At the beginning of the pandemic, there was a catchphrase we were hearing all the time – the new normal – and many thought that it would “stick around” for just a few months, and afterward, we could easily return to our old normal. But the new normal is here to stay and in order to grow or, in some cases, to survive businesses around the world had to adapt. Yet, some of them were not ready for such disruption so they either failed or barely made it, while others managed to thrive as they’ve succeeded in quickly reconfiguring and adapting to the new challenges by reviewing their business models. Moreover, there are businesses that started right in 2020 that are successful and constantly growing. So that made us wonder: are Italian PMI’s, the lifeblood of the economy, reviewing their business models? And should they?
Why PMIs have to review their business model?
Well, that’s because markets are changing and so does consumer behavior, thus a product or service that yesterday was doing well, today may no longer respond or entirely fulfill your customer needs. Or maybe, the way you once produced and delivered the product does not bring you the same profit that it did before. Moreover, competition might get fiercer or deliver a value proposition that brings more value to the customers than yours does, or a force majeure event might happen, like Covid 19.
Yes, Covid 19 has shifted economies and forced business to take a close look at their business models. And if we take a look at one of the McKinsey Global Institute reports we can see that the pandemic has brought both changes and opportunities. On the change side, consumer preferences have definitely transformed, with online at the top that changed the way we shop or seek medical advice. On the opportunities side, innovation in traditional sectors could bring further growth meaning that manufacturers that introduce new technologies, materials and processes could have new growth opportunities, and those come from reviewing your business model. Back in Italy, Accenture has also deep dived into the changes and repercussions of the pandemic, and we are seeing the same major shifts: from reinventing businesses to new skills and roles concerning the workforce, or adoption of new technologies.
Back to our PMIs and why reviewing the business model from time to time is important.
What we know for sure is that the Italian economy relies on them: over 4 million small companies and 156.000 medium companies are operating in Italy with 80% of the total Italian workforce. And it seems that they were the most affected by the pandemic, according to an EY SME Survey. The research states that at a European level 74% of the PMIs were negatively impacted by Covid whereas in Italy 90% of the PMIs were heavily impacted. Why this huge gap? Besides the fact that Italy was the first country to impose a full lockdown, the survey states that the lack of digitalization in Italian PMIs has made the crisis deepen, making it easier for foreign competitors to thrive. And that made half of the PMIs start revising their business models to best respond to the crisis. Some of them adopted new business models like the Franchising or Fremium (basic service package to which personalized premium services are added) others turned over digital platforms.
It’s clear that the pandemic has had an unprecedented effect on businesses, but it’s also true that companies that succeeded in best analyzing their business model, meaning their offer to the market, the way they deliver it and at what costs, long time before the pandemic, have managed to ride it or even grow exponentially. Thus, checking and reviewing your business model and business environment is crucial.
How to analyze your business model
Each business owner has his way of analyzing a business, whether it is a start-up, or an established one. Some may only look at the numbers or partnerships, others may take a deep dive into consumer changes over time, while others may closely follow the competition. But today there are a lot of tools to help business owners analyze their business and one of them is the Business Model Canvas.
This is a tool invented by Alex Osterwalder that is utterly clear and so well structured, tested and implemented by big companies around the world, designed to help business owners understand how their business works and what needs to be done in order to stay relevant or innovate. The business model canvas can bring such insights about your business and help you strategize, attain a clear picture of who you serve (Customer Segments), what do you offer your customers to better differentiate from your competition or what is your value proposition (Value Propositions), what channels are you selling your value proposition trough (Channels), what key resources do you need and how your company makes money (Key Resources). But what exactly is it?
It’s a model divided into nine building blocks that do not function on their own but are connected and thus tell the story of your company. These intertwined blocks help you work on a new business idea or see where your business is today, but they can also help you plan your next moves in order to grow it, face consumer behavior changes, market challenges and competition. In a second article, we will give some tips on how to work with the Business Model Canvas.
Seems easy, right? Well, yes, the canvas helps you get a quick view of what your business looks like today, but there are many other factors that impact your business you should take into consideration: from key market trends to market forces such as market segments, needs and demands, issues, switching costs and macro-economic forces. It is a type of exercise that takes time, reviewing your business, but it is proven to work so could be to the benefit of your business in trying it out.
Successful new business born in the pandemic years.
There are plenty of new businesses and business models that launched during the pandemic years, and Delivery Valley in Milan is one of them and we found it to be extremely interesting. It is a 100% Italian-owned business that not only succeeded to take off in 2020 but managed to rapidly expand and turn into a successful one. Born right in the middle of the pandemic, June 2020, Delivery Valley is the “Italian Kitchen Reloaded”, that offers quality restaurant food, without getting into one, cooked to be transported on two wheels by collaborating with major players in the food delivery industry.
Their model is successful as they’ve carefully constructed their business or better say their story, creating a new way of cooking and delivering good food, that happened to launch in a time when Italians had been already experiencing the full lockdown without knowing they were heading to a second one. Besides the concept, the owners created some playful and inventive brands, that quickly turn on your imagination and curiosity to taste the giga burger, the fritt fighter, the cat-su Sandro or the lievito mother fucker, that is actually their brand of pizzas 😊 Moreover, Delivery Values has an Incubator Lab for third party brands in need of expertise, communication and location that facilitate the entire “delivery” of the brand without having to create a full infrastructure.
Is this a sustainable business? Does their story fill and fit the nine blocks of the Business Model Canvas? In 2021, Delivery Valley opened a second location in Milan, thus it seems their business creates and delivers value to its consumers for the time being so they must have done it right.
Do you want to create a new business or are you the owner of a PMI that wants to review the actual business model backed by a marketing strategy? Leave us a message, we will be happy to meet with you.
