What has been cruelly exposed over the last months of the Covid19 crisis is the fragility of many of our strategic business models. Many organizations – large and small - have effectively shut down overnight because of this fragility. Others have struggled to pull a ‘herculean rabbit out of the hat’ in order to find new ways to trade and generate revenue. Cost cutting has been swift and painful.
Now, some may argue that its difficult to plan for a once in a lifetime event where control has often been wrested from organizations by swift and draconian government action. How can a retail business cope when the high street is shut down without notice – or a manufacturer cope when suppliers’ factories in another country cease to generate output?
The reality of course is that no organization can totally ‘future-proof’ itself from such a seismic shock and there will inevitably be, for many, a severe financial impact as a consequence. The question is ‘can we ensure that this impact does not become terminal to the life of the organization’ and thereby minimise the wider, adverse economic impact on both local and global economies?
One critical approach that all organizations must now undertake is to ramp up their business continuity planning. A structured approach to this is use a ‘business model canvas’ to identify ‘business continuity bottlenecks.’
The business model canvas is a tool originally promulgated by Alexander Osterwalder in 2005. It describes uniquely how each organization creates value based on the strategic decisions that it has taken. The canvas uses 9 building blocks which effectively describe the choices made through the strategy on how to operate. A template example of this canvas is shown below:
The advantage of this framework is that it highlights decisions made in all aspects of value creation including partners and suppliers, key activities, key resources, channels to market etc.
By first describing your business model using the canvas, you can then visit each of the 9 building blocks - establishing within the detailed content for each one where there may be a severe impact caused should any one of these elements be deemed, a ‘bottleneck’ to doing business. For example, a sole supplier, or just-in-time international supply model would be an obvious such bottleneck in business continuity should the sole supplier fail, or international trade be interrupted. Similarly, a single or heavily weighted sole channel to market as in the case of a substantial reliance on a ‘bricks and mortar’ retail sales model would constitute a similar continuity bottleneck.
With business continuity bottlenecks identified across the 9 categories of the business model canvas, the organization can then apply its ‘risk appetite’ to identify those bottlenecks that it may be prepared to live with – or it may, more likely, seek to find ways to ameliorate the impact of its bottlenecks by revising aspects of its business model. It may use some scenario planning here and model levels of potential business impact based on different investment and profit impact in moving to adjusted business models
The value of selecting a business model canvas for this work is that using ‘frameworks’ helps focus discussion and minimise the risk of error by omission or items just ‘falling through the cracks.’ Organizations should rapidly undertake a business model canvas development and seek to align a desired future business continuity state with its current survival decision making in order to, as much as possible, ensure that a set of coincident decisions are being made now to start the process of alignment to a more resilient future business model.
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