Why getting your business model right is only a start

‘If you do nothing else to create a great place to work, at least get your business model right,’ is an oft-used quote. Of course, without a working model that helps a business to be successful, any number of massage chairs in the office will not make people believe that it’s a great workplace.

Here are two examples…

An airline in the highly competitive aviation industry became the market leader on the strength of its highly focussed business model and unique employee-centric culture.

In a red ocean, this organisation was consistently making money as employees went out of their way to serve customers. Comparisons were routinely made with industry leader Southwest Airlines. The owners earned a healthy income and investors fell over each other to buy shares in the initial public offering (IPO).

Today, there is little to distinguish this airline from others – time performance, which was once the benchmark for the industry, is no longer a differentiator. Fares are as good or bad as others and like other airlines, customer experience is anything but satisfactory.

Uber is an example of a company that revolutionised the market for cabs with many copycat competitors emerging later. In one country, three such aggregators of radio taxis generated more than 100,000 jobs for drivers with incomes that were three to four times the standard. Qualified engineers began driving cars for these companies while migrant workers to the Middle East returned because of the earning power in their own country.

All went well for a while for one such company whose business model was based on burning cash to capture market share. Though it was a perpetually loss-making business model being run with funds from shareholders who did not expect it to generate cash, the company was hailed as a masterstroke by the business media.

The moment the company tried to increase its fares, the price-sensitive customers began shifting to lower-cost modes of transport. The high commissions paid to the drivers were not sustainable, and unionisation and strike action followed. Customers were loyal only to the discounts and not the company. These two organisations merit a few observations.

Getting the business model right is only the first step but it is by no means the only one. Employees must believe in your business before the customer begins believing in you. Start looking at employee feedback closely to understand what is happening to your business.

Customers begin noticing the difference – the business model is not sustainable without passion. And if your passion is only limited to the business model and making money, the company is unlikely to be successful in the long run once you earn enough.

The good news is that all these businesses are run by some amazing people. They have succeeded not only because of their unique business model but due to their passion to make a difference to their stakeholders.

BY Prasenjit Bhattacharya