The 2020 Mid-Year Economic Update_long

Business Strategies: Maximizing Risk Opportunity

Too often, the principles that a business is founded upon end up being the limitations preventing it from growing.
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Recognizing a need for change in a business is only the first hurdle for many distributors; many need a little more direction to help steer the ship.

Finding direction is easier than you think, according to Karan Girotra and Serguei Netessine, authors of The Risk-Driven Business Model: Four Questions That Will Define Your Company.

“Not every company is in an industry where there are massive technological changes or improvements,” says Girotra in the MDM Interview: Operations as a ‘Lever for Innovation.’ “But every company is in an industry where you have a business model, a distribution system, some operational systems. An operational system is a lever for innovation. This is a game that everyone can play.”

All you need is a framework for assessing how your company is currently operating and the ability to tolerate some shifts in those operations.

Informational basics apply here, Girotra says. What are you offering? When are your decisions made? Who is making those decisions? And, why are you making them?

Girotra and Netessine say that too often, the principles that a business is founded upon end up being the limitations preventing it from growing. One obvious example they noted was Blockbuster: the company didn’t respond to the question of "what" it was offering and if that product was still something that its customers wanted.

In another example, the company changed its business model so that they decided what products to offer later in the process, when they had more information about what customers wanted. Girotra says that the “when” is perhaps the most accessible lever for distributors.

“Sometimes we can tell a certain group of customers that if they book well in advance, we’ll give them a discount on the price,” he says. “That will give us some advance information on what we need to manufacture or have in stock.”

Stagnant business development will affect profits, and inefficiencies are risks that can contribute to success or failure.

Determine what the risks are in your company’s current decision-making models. What problems have occurred in the past and show where there is room for improvement? Identify the patterns that have led to previous inefficiencies, and modify them so that those risks are minimized. The right changes can provide the room to take bigger risks with more confidence.

Read more from my interview with Girotra in MDM Interview: Operations as a ‘Lever for Innovation.’

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