A new approach to business models
Why settle for one business operating under one model? Why not spread the love across multiple models within the one business. In an opinion piece that first appeared in Encore, Chris Stephenson explores the possibility.
There is no question that the media landscape is deep in the throes of its greatest period of change to date. This is no more evident than for journalism, news and print media. There is a specific danger in continuing to think of them as one and the same thing, especially as shifts in ad media revenues put pressure on existing business models. Based on the premise that journalism is of fundamental importance, how can – and should – we protect journalism as news organisation revenues continue to come under threat?
One suggestion is that some journalism will go. Fact. And that over time – decades not years – the industry will realign and settle as new models emerge. So far we have seen three potential models (1) vertical interest (2) conversation and (3) philanthropy.
I was reminded of this point while talking to a senior media executive about digital innovation in businesses. It occurred to me that innovation doesn’t have to be at an industry level: what would a single business look like with completely different, distinct and differentiated business models working under the same roof, profit and loss statement or holding company?
Perhaps the key question in surviving the ride of change wrought by digitisation isn’t ‘what is your business model’ but ‘what are your business models?’ I’ve tried to think of examples close to home and further afield of businesses and companies that deliberately cultivate different business models under the same roof. There are examples of companies that take a business model into new categories (Virgin obviously), and examples of parallel (independent) business models in different categories (Jetstar and Aldi). You also get examples of very different revenue streams under one roof; media agencies – and indeed the publisher of this article – are great examples. But there aren’t a whole load of decent examples (that I can think of) where fundamentally different and potentially opposing models co-exist under the same roof.
It may be that once the most successful business model emerges, it’s logical to divert all resources in that direction – but perhaps that’s the trap? Perhaps success is in not being single minded? Perhaps tolerating lower margins and revenues in one area this year means being ready to maximize the potential of new revenues when the world turns in your direction next year.
Many media organisations are already doing this by necessity but how difficult would it be to make it a deliberate choice? If you’re lucky enough to have margins that allow you to experiment, why on earth wouldn’t you go as far as you possibly could?
It is true. Different models will emerge. But winning tomorrow shouldn’t be like trying to back the winning (model) horse. Have a stake in every one instead. You couldn’t lose, right?
Chris Stephenson is strategy director at PHD Australia. This is an amended version of a post that first appeared on cwstephenson.com.
This story first appeared in the weekly edition of Encore available for iPad and Android tablets. Visit encore.com.au for a preview of the app or click below to download.
wrong!
why ?
the more variables you choose ( models in a sense) there is an interative ( and multiplicative ) increase in your error rate.
most of the time the simplest model is better, that is the complex model has marginal benefit at best,
Have you noticed recently the pointy- heads at Treasury with those diverse models on screens they gaze at all day .. resulted in a doubling of the budget deficit ? I am sure that did not intend that.
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Totally agree with simonetta.
The best businesses have a simple cohesive vision and purpose, it’s hard to then have multiple, often conflicting, operating models underneath this and remain true a vision.
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Businesses really need to be adaptable. While the business model can involve, they still need to be consistent with their value. If you look at virgin, their business model may differ based on the industry they are in, but they have always been a challenger brand who is there to do better for the customer. Yes some failed, but more importantly, some succeed, and it’s really about picking the successful ones and build them up over time.
I don’t think we can say there is a right or wrong approach in business model. There is simply what has worked, and what hasn’t. While I agree that simplicity is one of the keys to good business model, but that’s not to say old business shouldn’t test new business models. So they should be more than one business model in place in order for it to evolve.
Disney is a classic example, which wanted hold on to a successful business model at time of change, and the NY Times is another for the complete opposite reason.
So my point of view is: do have more than one business model, but focus on the more successful ones over time.
Really enjoyed the read Chris.
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Totally confused – what is the (3) philanthropy business model for journalism?
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