Re-Load for a New Reality

Volume 10 Letter 1

How do you know when your business model is tired?

Most new ideas are born out of necessity – usually the need to stay in business. Much has been written in business journals about the Swedish furniture manufacturer IKEA. The owner of IKEA didn’t originally set out to manufacture furniture – he just wanted to sell it. Ingvar Kamprad was so successful at selling furniture through his catalogue that his competitors started a price war. As prices headed south his competitors spread a rumor that he was selling “cheap” furniture forcing Mr. Kamprad to open his first IKEA showroom so his customers could see IKEA quality for themselves. Next, competitors started pressuring suppliers to stop selling product to IKEA. To ensure a supply of product and unwilling to bow to competitive pressures IKEA started manufacturing their own quality furniture. Next IKEA developed precision manufacturing so the furniture could be shipped and assembled at home further reducing costs to the customer. And the story continues today… foreseeing that certain kinds of wood used in IKEA furniture could be in short supply IKEA has now purchased forests in Poland and the Baltic states allowing it to control raw material prices as well as introduce environmentally sound logging practices that customers appreciate.

Charles Reade stated ‘if you wish to please your customers you must begin by understanding them’[1]. Given recent economic turbulence likely many of your customers’ needs have changed. They suddenly have different goals and agendas and formerly solid long established relationships can sometimes have little value in this new environment. It’s precisely in these conditions that suppliers need to redefine themselves.

So how do you know when it’s time to redefine your business?

  1. Is your value questioned by your customers?
  2. Are other nontraditional players creating value in your market space?
  3. Are most of your contracts bid out?
  4. Is your sector being redefined while you still play a traditional game?

If you answered Yes to any of the above questions – it’s time! Waiting for the market to come back is a fools game. Re-view your customers’ needs, Re-invent your strategy, Re-align your business, Re-load for the new reality.

1.Adapted from Charles Reade

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