Changing your business model can be one of your toughest business decisions. But failing to adapt your business when market conditions change can cost you more than lost revenues.
A mobile app development company was on the brink of bankruptcy. They developed a mobile app that provided estimates and auto shop contacts to users who sent in their car wreck photos. But they had a big problem. Consumers weren’t interested. Since drivers may only have a wreck once every 7 to 10 years, there was no interest by consumers to buy the app.
The company started drastically cutting costs to save the business. Because consumers weren’t buying, they had to find someone who would. In a desperate act, they went to insurance industry trade-shows and met with auto insurance companies. They quickly learned the auto insurance industry was way behind in technology.
The spotted an opportunity for the business and that’s when the licensing mindset kicked in. If the company could license its technology to insurance companies, and let them offer it to the tens of millions of insurance customers, they’d have a revenue generating business.
The company quickly revamped its business model and turned it into a licensing model. They changed the company name and licensed the technology directly to insurance companies. The Insurance carriers got rights to brand it as their own app and offer it to customers who wanted to get inspections done quickly, without having to wait for an agent on site.
In less than two years, the company completely turned around its business, and went on to raise $10 million. Its business grew over 400%, and the app is used by 14 of the top US auto insurance companies
Don’t get stuck in the tangible “we’ve always done it this way” box. Profit is now a game of out thinking your competitor and less about out producing him. The old business model designs a product and sells it to create income. The new business model uses intellectual property (IP) to generate revenue and build a higher business value than the traditional “product only” business.
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