“When you’re finished changing, you’re finished,” said the wise Benjamin Franklin. The trick is, how to decide when change should happen?
It’s a topic that makes business leaders nervous. Change is good, but so is stability. The world does not comprise of only mavericks and trailblazers – and even those often reach their stature through steady determination, not constantly rocking the boat.
As the world builds on the tectonic shift of technology that was the Internet 1.0 era, we move into Industry 4.0, also called the Fourth Industrial Revolution. The radical impact that technologies such as the internet, email and business applications created is now reaching beyond our computer screens and into the world around us.
Breakthroughs such as the Internet of Things, blockchain, artificial intelligence, connected cars, and smart cities are not just shaking things up – they are rewriting the rules.
History repeating itself?
Radically changing business models is not a new phenomenon. By 2027, three quarters of S&P 500 companies will be replaced. Over the last 60 years nearly 90 percent of Fortune 500 companies ceased to exist as independent entities.
The last time business experienced such upheaval was in the late 1970s, when new technologies sparked a massive shakeup of incumbents, leading into the consolidation-crazy 1980s.
Related: 4 Types Of Business Models
Hasbro, a multinational toy giant, previously sold textiles. So did Berkshire Hathaway, now an investment titan. Western Union was once the leader of telegraph systems, today it is a leader in cash transfers. Fujifilm has shifted its vast skills in chemicals from photography to making high-end cosmetics.
The six business models for change
Although we can’t see the future, we can look at what is working so far. And from these learnings, six distinct business models show promising resilience:
- The Outcomes Based Model – Instead of selling just products or services, a company’s revenue is determined by the outcomes their customers experience. Insurance companies favouring a usage-based model are good examples of this.
- The Expansion Into New Territories Model – This is the most popular example of disruption, with cases that include banks moving into telecommunications and telecommunication moving into banking. Amazon – a major freight customer – is now expanding into that very business.
- The Digitisation of Products and Services Model – Here companies use digitisation to improve the entire value chain and reduce costs. Think Apple’s music empire, or the efforts by banks to convince customers to swipe cards instead of exchanging cash.
- The Companies that Compete as an Ecosystem Model – This involves using complementary partners to build richer products. One could argue that car companies have been doing this for decades, but the connected car is reshaping even that stoic sector through new and radical partnerships.
- The Shared Economy Model – These businesses thrive on exploiting under-utilised assets sourced from third parties. AirBnB owns no hotels. Facebook creates no content. Yet both grow on those elements, all coming from the outside.
- The Digital Platform – The sixth and final model, this could be an online marketplace such as New Zealand’s Powershop; a networking space like SAP Ariba or the business tools found in Microsoft’s Office 365. Digital Platforms not only offer more for less, but create new and exotic ways of monetisation.
Related: 3 Types Of Ecommerce Business Models
Even the most conservative and largest companies have shifted their business models, extracting most of their revenue from streams that didn’t even exist a decade ago.
You may feel your business is still in calm seas, or perhaps it already feels the waves smacking its hull. But it’s critical that you see the winds of change blowing, and prepare to chart a new course for success in your business.
Investing In Value Creation Tools Can Help Your Business Grow
ACCA on attracting new clients, establishing and strengthening commercial partnerships and accessing external finance to help your business expand.
The business journey of many SMEs is often characterised by a gradual change in internal management practices which develop as the business operations grow. The subsequent recognition of the business’s value creation, across all its operations – tends to emerge slowly but surely alongside this process.
Gaining an understanding of ongoing value creation can be challenging. This is because smaller companies tend to not have access to simple and understandable data sets on everything, which is and isn’t contributing to value across the business.
For example, customer and supplier relationships, human capital and intellectual property are all common examples of activities where SMEs regularly experience difficulties in determining the real contribution to the businesses’ overall value. These are areas that are not picked up by financial reports that are a focal point of many growing businesses, hence the importance of these areas in business is not given the proper attention it deserves.
However, by improving trust and relationships between customers and those along your supply chain, this information can be used to attract new clients, establish and strengthen commercial partnerships and access external finance to help your business expand.
Key actions to consider when capturing the value within your business include the following:
- Use cloud and data analytics technology to support growth;
- Create a business strategy which incorporates everything;
- Allow staff to use new technologies to innovate; and
- Appreciate the importance of technology in attracting external finance.
