Transitioning to a different business model

Transitioning to a different business model is not an overnight task. It is a process that needs to be reviewed regularly to prevent the company from being left behind by evolving market trends, or becoming disconnected from the expectations of stakeholders, such as consumers, employees or financiers.

There are three main stages to business model transition:

1. Assessing the current state. The first step is to identify issues such as how the existing business model is performing, where the weak spots are, what the expectations of stakeholders are, how the external environment is changing and what impact it will have. This can be both an absolute analysis and a relative assessment to benchmark against other businesses in the same or similar sectors. Obtaining these insights enables you to build up an accurate picture of the organisation and its operating environment, where changes need to be made and the cost implications of those changes. Not sure where to start? Our Optimize platform can support you to confidently map your business.
2. Designing the new business model. The aim here is to turn the insights gained in stage one into a new business model that considers the key operational aspects of people, process, controls, data and technology. It will be informed by interviews with department and process leaders, customers and stakeholders to truly understand how business processes could be leveraged or optimised, and how business operations could be improved. Could some processes be digitised, for example? There should also be an appropriate risk and compliance management element, to identify the relevant risks and compliance requirements in a timely manner and understand how they are, or can be, managed within a control framework.
3. Implementation. The final phase is about implementing the new model into the organisation. It is crucial to have a clear roadmap with milestones to ensure that the adaptation of infrastructure and processes, or the hiring of new professionals to implement the business transformation have actually taken place at the right time.

The culture of the business is critical to effective business model implementation. Senior management needs to be engaged and committed to the changes – and seen to be so. The transition and the benefits it will bring need to be communicated clearly to employees. The actual purpose of the company must be communicated transparently and authentically. Everyone should feel involved, to understand what’s happening and why, and to take ownership of their responsibilities. This may mean revising the rewards and incentive programme to ensure it is aligned with the objectives and key milestones of the new model.

Investment is also likely to be crucial. Effective transformation needs effective budgeting, which may mean securing external funding from banks or other finance providers. If you need to secure finance externally, the assessment and analysis you’ve carried out during stages one and two can be invaluable when demonstrating the viability of your strategy to potential lenders or investors. Having accurate ESG data, for example, will position the business more positively for most finance providers, who will have their own sustainability requirements to comply with.

At Mazars, our global privately owned business teams work with clients around the world to support them in transitioning to new business models. To find out more, please get in touch with us below:

Author: Joern Dieckmann, Partner, Germany (Audit, Tax, head of POB)

Published: 29/11/22

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