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Startup Business Models - Using External Change to Your Advantage

Startup Business Models – Using External Change to Your Advantage

One well-trod path to entrepreneurial success is capitalizing on changes in the external environment. Rather than inventing a new techno-gadget and looking to find a market for it, why not be alert to shifts in regulation, technology or society itself and design a business model that uses them to shake up a stagnant industry.

This approach to creating new ventures requires:

  1. Being alert to changes in the environment
  2. Thinking through their potential impact and flow-on effects
  3. Designing a business model that capitalizes on the changes in a useful way
  4. Recognizing when the time is right and launching the business

Timing is critical. Plenty of people have been right about an underlying trend, but launched before the opportunity was ripe, or before supporting factors were in place. That said, you don’t want to be too late – someone else might nail it first.

Here are a few examples of how external change can create opportunities (and threats) for business models:

  • Easy Being Green: Took advantage of regulatory change, using the NSW Greenhouse Gas Abatement Scheme to build a business making homes more eco-friendly – at no cost to the consumer. It made money selling carbon credits earned for installing energy efficient light bulbs and shower heads. However, the winds of change don’t always blow in the right direction. Regulatory uncertainty over the future of the NSW government scheme recently led to a price collapse in carbon credits, effectively destroying the company’s revenue model and putting it out of business.
  • iTunes + iPod: Apple used technology changes to revolutionise the music industry. They saw the internet changed the economics of distributing music, and existing music companies would be reluctant to change. Apple also recognised online music distribution was only half the picture – people needed a better way to take their music with them. Hence the iPod – a design icon and highly portable music device, enabled by improvements in the cost and size of electronics technology. The combination of iTunes and iPod is truly powerful.
  • Boost Juice Bars: Recognised a social change towards increased health-consciousness, and saw the potential for juice bars as a healthier alternative to fast-food. The founder, Janine Ellis, realised the time was right and that many competitors would soon enter, so she chose a franchise model to enable rapid expansion and ensure the right culture.
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