Smart Lean Ideas for the New Business Model: Is it a future?

The (business) world is changing. Although this phrase has already become a popular cliché, few people and companies realize how fast and in what direction. Old business models do not work in the new economy. They either experience great difficulties or are dying away.

People are becoming more aware of what are bad, unfair or corrupt business practices. Besides, they have received tools to fight with or prevent them due to the rapid technological advancement.

Sales strategies do not produce desired results, unless they are innovative and creative. Cold calling looks like a sales approach from the dinosaur era. Potential customers do not want to be bothered by sales calls, traveling sales persons or street sellers. Traditional advertising is becoming less and less effective.

Subsequently, companies are looking for new trends and business models to help them expand their business opportunities and start to adopt one or more of the approaches described below.

Cooperation VS Competition

Why should many people do one and the same thing and fight for the same resources when they can cooperate and share resources? We can find the root of competition in our childhood. It certainly develops or enhances some skills. But let us see how it evolves in adolescence and professional life.

Competition is nurtured by parents in early childhood. Parents teach their children to help the weaker, compete with and defeat the equals and the stronger. They use three different slogans to push their kids into the rat race – excel-in-everything, be-the-popular-guy, and/or outshine-your-peers; otherwise you will fall out of the ship and will be considered an outsider. Nevertheless, some outsiders become great people.

Competition within a company, however, may often delay progress. For example, some employees, instead of helping a colleague to make a breakthrough, may try to impede his/her work because they consider him/her a competitor in the company’s race. Others may try to oust a colleague who is more capable than them. Managers may not hire more knowledgeable, talented or creative assistants because they are afraid to be replaced by the new employee. In any of the above cases, employees never calculate the future loss of profit for the company.

Rivalry between competitors on one and the same market may also result in loss of profit. The phenomenon prisoners’ dilemma, originally explained by Merrill Flood and Melvin Dreshe and later named by Albert W. Tucker, is an illustrative example of how companies may benefit from cooperation and lose from competition. It can be presented as follows: two accomplices in a crime are arrested and offered a deal to betray one another. There are three possible scenarios:

  • If they betray each other, both will be sentenced to 5 years’ imprisonment.
  • If one of them betrays the other. One will be sentenced to 2 years’ imprisonment, and the other – to 5 years.
  • Both of them keep silence. Both of them receive a year prison sentence.

Although, the greatest advantage for both prisoners is to cooperate and remain silent, they are more likely to choose one of the other two options.

Some businesses also have to resolve such a dilemma, let’s call it a competitors’ dilemma and explain it by the following example. There is a company that offers a product and it has one competitor who has not built up its reputation yet. If the demand is greater than the supply of this product, there are three possible options:

  • The company neither refers its costumers to nor shares resources with its competitor to satisfy the demand: both parties lose customers and profit, respectively.
  • The company refers surplus customers to its competitor: the company loses profit, but the competitor generates sales revenue for a short period of time.
  • The company shares resources with its competitors and satisfies the demand: both parties expand their business in the long term.

Only few companies will chose the most rewarding option since the rest of them are afraid that their competitor will take over their business or will profit on their account. Even so, it is a short term victory for the competitor, not a successful strategy for future growth. What happens next is explained by Paulo Coelho in his book The Zahir. He compares the (business) world with a Favor Bank. Everybody asks for favors and when they gain a favor, they receive credits from the bank. The credits should be returned on request. If a debtor does not return his credits, he will be excluded from the Favor Bank, or as Paulo Coelho describes it:

“You’ll grow only half as much as you could have grown, and certainly not as much as you would have liked to. At a certain point, your life will begin to decline, you got halfway, but not all the way… (The Zahir, Paulo Coelho, 2005)

Translated in the language of business, it means that such a behavior is not a successful strategy for future growth. The most important aspect in all types of business sectors is at least to strike a balance between cooperation and competition.

We try to lean test and set in motion Paulo Coelho’s Favor Bank. Our aim is to provide a place where people, businesses and customers can meet, cooperate and help each other, and everybody is invited to take part in the experiment by just following this link.

Growth VS Sustainability

 Business sustainability is defined as the ability of a company to manage financial, social and environmental risks. A company can not handle revenue growth faster than its resources allow. If a company grows too fast or a product becomes much in demand, it may not have the resources to meet the demand thus losing potential customers. There are two crucially important aspects of company sustainability, namely workforce and product sustainability.

