Life is changing, civilization has come to the unimaginable era that human never thought could be, the disruptive business models have altered the former giant companies, and yet we still rely our analysis on SWOT (Strength, Weakness, Opportunity, and Threat).
As we delve into the history of this remarkable founding in helping mankind doing their business, it was Albert Humphrey who led the research in Stanford Research Institute –taking data from enlisted companies of Fortune 500 from 1960-1970.
This analysis, in the end was a big contribution when analysts or even the business men themselves would like to figure the required sequences to obtain their competitive advantage.
But here’s the thing: SWOT analysis has become obsolete and we, as the children today (anak jaman now) – who do our own business or work for private / public companies, do not realize it.
How long did it take when dot-com business dissolve the business and industry all around the world? How long did it take when big companies like Kodak, Fujifilm, and Nokia meet their end? How long it would take for blockchain and crypto to dominate human interaction (since fintech is everywhere)?
Jeff Immelt, the CEO of General Electric once said, “every industrial company will become a software company”. What he said is against all codices that have been planted since internet and www business disintegrate the business sphere.
We already enter, even a newer era than software company. All businesses in the world will be connected each other by blockchain. The competition will be fiercer, there is almost no one business line that has not made using the agility of software. All industries have entered a ‘red ocean’. Well, but do not make this reality as our cross beam to do business.
One important thing that we can change and may lead us to the ‘blue ocean’ is by using a new analysis to gauge and determine the felicitous business strategy. SWOT is good, but good is not enough for today – where everyone offers the same good. We need more an incisive and applicable method to deal in the fight.
We could say that the most precise measurement to consider whether our business going to be survive and thrive or not – is by using a scale of ‘Sustain Competitive Advantage”.
To achieve this level, the gambit is we should understand how to create the right business model. There are two aspect of business models; old business model and new business model. We can find old business model everywhere, in most cases they used to be giants but do not want to change. In other hand, new business model is the unconventional way to meet customer needs, and this model can be disruptive and alter the old models.
The right business model initiated by a proper business strategy. Do they differ? Yes, they do. Business strategy means we deal with company’s competitive initiatives and business approaches, while business model concerns whether revenues and costs flowing from the strategy demonstrate a business can be amply profitable and viable.
There is a ‘different method’ to analyze our business model, such Value Chain Analysis. Value Chain Analysis (VCA) is a process where a firm identifies its primary and support activities that add value to its final product and then analyze these activities to reduce costs or increase differentiation. It was designated by M. Porter. In Value Chain Analysis we cluster 2 major activities to lead us to the profit. The primary activities add value to the final product directly, while support activities add value indirectly. Primary activities composed of inbound logistics, operations, outbound logistics, marketing & sales, and services. Note that, Although, primary activities add value directly to the production process, they are not enough. Nowadays, competitive advantage mainly derives from agile innovations in business models or processes. Therefore, such support activities as ‘information systems’, ‘R&D’ or ‘general management’ are usually the most important source of differentiation advantage.
As we experienced since studied in high school and college, the lecturers always taught us about SWOT. And as we encounter the facts today, SWOT has some limitations. It is so subjective and has no weighs. We prefer to write down more ‘good things’ than the ‘bad things’, like 10 strengths but 3 weaknesses, and 7 opportunities but 2 threats. We also cannot determine which activity is priority and should be dealt first or not.
So, by knowing this, we will be more thoroughly on creating the best business model so we can achieve a Sustain Competitive Advantage. A good business model comes from a good business strategy, that’s why they should be align and SWOT analysis cannot elaborate it. By doing things differently, or create something new to the company will not necessarily our company to obtain that Sustain Competitive Advantage. It is needed to have a strong business model that consists of elaboration of resources and capability which is not easily to be imitated. By doing this, we will create an attractive industry and lead us to the above average returns.
***Karya : Monica Anggi JR