Rethinking Your Business
What are your options when you, as an owner or senior executive, see your business model deteriorating?
An article from last week’s small-business section in The Wall Street Journal shared how an Atlanta bookstore, A Cappella Books, and its owner, Frank Reiss, successfully addressed this challenge. Like other small booksellers, Reiss faced a critical situation around the turn of the century. His business was under threat from major offline and online sources: seemingly omnipresent bookstore chains and Amazon, respectively.
The quick story: Reiss and A Cappella Books are still around in 2019 and doing relatively well following a years-long business transformation. You can read the article (link at the end) for the full story. Here, we are using Reiss’ business strategy changes as the basis for imagining questions that he may have had to ask and answer along the way.
Working through Your Options
If your business is facing severe competitive threats, migrating customers, and/or a crumbling business model, the types of questions Reiss must have had to address provide valuable exploration. Use them to consider various alternatives for survival and growth.
Performing a Competitive Assessment
Make a reality- and fact-based assessment of your most significant competitive threats.
Ask and answer:
- Where does each major competitive threat have weaknesses?
- In what specific areas are their apparent advantages for customers glossing over product and experience features and benefits that consumers desire?
- Is the intensity of the competitive weaknesses more extreme within specific customer segments vs. the overall market? If so, what characterizes the segments that perceive a greater gap relative to their desired experiences?
- If there are large competitive threats with contrasting business models (and you’re caught in the middle), how likely is it that their large sizes reduce their agility and make them more susceptible than your business is? What would that scenario look like?
A Cappella Books Experience: Reiss saw that both Amazon and the major book chains lacked a personal touch in both products and experience. Having identified a viable, poorly-served niche market, Reiss focused on offering books of intense personal interest to both himself and the market niche looking for local and personal service.
Considering New Sales Channels and Situations
Suppose you have a product that you know people are going to continue to seek out, but the dynamics of the sale (channels, prices and discounting, timing, etc.) are changing dramatically.
Ask and answer:
- Can we credibly expect future demand for what we’re selling?
- If there is future demand, what changes will take place in related product categories? How might the type of product change?
- What changes can we expect in terms of where and how (and how often) people buy the product?
- Are there specific market segments with a smaller demand that is nonetheless more lucrative than trying to compete in a broader market? What does that scenario look like?
- If we’re selling a product, how can we wrap it in an experience to increase our brand’s differentiation?
- If we’re selling a custom service, how can we convert it to (or add) a product that could allow us to sell at greater volume to a broader audience?
- How might we radically rework our cost structure to provide a new and/or greater range of sales channel opportunities?
A Cappella Books Experience: While people still wanted books, price points for the rare books that A Cappella was selling were dropping precipitously. The store barely covered costs with a move to more popular, heavily discounted titles. Reiss hit on the idea of sponsoring author events with a low production cost. By bundling an experience (seeing / meeting an author) with the books, he could sell popular titles at full retail prices or higher as part of admission ticket packages. The opportunity for an author to sign the book also added urgency and scarcity to the purchase decision, further surprising higher price points. Events now account for 50% of the store’s sales.
Reworking What’s Left
It’s worthwhile to anticipate what will remain from your old business model after you make significant changes to your business.
Ask and answer:
- If we change what we are selling and how we are
selling it, what might that mean for:
- Our current physical structure(s)?
- Our current people (agility / readiness for change, number of people, their skill sets, aspirations)?
- The fixed costs of operating the business and how quickly we can change them?
- Our ability to make investments in new growth areas?
- How might our reputation change? How can we adapt current perception about our business to the new model?
- How could changes in perceptions and our reputation allow us to extend what we do into other new areas?
A Cappella Books Experience: With the shift to a greater percentage of sales away from the bookstore, Reiss downsized the store. This move was also driven by the failure of a previous move to run an adjacent dessert shop. Throughout the transformation, Reiss aggressively managed employee costs, including keeping his own salary very low. The cache created by these successful author events provides, according to an executive with a regional bookselling organization, the opportunity for A Cappella to attract even more prominent authors and events.
Road Testing These Questions
We road-tested these questions with an entrepreneur friend who is in the middle of reimagining and reworking his business. They resonated with him. He is planning to incorporate them into his next rounds of figuring out what his future business model looks like.
ITIS: When your business model is under threat from apparent behemoths, consider that the situation does not preclude the opportunity for you to do what they can’t—in innovative ways that win loyalty from an attractive customer segment.
The Next Chapter (The Wall Street Journal): https://www.wsj.com/articles/how-one-independent-bookstore-succeeds-in-the-amazon-age-11556503740