Business Model Failure: Reasons and Remedies

Summary

The speaker discusses the critical aspects of business model failure and the importance of enhancing value. They explore reasons for failure, such as misalignment with customer desires or market forces, using examples from various industries. The emphasis is on identifying and addressing the root causes of failure through a futuristic approach, understanding customer needs, and enhancing the value proposition throughout the entire value chain. The summary highlights the need for continuous value enhancement to avoid stagnation and ensure business success.

Takeaways

• 📈 The importance of enhancing value in business models and the challenges of failure.
• 🔍 The need to consider the consequences and responses when a business model fails, as it involves investments, resources, and reputation.
• 🚫 The difficulty in attributing failure to a single factor, as retrospective analysis can be misleading and oversimplified.
• 🚀 The concept of 'early mover advantage' and its potential pitfalls, as being first to market does not guarantee success.
• 🔄 The cyclical nature of business success and failure, with examples of products and companies that have fluctuated between growth and decline.
• 🤔 The significance of understanding customer desires and ensuring that the value proposition aligns with their expectations.
• 🔑 The role of each element in a business model, and how a misalignment can lead to partial or complete failure.
• 🛠️ The necessity for a futuristic approach to business, anticipating needs, and preparing for potential changes in the market.
• 📉 The importance of recognizing early signs of failure, such as dips in sales or employee attrition, and addressing them proactively.
• 💡 The process of identifying and eliminating the root causes of failure, rather than just treating the symptoms.
• 🛑 The strategy of considering alternative courses of action when addressing failure, and the importance of choosing the most effective approach.

Q & A

What is a fundamental question that arises when discussing business models and value propositions?

A fundamental question is how to enhance value, especially considering the potential for business model failure and the consequences of such failures.

Why is business model failure considered a major concern?

Business model failure is a major concern because it involves significant investments, resources, people, and market forces, along with the associated image and positioning of the business.

What is an example of a business that failed despite early success?

Jaws Polymers is an example of a business that failed despite entering the PET plastic bottles and jars market early and having initial orders.

What is the importance of understanding customer desires in product development?

Understanding customer desires is crucial because even if a product is logically sound and well-designed, if it does not meet customer expectations or desires, it may fail in the market.

How can a company identify the causes of failure in a business model?

A company can identify the causes of failure by analyzing the elements of the business model, such as partners, customers, and products, and determining if any element is not generating the expected value.

What is the role of a futuristic approach in avoiding business failure?

A futuristic approach involves envisioning the potential characteristics of a product, service, or process and nurturing it to meet those expectations, which can help in avoiding failure by aligning with long-term goals and values.

How can a company address the signs of impending failure?

A company should take the signs of impending failure seriously, identify the problems, and analyze the causes and symptoms to find and eliminate the root causes effectively.

What is the significance of enhancing the value of a business model?

Enhancing the value of a business model is significant as it helps the business to grow and adapt to changing market conditions, ensuring that it continues to meet or exceed customer expectations and potential.

Can you provide an example of a company that successfully turned around a failing product?

Mahindra's Scorpio is an example of a company that successfully turned around a failing product by rejuvenating the design and features while maintaining the basic positioning of the vehicle.

What steps can a company take to ensure the potential of its value proposition is fully realized?

A company can analyze each element of the value chain for potential value enhancement, focus on customer desires, ensure partner commitment, and revisit quality standards to ensure the potential of its value proposition is fully realized.

What is the impact of failing to meet the potential of a value proposition in an industry like management education?

Failing to meet the potential of a value proposition in an industry like management education can lead to a mismatch between industry expectations and the skills of the graduates, resulting in high unemployment rates among the students.

Outlines

00:00

🚀 Business Model Failures and Early Mover Advantage

The speaker discusses the critical issue of business model failure, emphasizing the importance of understanding what happens when a business model does not succeed. They mention the significant investments and resources that go into a business, and the potential for failure at any stage. The speaker uses the example of JAWS Polymers, a company that struggled and ultimately failed, despite being an early entrant in the PET bottle and jar market. This highlights the challenges of being an early mover and the necessity to adapt and overcome obstacles to achieve success.

