What’s the best business model for growing a business?
Question: We have our own questions about business models and business model innovation and we’d like to ask them. We know your column has limited space, so we’d like to focus on our most important question.
In last Friday’s column, you told us that there are so many business models to choose from. Given that there are so many models, what’s the best one for growing a business?
We’re like the ad agency that wrote you last Friday. We’re also an ad agency but we’re small, a boutique. But we have both FMCG (fast moving consumer goods) and service marketing clients. We work closely with our clients and we help them in corporate strategy planning. We ask our question more for them than for us. We want to help them choose the business model that’s best for their goal of growing their business.
Answer: The ad agency that wrote last Friday also asked the question for its clients. So your need is no different. This makes it convenient for me to respond to your question at a specific level by using the “alternative” business models I proposed there.
We first looked at the business model that TV Channel 7 used for making the AlDub kalyeserye a hit. It succeeded in drawing a large segment or segments of viewers by being uniquely different from competitor noontime shows. It then grew this business by selling to advertisers the opportunity to advertise their products in those segments. Subsequently, viewership of its host program Eat Bulaga declined from its peak of 6.2 million household viewers in October 2015 down to 2.6 million after just two months.
On hindsight, AlDub’s success can be explained by the once popular Blue Ocean business model. That’s creating and appealing to unserved and underserved viewing segments. Capturing this segment is via a differentiator and in AlDub’s case, that’s by integrating neglected cultural values with entertainment. With the viewer market segment’s fast and alarmingly huge decline, the need has turned into explaining the downturn so that the bleeding can be stopped and hopefully to reverse or regrow the business.
In the Blue Ocean business model, its twin business model about the Red Ocean market space offers one explanation. The Blue Ocean of unserved and underserved viewer segments has become a Red Ocean of served and over served viewer segments. Many of these consumers experienced “sawa” (satiation). They want another “new” show, another breakthrough innovation show or a second generation innovation show.
But as we said last Friday, this is just one explanatory business model. There are others that are just as credible. Consider, for example, the argument that AlDub lost much of its viewer segments because it did not stick to its formula of success like its priority on neglected cultural values and magnetic behavior modeling from its talents. So to extend success or to bring it back, restore what has been dropped or minimized. This may be right but it also may be wrong. The past is rarely a good recipe for the future.
The challenge comes from another and better business model. It’s the cyclical trend-counter-trend-synthesis model. There was a prevailing noon time show trend before AlDub. Eat Bulaga also participated in the trend. Then Eat Bulaga decided to innovate with a counter-trend, a differentiator in AlDub.
However, according to the “law of nemesis,” any trend “bears the seed of its own reversal.” It will end and will be replaced. The replacement will be a synthesis trend. This is usually a combination of the original trend and the counter-trend. One of the practical implications of this business model says that to extend or sustain the AlDub success, what’s required is to predict or better yet, to innovate the synthesis.
This brings us to business model innovating.
Innovation has two categories. The first is breakthrough innovation. That’s creating something completely new and unexpected. The second is a next-generation innovation. It’s an improvement of the previous innovation. One or two features are usually improved.
A business model of the first category is in Michael Porter’s Competitive Advantage. For him, the successful innovation must either bring to the market the best product or service or else have the lowest cost. Following this model led to many successful innovations in the 1980s. In the new millennium, Clayton Christensen’s business model that he termed “disruptive innovation” asserts the truth of what’s almost the opposite of Porter’s prescription.
Christensen’s business model predicts as much success by innovating with just a better (and not the best) product or service and lower (not the lowest) cost.
The answers to your question should now be clear. First, there is no best business model for business growing. Choose from many. Avoid locking yourself to one business model. Choose according to purpose. If you want to explain an innovation’s success, there’s the Blue Ocean model or its analogies.
If you want to predict the eventual end of the Blue Ocean market, see how the Red Ocean model or its analogies fit the transition.
If you’re into business model innovating, and your purpose is to search for serving the unserved or new market versus serving the underserved market, look into the Porter model versus the Christensen model.
Keep your questions coming. Send them to me at [email protected].