These actions will help you succeed in developing a successful business strategy.
Use cloud and data analytics technology to support growth
Purchasing relevant software packages could help you access the data you need to understand where and when value is being created. Cloud and data analytics technology can provide a real-time flow of information, offering detailed measures across workflows, whilst also complementing existing reporting processes.
More long term, this technology can provide you with greater flexibility when anticipating future periods of growth.
For example, when the time comes to up-scale your business operations, it could help your finance function adapt more easily to any additional demands being placed upon it and mitigate the risk of disruption towards ongoing operations.
At the same time investing in this technology doesn’t have to happen overnight. Software packages can be purchased in stages and tailored to meet the specific needs of your business.
Create a business strategy which incorporates everything
Business success will often be determined by how effectively you can combine the value of ongoing operations into the development of a single, overarching business strategy. Understanding of the key strategic themes by employees is critical in aiding future business expansion plans and growth. This integration can support planning processes.
By taking a short, medium and long-term view on how value creation might change across the business, you will be in a much better place to identify upcoming risks and opportunities related to your growth ambitions.
The practical delivery of this might involve regular integrated reporting across your business’s operations. The more data that is involved in this process, the more helpful it will be towards informing your management decisions.
Allow work teams to use new technologies to innovate
Companies might also want to consider supporting work teams in certain areas to come up with new ideas to enhance plans for business growth and learn from possible failures, without the personal risks that entrepreneurship entails.
Allowing employees to use new technologies could help to reduce costs and offer new revenue opportunities as your business expands. It could also help to stimulate a high growth business and to fully communicate business’s value to potential clients and commercial partners.
Appreciate the importance of technology in attracting external finance
Investing in technology at an early stage can help attract external investors, as well as reducing the cost of raising growth finance. Such investors need to be able to understand the broader strategy of your business.
Lenders are increasingly using data to build up a broad perspective on the growth potential of SMEs. If you can provide real-time information – rather than just historical data – of your business’s performance, this could greatly increase the chances of obtaining the finance you need to grow.
However, there remains a gap and potential to co-create new approaches of raising capital amongst growing businesses and in creating agreed terms of sharing risks. This could bolster the advancement of entrepreneurial houses toward creating real economic equity in long term.
Embracing Technology For Business
The technologies that can boost efficiency in your organisation.
The world is dominated by technology. So if you haven’t yet heard terms like ML, AI, VR, and the wave of other acronyms used to address the new developments in this modern age, you will soon. Because, the era of big data is here. And resisting it is futile. We have to embrace new technologies to survive, let alone compete. Luckily, a lot of today’s tech helps make business more streamlined.
Here are a few that make all the difference:
WebVault is a digital ‘vault’ for securely storing documents, emails, certificates, voice files, and other data in the cloud. WebVault Achiever can even load completed trainee certificates into the vault, without your needing to vet or track them.
Asana is a tool for managing team-based projects. It allows users to break projects into tasks, assign them to individuals, add followers, and schedule deadlines. This ensures transparency, accountability, and helps to streamline and track deliverables.
Slack is like a WhatsApp group for business. You can sort interests by topic, and use the search function for anything, including old discussions and shared files. The most notable benefit is that Slack stops back and forth email discussions, decluttering your inbox. It also integrates easily with platforms like Twitter and Dropbox.
Wave is accounting software that offers small to medium-sized businesses access to helpful tools. Through mobile and web-based platforms, users can build and send professional cost estimates and tax invoices, accept credit cards, keep track of payments, administer payroll, and streamline expense tracking.
Artificial intelligence (also known as AI) is created from technology called machine (or computer) learning (ML). In other words: by using complex networks, computers can learn without the need for human direction or oversight.
One of the most exciting ways that AI affects learning is by identifying overlaps between different industries and subjects. Connections that would take humans many years of study to discover, can now take computers less than a day to unveil, revealing complex subjects that we may never have realised existed without it.
Virtual & augmented reality
Most people learn best by getting involved. But, where the stakes are high or expensive, like the military, medicine, and mining, this isn’t feasible. By digitally influencing how learners see their environment, virtual reality (VR) and augmented reality (AR) allow them to safely, cost-effectively practise the impractical.