05:00

🔍 Identifying the Causes of Business Failure

This paragraph delves into the analysis of business failures, focusing on the importance of recognizing the signs of impending failure and taking proactive measures. The speaker talks about the need to understand the root causes of failure, such as misalignment with customer needs or market trends, and the importance of identifying and addressing these issues promptly. Examples from various industries, including automotive and online platforms, illustrate the consequences of failing to adapt or meet customer expectations.

10:00

📚 The Challenges of the Publication Industry

The speaker reflects on the challenges faced by the publication industry, particularly book publishers, who despite having everything in place, struggle with declining sales. They discuss the difficulty of understanding why people are not reading as much as expected, even when the content is available and accessible. The paragraph highlights the need for publishers to adapt to changing consumer behaviors and preferences, possibly by enriching their content or exploring new delivery methods.

15:09

🛠️ Remedies for Business Failure and Futuristic Approach

The speaker introduces the concept of a futuristic approach to avoiding business failure, suggesting that businesses should envision their ideal future state and work towards it. They discuss the importance of identifying and addressing the causes of failure, using the analogy of a physician diagnosing an illness. The speaker emphasizes the need for businesses to consider various areas of improvement and choose alternative courses of action to address the underlying issues effectively.

20:11

🏎️ Success Stories of Business Revival

This paragraph presents success stories of companies that have managed to turn around their fortunes by enhancing their value proposition. The speaker cites examples such as Mahindra's Scorpio, which was redesigned to meet customer expectations, and Royal Enfield, which revitalized its motorcycle brand by understanding and catering to customer sentiment. The emphasis is on the importance of value enhancement and aligning with the potential of the business to achieve success.

25:12

🎓 The Paradox of Management Education in India

The final paragraph addresses the paradox of management education in India, where despite a high demand, there is a perception that a large percentage of graduates are unemployable. The speaker discusses the failure of the value proposition throughout the value chain of management education and the need for a reevaluation of the educational system to better meet industry expectations and societal needs.

Keywords

💡Business Model

A business model is a conceptual tool that outlines how a company creates and delivers value to its customers and captures that value in the form of revenue and profit. In the video, the speaker discusses the evolution and potential failure of business models, emphasizing the importance of understanding and enhancing value within the business model framework. The script mentions 'business model failure' as a major concern when investments and resources have been infused into a business.

💡Value Proposition

A value proposition is a promise of value to be delivered by a company to its customers. It explains why customers should buy a product or use a service. The video's theme revolves around enhancing the value proposition, and the speaker discusses how understanding and adapting to customer desires is crucial for a successful business model, as illustrated by the examples of automotive products and the case study of Jaws Polymers.

💡Failure Analysis

Failure analysis refers to the process of examining the reasons behind the failure of a product, process, or business model. The script emphasizes the importance of identifying the causes of failure to prevent or mitigate it. The speaker mentions that retrospective analysis is easy but not as useful as proactive measures to understand and address the signs of impending failure.

💡Early Mover Advantage

Early mover advantage is a competitive advantage that arises from being among the first to enter a new market. The video script uses the example of an entrepreneur who entered an industry early when no one was thinking of that kind of business, suggesting that being an early entrant can provide a strategic advantage, even though it does not guarantee success.

💡Stagnation

Stagnation in a business context refers to a period of little or no growth or development. The speaker discusses how products and businesses can reach a stage of stagnation after a period of growth, and then decline, highlighting the need for continuous innovation and adaptation to avoid this phase.

💡Retrospective Analysis

Retrospective analysis is the examination of past events or decisions to identify what went wrong or right. The script mentions that while it is easy to perform retrospective analysis after a failure, it is less useful than proactive measures to identify and address issues before they lead to failure.

💡Customer Analysis

Customer analysis involves understanding customer needs, preferences, and behaviors to inform business decisions. The video emphasizes the importance of accurately analyzing customer desires to create products that meet their expectations, as seen in the example of an automotive company that failed to do so.

💡Attrition

Attrition refers to the rate at which employees leave a company. In the script, the speaker mentions attrition as a sign of failure, indicating that when employees are not happy, they tend to leave for other organizations, which can be a symptom of deeper issues within the business.

💡Futuristic Approach

A futuristic approach involves planning and thinking ahead to anticipate future needs and opportunities. The speaker uses the analogy of parents envisioning their child's future characteristics to explain how businesses should think about the potential features, services, and processes that will generate value in the future.

