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Jun 12
2017

Beware of Changing Business Models

Posted by: Steve Marr

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Business models and the landscape for them change quickly. Several recent examples include Kodak's bankruptcy because they failed to embrace the new digital camera technology.  We all know that Amazon is wreaking havoc on the traditional brick and mortar stores.  Newspapers all over the country are folding because they are unable to compete with new online models.

 

When I was in the international trade business customer service made a major adjustment. In the past they appraised value for duty purposes and it could be a very complex process to determine the correct valuation for custom's purposes.  The government changed the value for duty by rewriting the tariff act. In most instances the value for duty became the price paid or payable by the importer. We had many experts on staff that assisted customers with very complex valuation issues.  When most of these issues went away we could no longer cover the expense for this expertise. The business model needed to be adjusted, something we never did as successfully as I would’ve liked.

I was recently in Michigan and stopped by the old Notre Dame pharmacy in my hometown, one of the few independent pharmacies still in business. My dad had his first job there serving sodas when they had a soda fountain.  Years later the fountain disappeared. It was replaced with merchandise providing more revenue for the space. I talked to the manager for a few minutes as he outlined how they’ve had to reinvent themselves numerous times to stay in business. The store has been owned by the same family for nearly 100 years.

We see examples in business where big name companies failed to adapt.  Kodak developed the first digital camera and made the decision not to bring it to market. Instead Kodak preferred to push the sales of their other camera lines, film and picture developing products. The result? Kodak went bankrupt. 

Just look back a few years at telephone development. Forty years ago managing your telephone's long distance expenses was a big deal and a major expense to many companies. Companies like Sprint drastically cut these costs. Most of us have an unlimited calling service nationwide for a few dollars a month. But that's not enough. We need Internet connections and the ability to install more apps than we can count. Your phone is no longer just a phone; it’s a computer.

We see an example of responding to change in the book of Genesis. Joseph’s brothers were starving due to a famine. The Pharaoh told Joseph, ". . . take your father and your households and come to me, and I will give you the best of the land of Egypt and you will eat the fat of the land.” (Genesis 45:18, NASB) In this instance Jacob could have stubbornly insisted on staying in his own land, but wisely made the trip to Egypt where food was available.

Understand and adapt to change. Alter your business practices as necessary and you will survive the changing currents of our business environment.

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