Adjusting the Business Model

One of the things that successful companies understand is that a business model is seldom perfect when it is first formulated. It may work in one country, but not in another. It may work with one set of customers, but not with another. Borrowed and proven models may not have this problem, but then the challenge often becomes dislodging established competitors.

A plausible model may overlook several factors and make reasonable, yet untrue assumptions. For example, EuroDisney assumed that European consumers were essentially like American consumers, but they weren't. The result was many years of losses, until they adjusted their business model. Sometimes luck will reveal a totally unforeseen opportunity. For example, when Ford built their first SUVs, they saw it as an opportunity to make a small profit, but the Ford SUV factories turned out to be the most profitable in the whole company.

It's wise to adjust the business model as circumstances dictate and not get wedded to the initial model. Business models should be flexible and built for change, especially in volatile industries.

An effective strategy needs to accompany the business model. For example, Microsoft has a great business model, but a new entry has essentially no viable strategy to successfully adopt the same model. On the other hand, there are viable business models and strategies that allow a company to compete in the IT consulting market.