💡Value Chain

A value chain is a model that describes the sequence of activities a company goes through to deliver a valuable product or service. The script discusses the importance of enhancing the value at every stage of the value chain to avoid failure and ensure the potential of the business is fully realized, as demonstrated by the examples of Bata and Royal Enfield.

💡Management Education

Management education refers to academic programs that teach business and management principles. The speaker uses the example of management education in India to illustrate how a valuable proposition can fail to meet expectations if it does not adapt to the potential and changing needs of the industry and students.

Highlights

The importance of enhancing value in business models and the challenges faced when they fail.

The impact of business model failure on resources, investments, people, and market forces.

The role of retrospective analysis in identifying problem generators after business failure.

Examples of product and organizational failures in various industries.

The case study of Jaws Polymers and their struggle to recover from business failure.

The concept of early mover advantage and its potential pitfalls in business.

The importance of aligning business elements to avoid partial or complete failure.

The role of customer analysis in product development and its impact on success.

The challenges faced by the publication industry due to changing consumer behaviors.

Strategies for identifying and addressing the causes of business failure.

The significance of a futuristic approach in avoiding business failure.

The process of identifying and eliminating the causes of failure through problem-solving.

The importance of considering alternative courses of action in response to failure.

Success stories of Mahindra Scorpio and Royal Enfield as examples of overcoming failure.

The role of value enhancement in the potential growth of an organization.

The challenges and potential solutions for the management education industry in India.

The necessity of aligning value propositions with the potential of an organization's value chain.

The conclusion emphasizing the importance of potential and value alignment for business success.

Transcripts

Hello again.

ah Now, carrying forward with business models and value proposition there is a very important

and a basic question which comes to our mind is that how to enhance the value.

But before that ah there is an important element which comes to our mind is that what if it

fails or what should we do when it fails.

So, business model failure is a basic and a major question because when business model

evolves or business evolves at large ah resources have been infused, investment has been done,

people have been involved market forces have been involved, there is an image associate

with that, there is a positioning associated with that.

And one does not after after so much one does not wants it to ah get over so easily and

then one associates his or her ambitions with or the organizational ambition also gets through

with with such kind of ah um a proposition.

And and there are several examples wherein ah you know ah ah things have ah come to that

kind of ah situation ah um they there are there have been so many products, there have

been so many organizations which have gone through such kind of a phases.

ah um One cannot say that ah this was ah um ah the mistake of x or y, or x factor or y

factor ah because ah retrospective analysis is ah very easy to do ah largely ah we just

spread ah this story and you ah you tend to identify ah the problem generators and then

you say that this was the problem.

So, it is its fairly easy.

ah Because when ah you are actually ah doing things ah then you never wanted the process

to ah get failed.

We have seen so many ah automotive products which have come in due course of time and

ah they did not work so well.

We have seen products which have done exceptionally well cross the particular stage of growth

ah reach to stagnation and then dipped down.

ah We ah ah I along with ah two of my colleagues we wrote ah a case study on ah ah an organization

called jaws polymers ah which came into the business of pet ah this this plastic bottles

and jars, and ah since their inception they could not do well and after a particular stage

they stumbled and they failed.

And ah to recuperate from that failure they had to struggle and after a particular stage

they could ah repair their deads, but but they could not earn lots of profits or or

let us say they could not do well as far as their business go.

In the meanwhile the other ah um participants of that industry or let us say other organizations

belonging to that industry they did exceptionally well and many of them they created their own

brands.

ah You see this is an example wherein ah one organization enters or an entrepreneur enters

into a business, and this entrepreneur ah basically is one of the early entrance into

that particular industry when no one is largely thinking of that kind of a business.

And ah ah ah he has an early mover advantage also ah the market is ripe for such kind of

a business and ah orders are flowing in and still ah you could not do well.

So, that is one situation.

ah As I said ah several automotive companies

have faced ah failures with their models ah they there are ah um ah examples wherein a

whole of the company has relayed on a particular kind of a car or a model and still has not

done well.

Ah there are several airlines or or ah let us say um ah there there was ah a low cost

airline which did exceptionally well after a particular stage, they ah um where taken

over by another airlines and ah they they somehow um ah failed ah cumulatively at the

end of the day.

