(Editor’s note: Mark Edmiston is CEO of Nomad Editions and the former president of Newsweek. He submitted this story to VentureBeat.)
Business models are blueprints. They force choices early in the developmental process. While necessary, they can also constrain (much like like construction blueprints). And ultimately, they’re a critical factor in determining future success.
The problem is: business models are backward facing (based on past experience). In other words, the last time a set of circumstances prevailed, a successful business followed a particular set of rules. However, when the circumstances are novel – and there is no past experience – you have to create a new model.
This is the challenge facing media today, most obviously in print, but also in electronic outlets such as TV and radio. Business models based on exclusivity, well established brands and control of distribution (the essence of the old media business models) are useless in today’s digitized world.
Recognizing that circumstances shift is the first step. Most existing companies refuse to accept that change has occurred – and attempt to force new facts into an old business model. This creates an opportunity for new companies to rise during a period of transition, stealing growth from existing businesses by inventing and using new models based on new circumstances.
So, how do you start a business when the models are obsolete? The answer is simple: Build a new model by realistically assessing the external environment, fearlessly cataloging your assets and liabilities, and realistically estimating the strengths and weaknesses of your (future) competitors.
Here are five things you’ll want to consider while building that model:
Don’t assume that a new model is the only way to go – Be sure your company actually needs, or would benefit from, a new business model. Even in a changing environment, your business opportunities may be served better by altering an existing model.
Don’t overestimate the changes – Change happens incrementally, so even though you may be moving in a new direction, your model still needs to be anchored historically.
Don’t allow “trying for great” to destroy the good – Just because you are building a new model, focus on the low-hanging fruit before shooting for the stars. Many of the first iPad apps, for example, were dizzyingly digital but slow to download and hard to use. Sales dropped dramatically after the initial excitement as a result.
Build flexibility into your model – It’s always good, for example, to overestimate the time it will take to achieve your goals. Like software, it always takes longer and costs more than anyone could have imagined at the beginning.
Expect competition – If you are going to eat your competitors’ lunch, they will notice – and will try very hard to prevent you from doing so. Build competitive response into your model.
Finally, ignore the critics. There will always be someone who doesn’t understand what you are doing, or doesn’t want to understand. But, they will have an opinion. Once you have launched your plan, stick with it until you know it is working or it just cannot work. Don’t give up too soon.