This is an extraordinarily difficult time for every organization. The current situation is chaotic, and we are unsure of what lies ahead. For your (and almost all organizations), it means the existing business model has been disrupted – maybe even obliterated – and your cash flow is drying up.
At the Miller Center for Social Entrepreneurship, we’ve been working with organizations around the world to help navigate a way through the crisis. Over the past three weeks, one message has come across loud and clear: Pivoting the business model into survival mode is foremost on the minds of leaders.
Innovation and pivoting
Pivoting a company’s business model is not new. It has been an integral part of business innovation for many years. Some companies are forced to pivot defensively because their original models are doomed. One of the most legendary pivots is the metamorphosis of Odeo into Twitter. Odeo began as a service for people to find podcasts, but their business model was threatened when iTunes launched. Odeo’s management gave employees two weeks to come up with new ideas. Twitter was born when the company decided to commercialize the microblogging tool they developed for internal communication.
Other companies pivot proactively when they see opportunities to change the competitive environment and seize an advantage. Starbucks, the coffee shop that seems to be on every other street corner, did not start out selling brewed coffee. They started off in 1971 selling espresso makers and coffee beans. Howard Schultz (current chairman, president and CEO) realized they were missing out on a huge opportunity. He transformed Starbucks’ business model to brew and sell Starbucks coffee in a European-style coffeehouse.
Pivots generally carry significant risks, but leadership recognizes that the potential benefits outweigh the risks. For companies looking at defensive pivots, it is clear that changing business models is less risky than doing nothing. This is the situation many organizations face today – inaction will lead to a failed business. This crisis makes defensive pivots essential for many companies.
The COVID-19 crisis has made it necessary for many commercial companies to shift their business models quickly. Many are repurposing their assets to create new value, protect the brand and survive.
- Gap, Nike, Zara, Brooks Brothers, and smaller manufacturers are using their factories to make masks, gowns and scrubs.
- Bicycle and sports equipment manufacturers are shifting to make personal protective equipment for frontline healthcare workers.
- LVMH, which owns luxury perfume and makeup brands, and P&G have shifted to hand sanitizer production; many alcoholic beverage producers are following a similar path.
- Warterfield, a trucking company, is partnering with logistics companies to replenish ransacked grocery and retail shelves.
- Hotel booking platform, Hotels.ng, has partnered with hotels to create isolation centers across Nigeria, an added buffer for the country’s limited quarantine facilities.
In addition, we have seen social impact enterprises pivoting to adjust to the current crisis.
- Extensio in Mexico provides agronomic advice via a mobile app for farmers; it’s now deploying its app to push public health advice and critical information.
- MaquaOnline, employing at-risk women as household maids, has pivoted to sanitation services.
- EllieFunDay, which sells baby clothes made by artisans, is now making fabric facemasks; the company is donating masks to hospitals and rolling out a buy-one-give-one model.
- Everytable, a Los-Angeles-based healthy food chain, has shifted to making home deliveries and started a COVID-19 helpline to link its services with schools, senior centers and homeless shelters in need of healthy, affordable meals.
- Lifebank, a health startup in Nigeria, created a national register for ventilators and respirators for hospitals.
- One social enterprise (which I am unable to reveal at the time) is pivoting their disease management expertise to track the spread of COVID-19 in Africa.
Where to look for pivots
All good pivots start with great questions. There are three business model aspects you should explore when deciding on potential pivots.
- Value proposition: What value do you deliver with your product or service?
- Value networks: How do you deliver and monetize your product or service?
- Target customers: Who receives and benefits from what you provide?
- Fulfill unmet needs. Shift to supply what people need today (health, nutrition, safety, and in-home education)
- Create solutions. Provide complete solutions to meet people’s needs, not just a partial solution. (The trucking industry works with logistics companies to supply food.)
- Create new value with existing assets. Shift from nice to have to must have. (MaquaOnline is focusing on offering sanitation services rather than its full line of domestic services.)
- Rethink product/service dichotomy. Make your service a product or vice versa. (Deliver home school education products rather than provide education services.)
- Focus on what customers love about what you do. Make this a business. (Wrigley gave away gum to support the original business of selling baking goods and realized people liked the gum more than the baking goods.)