There ah there have been so many insurance companies which have ah a not done well, there

have been apparel companies which have not done well, ah there ah there are portals or

let us say um there are platforms, online trading platforms or online ah consumer goods

ah selling platforms which have ah um initially done well, but are not doing or stagnating

at this moment or or not doing well.

So, all these examples they take a take us towards ah three aspects as I said retrospective

analysis when when ah things are over its slightly easy to ah um ah understand.

But ah what what is to be done when this ah moment of failure is about to approach who

or failure is coming and ah if it happens suddenly what is the remedy kind of and ah

ah um ah what reasons have to be identified as the major reasons for the same.

Now, that is where ah one has to think about.

So, ah when when we were talking of ah the canvas associated with value proposition ah

and ah when we were talking ah with reference to the elements of ah business models and

value proposition ah we were referring to the partners, we were referring to the customers,

we were referring to the processors, the products, and ah ah the proposition the company ah have

in totality as far as the offspring goes.

ah um ah We ah also should remember while while discussing that picture is that if any

of the elements does not do well or let us say is not in sync with the complete process,

or or the larger picture, or to be precise if any of the element is not generating the

value it is suppose to then ah there might ah occur a failure or let us say a partial

failure or it might instigate a process of failure later on.

So, ah for example, an automotive company is very good as far as its design approach

is concern, but somehow they could not fandom or analyze that what their customer actually

wants.

And ah they create a product which is good which is logically ah fine as far as the present

ah situation goes ah utility goes ah and and several other aspects ah associated with that

product.

Their ah partners and suppliers are in sync with them they are working ah fine as far

as ah production of that process goes everything is in place.

But somehow when the product comes in front of the customers, the customer is though the

customer was excited about this product to ah come to fore, but the customer response

is not that good.

So, that that takes us to a situation that somehow we could not analyze the ah actual

desire of the customer in association with that product somehow the customer ah actually

ah um does not feel ah so delighted to look at the final product actually somehow.

So, same ah happens in in ah several other cases or ah um you know ah with whichever

ah failure you may count upon at this moment.

ah um ah There have been ah ah ah let us say food chains or ah restaurant chains or let

us say there they are having shoes which have been marketed ah after a particular long analysis

and and ah due course, but but ah they could not do well.

So, ah the the message here is that if any of those elements is not generating the value

it is supposed to ah um a process of failure might get instigated.

So, then we have to analyze while while thinking in terms of what is not working properly.

We have also have to analyze that what is working properly actually, what what is the

element which is actually working properly because um ah to avoid failure we may further

focus upon the element which is actually working properly.

So, if if we are very strong and as far as our customer perspective goes then we may

direct that towards recuperating or let us say towards ah correcting the the problems

which may have which we may have a ah at the process end or let us say ah at the end of

the partners So, ah ah then ah then the next question is

that if somehow everything is working ok.

But still it is not working according to the potential ah which which maybe there or which

should be there then also ah there would be ah a chance of failure.

I have realized this ah in in several examples wherein ah my one of my favorites is ah um

publication industry, book publication.

Wherein everything is in place they tend to chose best of the authors who have a lots

of knowledge and they try to put up ah their knowledge in a very structured format in terms

of books or ah you know kind of ah case collections or or ah text books or reference books and

and ah lots of hard work goes in as far as the book production or a book publication

goes, wherein lot of a editors they are involved, review words are involved.

And and lot of voluntary work is also being done here, but because because it does not

ah yield so much of ah um ah you know ah price ah for everyone in this ah in this kind of

an industry.

And ah after a particular stage they ah number of students is ah always rising and ah, but

somehow at the end of the day you feel that the cells of ah the books has reduced because

somehow ah people purchase books or require books, if they ah mandatorily have to do it

otherwise they do not tend to open and read books.

And even if they have books they do not read books I i do this ah general survey ah ah

of of the students and ah I tend to ask them that how many books you have ah read completely

and ah seldom I find this answer that they have done this actually.

And how many books have you read at the end of the course for example, you are into a

4 years course or 3 years course and how many books you were supposed to read and how many

books have you ah you actually read it is a huge gap basically.

So, everything is in place, but somehow these people ah are unable to understand or or ah

unable to ah analyze that why the a sale is getting stagnated or why the sales is getting

reduced, is it because of lot of internet based content or let us say online content.

ah If it is then ah then ah one has to analyze that how that content ah content can be enriched.