The modern technologies we’re seeing today are fascinating, but they aren’t always fool-proof. Indeed, for every new technology, there are thousands of hackers spending all of their time looking for ways to break in.
For example, consider how you can monitor your home on a device. This is convenient for you, but it defeats the point if a hacker can access the video feed. There are even organisations online that provide malware and phishing as a service.
If you’re stepping into new technological territory, you need to be prepared for whatever comes your way. The best protection against threats like this is to hire an ethical hacker yourself; one who can tell you where your weak points are and how to protect them.
Blockchain technology is controversial thanks to its association with Bitcoin. But it is critical to differentiate the two. Bitcoin, on the one hand, is a digital currency. Blockchain, however, is the technology it uses for its distributed digital ledger.
Because a blockchain is both distributed and transparent, it allows digital peer-to-peer transactions to be executed safely and stored securely. And because the technology isn’t limited to finance, it has the potential to disrupt the way many companies do business. Notable leaders in this space include WalMart, IBM, and Nestlé, who are using blockchain technology to improve their systems.
The age of the digital innovation is here, and that means the world is changing rapidly. The best ways to be prepared are to be aware and to adapt quickly.
Technology As A Platform For Organisation Wealth
How embracing technology can lead to all-round business efficiency.
Organisational wealth can mean different things to different people, but holistically, organisational wealth means that every part of the business is running optimally. This includes business systems, internal processes, staff morale, job satisfaction and, of course, financial success. Technology is arguably more integral today than it ever has been before – if businesses don’t take advantage of, and embrace, the technology that is available to them then they are very likely to fall behind the competition.
In today’s fast-paced world, technology is an essential tool and this rings true for small to medium businesses (SME’s) too – it can enable them to thrive and remain agile in an increasingly turbulent environment. Technology can be quite intimidating, and it may seem too costly for an SME, but in actual fact there are many ways to use technology in a cost-effective way to promote holistic organisational wealth.
Having the correct business systems in place means that your employees are more likely to feel productive, less frustrated and more efficient. These are all important factors for ensuring employees are satisfied and morale is positive within the company.
If we look at the business systems that are essential for SME’s, business owners agree that having a good accounting system is essential to ensure a healthy cash flow. However, in order to effectively manage a growing business, the correct business management system has to be implemented to control and integrate key business functionalities that drive a holistic and profitable operation. An accounting-only system will not suffice and/or promote growth. A comprehensive business management solution makes it possible to gather, store, integrate and analyse information for increased productivity and profit; all key components of promoting organisational wealth.
For SMEs, this technology comes in the form of an enterprise resource planning (ERP) software, meaning that key business functionalities are integrated under one flexible and responsive system. Smaller companies can benefit greatly from using ERP software to streamline their internal processes and reduce the time taken on admin tasks. Management are now able to instantly access accurate and real-time business information, so that they can respond to customers faster and increase their profitabilty.
If SME’s implement the correct ERP system, they can see substantial benefits for the organisation. The biggest of which is increased efficiency – by automating tasks less time is spent on admin, and more time can be devoted to growing the business. This also ties into greater profit margins. Having better control over the processes within your business will lead to an increase in output and a decrease in inefficient overheads, therefore improving sales and profit margins.
Another important advantage is greater organisational control. Having insight into operational activities and traceability over stock means that managers are able to control the workflows and utilise resources more efficiently, without having to resort to micro-management. This leads into another very important advantage: uplifted staff morale. By removing the need for micro-management and by automating certain processes and workflows, the likelihood of human error is greatly reduced and employees will become more efficient and confident in their capabilities.
Perhaps the greatest benefit is having access to real-time insights and data, whereby accurate and informed decisions can be made to respond to environmental changes effectively and quickly. Enhanced decision-making using up-to-the-minute information means that managers can ensure correct decisions are being made at the right time, and in the right context.
All of the above advantages lead to one road: increased customer satisfaction, which is, after all, the end goal. By having the entire sales process optimised and tracked from the initial lead stage, through to managing sales orders, customer data and streamlining after-sales support, customers will be more satisfied. This operational integration and increased proficiency leads to greater sales and profits, which ultimately increases organisational wealth.
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