Under normal circumstances, changing a business model presents a risky move. However, the COVID-19 pandemic has accelerated and magnified shifts in the business world, creating a different setting for businesses to operate in. While these challenges have proved to be too great for many enterprises, the pandemic-related constraints have also spurred a great deal of innovation. Here are my favourite business pivots of 2020.
Spotify’s business model used to rely on free-users who listen to advertisements. Before the pandemic, this business model was supporting the company’s growth and development for years. With the pandemic, advertising agencies began slashing their budgets and the former business model became a liability.
As a result of these drops in revenues, Spotify pivoted towards creating original content. In a similar fashion to Netflix, Spotify began creating original podcasts which have seen a massive rise in popularity and bolstered the number of new users. Spotify is no longer an intermediary in the delivery of music but is now a source of original content for its consumers. This new business model will also enable Spotify to retain a larger profit share and this will likely be a better driver of growth for the company in years to come.
Banzai International Inc
Banzai International Inc hosted and marketed conferences in the LA area. As the majority of the conferences were in-person, the company was amongst the most impacted by the pandemic. Online events represented 13% of the company’s events and they did not have the infrastructure required to scale that part of the business. Rather than accept their inability to meet the demand for online events, they acquired a small firm that could: High Attendance out of Houston.
Following the acquisition, the company rebranded itself as Banzai Virtual — a company specializing in virtual events. Since then, the volume of events has sky-rocketed with tech companies like Google and Hitachi being amongst their clients. These last few months saw the company rise from the brink of bankruptcy to a booming business as a result of a smart and timely pivot in its value proposition.
New technologies are often seen as threats to established businesses, doomed to destroy those that cannot adapt. What if you tried to find an opportunity in this new technology? How might you be able to leverage this new technology to better your business? Think of Blockbuster and Netflix: one leveraged rising technology while the other refused to acknowledge its outdated business model. Unlike Blockbuster, how will your business be able to leverage the next technological advancements?
The tech giant IBM used the work from home policies to kickstart a permanent work from home (WFH) culture. Whilst other companies have seen the value in WFH, few have been willing to standardize this trend. IBM used the pandemic to shift 75’000 employees to permanently WFH — more than 20% of the company’s global workforce. This saved IBM a whopping $50 Million as IBM was able to drastically reduce its real estate and office costs. By seeing the need for WFH not as a threat but as an opportunity, IBM was able to leverage the potential benefit of this newfound constraint.
In this case, you should challenge the premise that your key costs are as lean as they can be. Much like IBM, how could you could find ways to shift to an asset-light structure by outsourcing or altogether eliminating a cost from your ledger.
Why do these examples matter
There are countless small and large business which have rapidly adapted their businesses in order to survive the pandemic. The examples highlight potential paths or questions for pivoting existing business models. Whether it is by reducing or removing some key costs (IBM), or by gaining some key partnerships (Banzai Virtual), or by finding a new revenue stream (Spotify), being innovative in your response to the pandemic’s constraints will enable you to create a more resilient business model. The pandemic has shown us that the ones which evolve are the truly resilient businesses. Ultimately, the goal should not be to outlast the pandemic in the hopes of returning to ‘business as usual,’ but rather to leverage the opportunities that it has created to build more resilient business models.
Sarah Patterson is a recent graduate from Imperial College London. She writes about navigating life after University, entrepreneurship, business and science. Read her works on Medium.
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