But um ah after analyzing ah this situation one finds out and the publishers they tell

me and ah I also realize that internet content is ah um ah provides ah complementary kind

of a content as far as the text book goes the fundamental textbook cannot be so easily

replaced.

ah Fine, it is downloadable or it is in e form that is a different issue, but ah but

textbook cannot be so easily replaced.

So, that is where ah one one has to think in terms of that everything is in ah in place

everything is right, but still somehow ah they are not working go ah according to their

potential.

And ah to do that they have gone for an incremental change as far as ah ah um ah provision of

content or the delivery of content goes they have tried to provide you a book, and then

they have ah given you a login id where you can ah get connected to their platform, and

then use that book with different ah kind of ah you know in in different kind of ways

they have connected authors, with the readers and authors keep on riding on that how they

would recommend ah the readers to read the book and so on.

The story is is endless, but but again it is a very big kind of a question when you

thing in terms of you know ah what is to be done.

So, what is the ah remedy like, what are the elements of ah you know ah how should we ah

come out of the situation.

One is futuristic approach . What is futuristic approach?

It is very simple you ah ah ask your parents or elders that what did they think about you

when ah they were nurturing you as a human being.

And ah you would suddenly realize that they had a particular idea of a particular idea

of your characteristics

Now, when when I say characteristics that is the features of a product, service and

process.

When you say features it is associated with the value that may generate your parents or

elders have always been thinking in terms of that what kind of value this person would

add to the society later on.

ah um When you raise your kids you always think in terms of that how ah what would they

do and how would they do that to make their own lives comfortable and to contribute meaningfully

as far as the society and the growth and and ah you know development of the society goes.

ah People envision that and then people put ah the youngsters under particular kind of

a training and process and then a product comes in.

Same happens with as far as you know this process of remedies or avoiding failure.

So, this is this is about avoiding failure or futuristic approach.

Now, now ah let us focus on ah you know precise aspect of when failure is happening actually.

So, one failure is happening it it provides ah the science as in case of an illness.

Something goes wrong, sales dips down, people tend to leave the organization some some attrition

is there we have force it moves out, due to the attraction towards other organization.

But but the prime reason is that they are not happy there your partners are leaving

you.

So, somehow there are signs which are happening around you and you are over looking that somehow.

Some somehow you are not received so well as far as um ah you know the present situation

is ah concerned that indication should be taken sportingly well and that indication

should be met with problem identification perspective, that is we have to immediately

try and deliberate upon and brings term upon that what kind of a problem is occurring and

why.

And then we have to disseminate that problem into causes and symptoms, and while looking

at the symptoms we have to eliminate the causes.

So, ah I further elaborate this ah a kind of.

For eliminating causes one has to think in terms of areas of considerations what kind

of ah areas of considerations you have to look for in the whole story.

ah We we have to look at the areas of consideration,

we have to focus upon the areas to eliminate the causes as far as the remedy process goes.

You go to a dentists and dentist say ah and you tell that that my tooth ah there is a

toothache I have.

So, dentist does not eliminate the tooth dentist tries to understand the problem and eliminate

the cause actually.

If ah you know cavity is a cause, so he tries to fill up the cavity.

If if something else is there he goes for a root canal procedure and so on.

So, ah one one has to look in terms of for example, we would go to a physician and you

say that I have a continuous headache, physician does not straightaway goes for a medicine

for the headache physician says that you should go for an eye checkup also, you have to look

for your blood pleasure checkup also.

So, one has to think in terms of causes and then the causes have to be eliminated.

So, areas of a consideration have to be gone for.

And then one has to chose for alternative courses of a action.

Alternative courses of action are wherein you want to address those causes of eliminate

those causes with one or I should say two or more than two mutually exclusive, but equally

powerful ways.

Because specially in business you have several ways of addressing a problem and you have

to think in terms of that what method or way would be more appropriate at this moment to

look at this kind of a situation.

Briefly ah you know ah I should quote a success story in front of you ah when when I say.

ah For example, ah this this ah ah ah if if you

would have monitored the growth of ah this ah product by ah Mahindra automotives Scorpio

its one of my favorites.

Wherein ah the earlier product was not doing well organization was going through a rough

phase and ah then ah a team was constituted by the organization and that team started

focusing on designing a new vehicle.

