Were Business Models Made to be Broken?
According to Fortune editor and The Airbnb Story author, Leigh Gallagher, changing or expanding your business model involves trusting your gut. And being able to provide the right resources needed to expand in new ways (while a scary proposition) can actually prove key to future growth.
“It’s important that whatever your first market is, you really make sure you get that down and do that well,” she asserts. “I think one mistake that a lot of companies make is they try to do too much too soon.”
The idea of brand stretch isn’t new, but its implications can vary. In her new book, Gallagher writes about Airbnb taking a step back and pivoting to sell cereal to raise cash flow. It seemed more like a failed plotline from an episode of Silicon Valley than a real business plan, but in all actuality, it helped Airbnb market themselves to the right investors. Another great example of business model adaption is Amazon. Not so long ago, Amazon was all about discounted books and now Amazon sells everything under the sun—including award-winning content. In both instances, the very ethos of each brand remained the same—which Gallagher says is tantamount to a company’s success.
She uses the example of a well-known CPG geared toward women that flouted its organic product and then proceeded to change it so it no longer stood out as a distinct brand in the marketplace. “If your whole thing is that you’re not that, and then you do that, it makes me wonder why a company would try to do something that stands against what they originally entered the marketplace for,” she says. “It has to be something that your customer is going to accept, and I think you have to have the resources and credibility to really make it work.”
From Gallagher’s perspective, holding on to the essence of a brand model is much more important than tearing it down and building it from the ground up. In Airbnb’s case, this meant evolving their open market home rental model to include curated experiences from local hosts around the world. For Amazon and even Apple (who succeeded in switching gears under Steve Jobs’ leadership by putting out fewer products and focusing on design, ease-of-use, and functionality), it meant continually driving innovation while taking into consideration the wants and needs of their consumers.
But customer needs aside, it’s often important to take a step back and look at the big picture. Rejiggering a brand model is a delicate dance, and in doing so, driving revenue and profit can adversely impact brand perception.
“Do you want to give customers something that they think they want or do you want to give them something they might not know that they want?” Gallagher asks. “Because if you’re willing to take a risk and the idea is good and that risk pays off, you can bet their next response could be, ‘Oh I want to try this, that’s so cool!’”