Therefore, a company should not concentrate only on revenue growth but also on using its resources wisely. It is not enough to create only win-win situations where both the business and the customers are satisfied. The focus should be shifted to creating win-win-win situation (company-customers-workforce). Otherwise, long-term sustainability may not be achieved.

Part of company sustainability is its workforce sustainability. If we may quote Richard Branson, the founder of Virgin Group: Clients do not come first. Employees come first. If you take care of your employees, they will take care of the clients.

Employees are not machines or robots. They have feelings, moods, own thoughts, ideas, and problems. Their efficiency and/or creativity may be reduced by various external factors like bad moods or personal problems, or by internal factors such as routine, the feeling of not being appreciated or paid enough, or thinking that their ideas and solutions are unjustifiably rejected. Empathic leaders more easily motivate their teams and achieve better results because they pay attention to those tiny details which are very significant for a good performance.

We all know that routine stifles creativity. People need to be challenged and provided with a ground/space where they can generate ideas, experiment with them and test them. What lacks in most companies is employees’ passion and enthusiasms. Maybe it is a good idea even to hire a “mood improver”, a person who will closely observe employees’ mood level and will help them resolve their problems, turn routine work into a game or just cheer them up. We even intend to test our idea “Workplace as a Playground” in the near future to establish whether we can bring back enthusiasm, interest and offer new challenges to employees.

Another part of company sustainability is product sustainability. It means that a product should not be harmful to the environment and should create social and economic benefits. In his study, Driving Revenue Growth Through Sustainable Products and Services, Thomas Singer reports that between 2010 and 2013, revenues from sustainable products and services among sample companies grew by 91 percent, while overall company revenues grew by 15 percent. This proves that sustainability is not achieved on the account of business growth.

A product should provide not only value but also added value to its customers. This is the so-called win-win situation when both parties are satisfied – the producer and the client. In the opposite case, when the customer is not offered the (added) value he/she expected, the product will be sold in large quantities in the beginning and at some point sales will drop significantly.

When customers are offered no or little value, then we have a win-lose situation. A simple example thereof is a children’s tabletop game. It is expensive, packed in a large glossy box with attractive colorful drawings. A mother is ready to pay above her budget because she either is trying to deal with the so-called “nag factor” used by marketers to sell child products, or wants to buy a present on a certain occasion. When the child opens the box, it turns out that it is 2/3 empty and the game is not as fun as advertised. The mother gets angry with the producer and starts to appeal to her contacts not to buy the product? With today’s technologies the word spreads quickly. Is this a successful sales strategy in the long run?

Therefore, the how-to-sell-the-product attitude should be replaced by the thought how I can help customers with respect to product development and sales, so that strong relationships with customers are built and a successful product is developed.

Efforting VS Magnetism

As we wrote in our previous post (Smart Lean Ideas for Business Development), business development is not equal to sales. It starts with product development, goes through human resource management and ends with sales. The best strategy to offer a sustainable product and put less time and effort into sales is to create a “magnetic” product/service, so alluring that will make customers seek it out. There are many examples of such products – Google, Facebook, Twitter, LinkedIn.

To better understand the notion of product magnetism, we may just answer the following simple questions: How do the above products attract customers’ attention? Do they make profit? Can customers use them for free? Are they improved all the time? Do customers need them? The answers to these questions give us an idea of what a magnetic product is.

The first component is customer (added) value and/or product uniqueness. The easiest way to achieve it to apply lean strategies and test the product before it is ready or, if possible, even before the minimum viable product is built. The aim is to identify what customer needs it might satisfy and whether its developer’s assumptions about prospects’ behavior towards the product are correct or should be revised.

Second, magnetic products do not rely on visual effects since it is impossible to achieve 100% likability among potential clients. In addition, products focused on glossy/shiny and attractive appearance, offering no value, may be sold for a certain period. It does not provide sustainability and further growth.

Third, they should be constantly improved and innovated. Customer needs change over time or new ones arise. Therefore, developers should closely observe customers’ behavior, inquire about their opinion or suggestions, and analyze the received information in order to tailor their products to customer needs.

Thus businesses can save time and investments by not building products that nobody is interested in or are difficult to sell because they have copycats. Less money and efforts will be spent on sales, marketing and advertising. To completely finish a product that in the end turns out to be not sellable and invest even more in its marketing is a poor strategy which consumes time, money and efforts.

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