So, we will talk about and referred to that saying more as far as our design thinking

discussion goes in the subsequent part.

But ah then you you have ah you know that team started addressing this problem or dipping

down of sales or loses with ah rejuvenating a product with a similar kind of a profile.

But entirely ah you know with with entire ah um ah ah or or let us say a lot of difference

as far as ah the product structure shape and ah features grow and and ah by having the

basic fabric of positioning of ah being a multi utility or sports utility vehicle which

Mahindra had been producing as far as their ah buckeye of vehicles was concerned ah they

they kept that positioning and fabric intact.

But, but again they enhanced the span of that positing were almost say thats that the partially

reposition themselves whether different kind of a vehicle and approach and today ah it

is its a huge success story when Scorpia has done exceptionally well and on the basis of

that vehicle.

Now, they have so many vehicles ah you know in the market and ah they are being received

fairly well.

So, that is there.

For example, Royal Enfield.

This motor bike almost became ah a product of the past, but this organization consistently

and persistently knowing very well that customer still likes the vehicle, they they went for

an analyzing ah the customer and ah the feelings of the customer which ah um ah you know existed

when when this product was doing well.

So, we try to analyze that why customer is is getting off and getting away and they realize

that it is actually not the customer who is getting away.

So, ah customer still likes the vehicle and and ah, but but there are several aspects

to be catered to ah some advancements in the processes, some advancements in the product

and the profile of the product and then from the side of the partners ah ah you know some

some more commitment from the side of the partners has to be taken.

And Royal Enfield try to address everything and they focused upon generating or enhancing

the value with reference to the potential of ah um the elements of the whole picture

or or let us say a value chain ah they they worked upon that kind of ah you know thing.

And ah finally, we see that Royal Enfield has started doing a well again.

So, the message here is that value generation or let us say ah keeping up the value ah would

keep you intact, but but value enhancement with the perspective of potential associated

with ah an organization or let us say ah value ah potential of the value which organization

has to provide.

So, is is the most important aspect.

And potential and value have to go hand in hand.

So, that is to be catered to.

For example, Bata, dept down for a while they were they have been doing exceptionally well

and ah every school boy used to wear Bata shoes earlier.

So, Bata did well, but Bata somehow lost on sales and ah they they try to find out that

what are the reasons kind of, is there the number of products or let us say the number

of models or the types of shoes or ah the associated products or or ah what what do

the ah do they have to do actually.

So, they try to analyze everything and then they realize that ah ah still customer has

a very specific brand value ah in his mind about Bata and ah um ah they have they still

have potential to grow.

And ah then they try to analyze value in terms of ah potential of value at every portion

of value chain and they realize that they have to enhance their presence through their

partners and distributors at large.

And ah Bata went for that and ah they they went for enhanced quality, and ah their their

quality standards were revisited by them and ah today Bata is doing ah quite well.

So, ah same happened with ah management education.

And ah I will I will ah finish this discussion with ah ah um ah the this example.

Wherein management education came into India several years back, few institutions supported

by them and they initiated management education, and ah so many stabbers they contributed as

far as enhancement and capacitating this management education, so many students they came in and

ah those students have played a pivotal role in the social development, societal development

at large and ah economic development of the country and abroad is well.

Management education was supposed to play a particular kind of a role and it had to

grow exponentially.

But despite of the fact that there is a huge demand and supply gap management education

somehow could not do well.

And today we find ah someone saying that 90 percent of the people are unemployable or

someone saying 70 percent of the people are unemployable.

There are several ratios which are being catered to at this moment.

But that gives me a ah you know a kind of ah um a sort of confusion wherein I i feel

that what went wrong.

ah Catering to this kind of ah a thought we we

studied this subject at length we talked to people who have been pivotal in delivering

a and developing management education in this country.

And at the end of the day we realize that somehow whole of the story of a value proposition

throughout the value chain did not work according to the potential ah that ah potential of the

value to be delivered actually or potential potentiality of that value ah which was supposed

to be delivered.

And and ah that is how it it ah did not meet the expectations of the industry as well as

the aspirants of management education, and it it ah remained restricted to a particular

kind of students ah um who still are interested in ah this education and they are doing, ok.

But but lot many people they get associated with management education because of ah the

reasons they um ah do not know.

So, that is where ah I would end up this discussion.

Thank you.