Business Model in economically challenging times

Businesses world over, are today facing economically challenging times. A good number of them have shut down operations with the attendant job losses and missed tax revenue by the government.

Best practice in Private Sector Development demands that the State sees the private sector operators as allies in economic development and therefore, should design policies and programme that are business-enabling. This approach should be aimed at encouraging these operators to successfully navigate the challenging times and remain in business.

However, the focus of this Research Brief from our Business Development Desk is on the need for businesses to interrogate and clarify their Business Model in economically challenging times.

An enterprise's ability to provide quality products or services, is no guarantee for success in the market place. Every enterprise needs to create an effective and efficient framework for operating, competing, using its resources, interfacing with its target customers/clients, looking at its cost structure and revenue streams, to deliver value, generate revenues and make profit.

Business Model, is the framework that embodies these and other related enterprise operating blocks. Wholistically, a business model captures the understated enterprise operating blocks:

- The key partners that facilitate the enterprise value creation (suppliers, service providers, including its bankers, regulatory agencies that interface with the enterprise etc.).

- Key activities carried out by the enterprise, that lead to value creation.

- Key resources owned by the enterprise to facilitate its value creation. These include the enterprise's internal capabilities or skill sets that give it a competitive edge.

- The enterprise's value proposition, that sets it apart from the "crowd ".

- CUSTOMER RELATIONSHIPS: This block x-rays how the enterprise relates with its target customers/clients.

- CUSTOMER SEGMENTS: This identifies the customer segments the enterprise serves.

- CHANNELS: This block identifies the enterprise's routes for communicating and reaching each of the customer segments in a way that gives them a delightful experience.

- COST STRUCTURE: This segment isolates the cost structure the enterprise normally incurs to deliver value and generate revenues.

- REVENUE STREAMS: This block identifies how the enterprise makes its money; that is, the way it generates its revenue. It is the lifeblood of a business model.

From the above brief review of the building blocks of a business model, it is clear that no enterprise can operate effectively, efficiently and sustainably without its own unique business model. A good business model should provide an enterprise with a competitive edge. Besides, crafting an enterprise business model, is part of the business development process. Thus, an enterprise development process is incomplete without its unique business model.
Beyond crafting an enterprise business model, our thesis is that a business model is not static; it is not cast on iron. Changing business environment, challenging economic situations, economy-wide business disruptions and market dynamics, call for an interrogation and reconfiguration of an enterprise business model. Once the fundamentals and the underlying assumptions of a Business Model change, there is need to interrogate the model, to make it responsive and relevant to the emerging business environment.

Some of the insights into a Business Model interrogation are:-

- Can our existing business model still support our business goals and aspirations?

- Are all our key partners still serving our need?

- Are there some of our key activities that need to be outsourced to save cost and strengthen the bottom line?

- Is our cost structure still business supportive or do we need to explore some cost containment strategies?

- How market relevant is our customer relationships? Do we need to re-jig it with more innovative strategies, to enhance customer/client retention?

- Have we embraced appropriate technology that can help us compete effectively in the changing market environment?

Our assessment of some of the SMEs that went out of business in Lagos, Nigeria, due to the impact of covid-19 pandemic, showed that a good number of them (65 percent) had no verifiable business model at the time of the pandemic, while 35 percent of them, never thought of revisiting or interrogating their existing business models.

An enterprise's interrogated and re-booted business model, can have a disruptive effect on the competitive space, setting the enterprise apart from the "crowd"

Young C. Okezie, PhD, FCA, FCDA,
The Chairman, CIDSAN Research, Innovation and Professional Development Committee