturn, companies with prepaid revenues, recurring income streams and/or subscription revenue models proved more resilient than others. What can we do to move more of our revenue to prepaid, recurring, or subscription models? Does COVID-19 create an opening for new, or updated, products and services we should be offering?
2. Channels
With huge numbers of people in lockdown, traditional distribution channels (particularly those involving bricks and mortar) often became useless. Do we need to change our existing distribution channel mix, or even add new channels (such as digital) altogether? The same issues apply to post-sale servicing. For example, many contact centers were quickly overwhelmed by their customers. Do we need to change, or add to, our mix of servicing channels? What can we do to make them more responsive to demand and/or migrate demand to other channels? And if we currently need to service our customers on-site, what can we do to add “remote” options?
3. Workforce
The COVID-19 lockdowns have proved that remote/mobile working is far more feasible than many senior executives had previously imagined. What is our opportunity to reduce our real estate footprint by making remote/mobile working the norm for certain employees? Conversely, how are we going to respond to any employees who, having started working off-site, now demand to continue working that way?
As the downturn hit, many companies struggled to deal with unneeded labor that they still had to pay. Meantime, companies such as Amazon and Instacart suddenly found themselves with far fewer workers than they now needed. What can our business do to make our own workforce more flexible in the future? Teamwork and collaboration usually drive significant benefits. And we’ve now discovered collaboration tools that can work successfully across vast geographies.
So do we have more scope for beneficial internal collaboration than we previously realized? COVID-19 has shown the susceptibility of carbon-based workers (humans!) to disease. What’s the scope for replacing more of them with less-vulnerable, silicon-based workers such as robots, process automation bots, and artificial intelligence?
4. Supply Chains
Given the disruptions we’ve seen to supply chains, do we need to carry higher levels of inventory in future? Given that many countries imposed blanket bans on certain exports, in some cases even from a subsidiary to a parent company, do we need to replace some of our overseas suppliers and/or overseas subsidiaries with in-country alternatives? Do we need to remove reliance on certain supply partners altogether, by manufacturing that component in-house (where possible)?
5. Internal Priorities
In addition to its business structures, a company also has a tacit understanding of its relative priorities. Do some of these also need to change? Do we need to invest (even) more into IT, especially in “hygiene factors” such as resilience and cybersecurity? Should we be allocating an increased share of our budgets to risk management and business continuity planning?
In common with individuals, many businesses found that their “rainy day funds” just weren’t big enough when faced with COVID-19. Even once things return to “normal,” should we be reducing the levels of cash we pay out in bonuses and/or dividends, so that we’re better-placed when the next “grey swan event” comes along?