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Innovating the business model is a skill that every company needs from time to time, but changing the model near-instantly and perhaps radically is something else. Whether tweaking the model or transforming it, virtually all companies have had to make changes during the pandemic. Here are a few that have done it creatively and well.
Mandarin Oriental Hotel Group
Do you desperately need a break with plenty of pampering, but you aren’t ready to get on a plane? No problem. Mandarin Oriental is telling customers that if they live in a city with an M.O. hotel, they should just drive over and check in for the “Staycation at M.O.” program. In Boston, for example, they’ll get early check-in and late checkout, breakfast included, a bottle of wine, and a $50 credit toward other purchases.
But wait—you don’t even want to check into a hotel? In some cities you can just call room service. They’ll bring the food to your house. Or goodies from the cake shop, supplies from the spa, or other merchandise.
The big idea is that M.O. is finding new ways to sell the luxury hotel experience. That’s biz model innovation.
A complete shutdown of bars and nightclubs is cataclysmic for makers of alcoholic beverages. During China’s lockdown, the huge JD.com e-commerce business engaged DJs and performers to stage three-hour live shows online—and with one click, viewers could get Rémy Martin cognac, Pernod Ricard spirits, or Budweiser or Carlsberg beers delivered to their doors. JD.com claims that during a show, sales of whiskey from “a single partner brand” increased eightfold versus the same period the previous day.
The lockdowns have mostly lifted in China, but JD.com plans to continue using live music events to sell merchandise, and not just alcohol.
With nearly all large gatherings canceled, a whole industry of specialist suppliers is hurting: audio-visual technicians, caterers, stage set designers, program producers. But did you ever think about the suppliers of magicians, caricaturists, and casino nights, not to mention the Chuggy Choo-Choo Crawl-Through Inflatable and the Big Stinka Bounce House? Rob Broms is the owner of one such supplier, Record-a-Hit Entertainment (motto: “We put the fun in your function”). While most of the attractions he offers can’t go virtual, a few (including the first three mentioned above) can, and he has developed others.
“We just added a virtual escape room two days ago,” he said recently. “There’s been a lot of interest—people compete in teams.” And because thousands of new college students can’t explore their campus in person, he has added a digital game in which teams explore it virtually and compete to answer questions and solve puzzles.
With car sales plunging nationwide, the Washington Post reports that this Glen Mills, Pa., auto dealership sold more cars in July than in any previous month in its 15-year existence. All car dealers knew they’d have to transform their business model in the pandemic; the difference is that owner David Kelleher and his sales staff went all in. He created a business development center to consolidate online leads, and he placed its desk prominently just inside the front door. Salespeople work phones, email, texts, Zoom; they use FaceTime to accompany customers on test drives. Some customers do the whole deal online, in which case David Dodge delivers the vehicle to their home. Kelleher and his top salesperson, Mike McVeigh, share the same view of their future: We’re never going back.
Chipotle Mexican Grill
Like David Dodge in the car business, Chipotle knew how it would have to change in the pandemic era—but unlike most competitors, it went all in. Orders for pickup would be its lifeline, so the company added “digital kitchens,” which handle online orders for pickup, at the restaurants that didn’t already have them. Digital orders for pickup grew so fast that Chipotle announced in May it would hire 8,000 new employees, then said in July it would hire 10,000 more. It began aggressively adding “Chipotlanes,” drive-thru lanes exclusively for picking up digital orders. That business model requires more employees than traditional stores—hence all that hiring—yet is much more profitable. As thousands of restaurants nationwide struggle or fail, Chipotle stock is hitting new all-time highs.
That’s the power of business model innovation. Remember that business models and strategies aren’t the same. A strategy is a set of choices about which markets to serve and not serve, where, delivering what value proposition. A business model is a way of getting paid. All the companies discussed here are bringing their same basic offerings—a luxury experience from Mandarin Oriental, for example—to their same customers and target customers, delivering those offerings in new ways.
Know of another great business model innovation? Send us an email at firstname.lastname@example.org.
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