A resilient business model

Customer- and innovation-led transformation is key to a profitable business

Business models today hinge on three main “green lights” or abilities that help them thrive: finding high-value customers, offering significant value to customers and providing good margins. Conversely, business models also try to avoid three red lights: problems in helping customers, difficulty in maintaining market position and impediments to raising funds for growth.

Functioning amidst an increasingly complex and challenging business environment has made it crucial for CEOs to adopt new technologies to create innovative business models and ensure they stay ahead.

With disruption being the order of the day, proven and verified business models are under attack. To overcome the challenges, CEOs are feeling the need to disrupt and grow. Over 50 per cent of CEOs we spoke to as part of KPMG India’s CEO Outlook 2017 said they will transform their organisations in the next three years.

CEOs realise the journey is not going to be easy. An important component will be identifying what’s critical for their organisation. To build a resilient and profitable business model, CEOs are initiating a variety of transformations within their organisations. Ninety-seven per cent feel a growing responsibility for representing the best interests of their customer. This is especially significant, considering 54 per cent CEOs are placing the customer at the heart of the transformations. A good 56 per cent are pursuing innovation-led transformation in their organisations.

This is noteworthy, as customers have varied preferences and their increasing affinity for technology is making it imperative for companies to cultivate a digital-first mindset among its employees. It is allowing them to execute simple user journeys, so as to be nimble on the go. So it comes as no surprise that 80 per cent CEOs view technological disruption more as an opportunity than a threat.

To this effect CEOs are looking at increasing investments in technologies such as IoT, data analytics tools and cognitive technologies. They believe a combination of adopting, innovating and deploying these technologies will go a long way in strengthening their business model.

With businesses experiencing uncertain ties at an unexpected pace, like rising costs, demands of millennials, high-value customer engagement and loyalty, it has become a challenge for CEOs to make a fundamental shift in business models to remain successful. Seventy-nine per cent are of the view that rise in inflation will affect costs and eventually shift the burden to customers. This would have huge repercussions on profitability, thus affecting the business model.

Hence, CEOs are adopting large-scale business model transformations. Besides customer-focused transformation and innovation-led transformation, they are looking at collaborative partnerships with public and private players, M&A driven transformation and competitive reaction-led transformations.

Factors such as speed to market and innovation are becoming important priorities, as they have to be tailor-made to cater to millennials. But at the same time, transformation models come with their challenges. Eighty-nine per cent CEOs cited cybersecurity as a major challenge and saw mitigating cyber-risk as a key priority. They are devising plans on how to sustain, run and build profitable business models and at the same time disrupt and grow.

Lastly, building a resilient and profitable business model is a lot like writing a story. Sometimes they are new versions of old ones or refurbished themes that are universal in nature. Similarly, business models are variations on the value chain. Thus, to build a resilient organisation and a sustainable business CEOs must be open to partnerships and new skills.