Adnan Ahmed, Head of Strategy at Starling Bank spoke on the first day of Elite Business Live on 10 March for the Financial Management talk, explaining why business model innovation is important during these changing times, the dos and don’ts of changing the way you operate your company, and why it is important to be adaptable with ever-changing consumer demands.
The Covid-19 pandemic has completely changed the way consumers operate and therefore has become one of the ‘biggest drivers’ in business innovation in the past decade, Adnan said. There has been a huge shift in consumer demands during the lockdown, meaning businesses had to adjust to the needs and wants of their customers and adapt to the changes in order to survive. A lot of SMEs were impacted by Covid, many of you in the room here saw a reduction in revenue. Two in five firms have changed their business line to adapt, and 70 per cent have accelerated digital transformation. From McDonald’s to Michelin star restaurants, you started getting inundated with food delivery options or preparing it at home yourself.
Adnan spoke about how Starling Bank was able to adapt to the changes brought about by the pandemic. They focused on putting their customers’ needs at the forefront by launching products that were helpful to consumers. We were ready from day one, Adnan explained. We had the right organisational structure in place to support us to go to fully remote working, so everyone worked from their laptop. We had the right governance and support in place for our staff to make decisions quickly and easily, but we were also really focused on the customer and their needs. We released products in days, we were one of the only banks in the UK to launch lending as quickly as we did but at the same time accept new SME customers. And we also launched products that were helpful to our customers.
What is business model innovation? It is important to change the way you operate your business in times of crisis, but to also make sure your new model is feasible and cost-effective in the long run, Adnan said. What is business model innovation really? It means adjusting changes to consumer demands to add value most cost-effectively, he explained. You’re trying to better serve your customers, figuring out where you lie along the value chain. You have to do it cost-effectively, so there’s no point in doing something innovative if it’s going to cost you more than you can make from it. And finally, I think this is the most interesting one and perhaps overlooked, you need an organisational structure and support to deliver that innovation and to maintain your cost space.
How do you execute an innovative business model? Adnan broke it down into four categories ‘ the Reinventors, the Mavericks, the Adaptors and the Adventurers. The first two types of business essentially transform the core of their businesses to adapt to changing consumer behaviours, while the latter expands into ‘non-core’ territories, such as mergers and acquisitions or partnerships, working with other businesses to leverage your capabilities. A lot of businesses did transform their core, previously you’d have McDonald’s – you couldn’t order McDonald’s online before, Adnan said. They probably didn’t want to order food online, it’s expensive to hire drivers and build up the logistics side of that, so Deliveroo for example, they could leverage that to get to customers when they couldn’t during Covid.
Moving on to expanding into non-core, there are several ways you could do that. One is M&A (mergers and acquisitions), so thinking about where your capabilities are not quite right and who you can purchase or merge with to supplement your capability. And I think this is quite important because you should always focus on what you’re good at and doing that well. Because that’s the key part of your business, this is what you’re good at and this is why you’re making a living out of it.