The coronavirus outbreak has radically changed our world in just a few short weeks. We have seen major shifts in customer behaviour, needs and demands, leaving few businesses worldwide unaffected. With many people isolated at home, some businesses such as grocery delivery companies are struggling to keep up with order inflow, while many small businesses have been left with virtually no orders in the books.
If you are a small business owner experiencing a standstill in your order inflow, the timing has never been better to reassess your business model to generate new sources of income. In Nordea’s Value Proposition Development team, where we focus on developing and delivering customer solutions, we have gathered a few tools to help businesses figure out how to tap into new revenue streams.
Identify the customer needs and evaluate your competitive edge
With many people hunkered down at home, previous needs disappear, and new ones emerge. Businesses that are quick to identify and adapt to these changes will have significantly better odds of riding out the crisis. So, what can you as a small business owner do to adapt your business?
One good way to start is to analyse how existing or potential customers’ needs, behaviour and preferences have changed due to the current situation. Make sure to talk to your target customers to understand:
- Has their need (that your product or services addresses) changed?
- Why has it changed? (Use the 5 why’s to get to the core of ‘why’.)
- How has it changed? (Use the 5 why’s to get to the core of ‘how’.)
- If it has changed, do they believe parts of, or their entire need, has changed permanently?
Once you start to see a repeating pattern, you know you’re on to something. To structure the information, you can use a couple of tools to capture what you learn about your customers. Try a so-called “value proposition canvas” or a “persona template”. These tools are simple, yet effective, ways for capturing the essence of who your customers are, what they need and what they care about.
Once you’ve structured the information, it’s time to transform it into potential solutions to be tested. To arrive at the best possible solution, you can use the “How Might we…” or “Round Robin” brainstorming approach.
After you’ve identified the best ideas, make sure to fail fast. Don’t spend endless time trying to get the solution perfect; accept “good enough.” Sometimes a drawing of the concept is enough to test out a viable idea – sometimes a digital mock-up is sufficient.
Read more about a quick pandemic response paid off for growth company.
Rethink how to use your key resources and competencies
Another way to create new revenue is to figure out how to use your resources and competencies to create entirely new products or services. We have already seen great examples of companies quickly readjusting their business to cater to new demands. For example, an airline has dispatched parts of its staff to support the work in hospitals; a car manufacturer has started producing personal protective equipment; and alcohol companies have ventured into the hand sanitizer market.
What are your key resources, skills and competencies?
When it comes to this kind of innovation, it’s important to start with your own business’s strengths. What are your key resources, skills and competencies? It could be your trustworthy brand, your staff of hospitality experts or your know-how in system architecture.
Make a list of your key resources, and brainstorm how you could use them in new ways. For each resource or competence, write down everything that comes to mind when you ask:
- What could we build using this alone?
- What entirely new business models could we create?
- Who would be willing to pay for access to this resource or competence?
Seek inspiration from others when you brainstorm. Search online how other companies have made use of their key strengths to innovate around their business model. Ask yourself: “What would we do if we were the leading player in this field?”
Once you’ve landed on what you think is a good idea for a potential new revenue stream, remember to make sure your intended customers agree. Talk to your target group, solicit feedback and keep improving along the way!
Evaluate alternative payment models
The current situation with populations in complete or partial lockdown won’t last forever. At some point, societies will reopen, little by little. One way to secure your liquidity until then is to rethink your payment model. Are there alternatives that could get your customers to pay in advance to secure a more even cash-flow?
To get this right, you need to give your customers a good reason to pay you in advance. Maybe you know that the demand will be high when your production is back to normal or when people have more mobility again? In that case, your customers might be willing to pay a deposit to secure access to your product or service in the future. Maybe you could offer your customers a discount if they pay for products now, which will be delivered later. Can you give customers some extra bonus or added value if they pay for your services in advance? But just make sure that you will be able to deliver on your promise later!
These are just a few ways to get started on finding alternative revenue streams. What is most important, of course, is getting started in the first place. Even if some societies are starting to open up again, there will most likely be long-term changes in customer behaviour. By spending time now to understand these changes and develop and test new offerings in response, you’ll have a good chance of boosting your future competitiveness.
The experts in Value Proposition Development team
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