BUSINESS METHODOLOGY: DEAL MAKER OR BREAKER


 

A friend and I spent days talking about and analyzing businesses in the university campus. We realized that most businesses have a low profit margin due to the way in which the business operated: the business methodology.

 A methodology is defined as “an approach to “doing something” with a defined set of rules, methods, tests activities, deliverables, and processes which typically serves to solve a specific problem.”
The approach a business employs to serve a specific problem can either make it a success or a failure. The business methodology could be the hit or miss of businesses in the same industry.

The problem might not be the idea. 
The problem might not be that the hassle premium is low. 
The problem might be your execution.

             THE ‘JISE’ BUSINESS (DELIVERY BUSINESS) 
‘Jise’ is a Yoruba word meaning Deliver. This business type helps in grocery shopping and delivery to students at a service charge. Most of the ones I know charge about 200 Naira, which is less than a dollar, in the running around, buying of groceries and delivery to the customer.

The problems inherent in this is not far-fetched. The service rate is too low to cover for the effort and time of the business owner. My friend and I reached one conclusion, this business can only be profitable if orders for the groceries came in at once, that is, if people pre-ordered, or if all the groceries are bought and kept in anticipation of orders, which is a more expensive option. Days after making this conclusion, a neighbor mentioned that since it was too much stress for him to go to the market, he patronized this type of business. He explained that they received orders and delivered only on the first Saturday of the month. In making orders, the customers have a choice of picking a silver, gold or platinum package which contained specific grocery items at various prices.

The difference between these two similar businesses is the approach employed. To discover the best business model, one must thoroughly break down and analyze a business idea before acting on it. The ‘jise’ business is a good one as there are a lot of students and workers who would rather not go through the market stress. This market is a needy one. But an incomprehensive analysis of the business would likely overlook the inherent problems and would fail to solve them appropriately. The people who came up with the second model must have realized the glaring disadvantages inherent in the business during their analysis, but they were able to use those identified problems to build a good and suitable mode of operation for the business. The fact that they limited their operation to just one day of the month ensures that they cater for a large number of people at the same time, thus, removing the inefficiency and low profitability that goes with people ordering indiscriminately at any time. It also enables them to buy in bulk, which means at a cheaper rate.

        
             THE UBER BEFORE UBER: TAXI MAGIC 
Years before Uber came into existence, Arison founded Taxi Magic to provide the same services that Uber would become famous for years later. Arison explains that when he was sent by his company to a few of the smaller cities, he realized how tiresome it was to try to book Taxis in unfamiliar cities. So, he invented an on-demand, press-a-button-and-get-a-car-and-pay-for-it-electronic space.

In an interview with Inc. Magazine, Arison mentions some of the things that impeded the success of Taxi Magic. The mode of payment, in which the customers paid the drivers and Taxi Magic separately was confusing and annoying. The payment technology was all wrong, and we had to throw it away. Also, the Taxi Magic’s booking didn’t work very well. The dispatch system was bizarre. There could be a car across the street from the user, but the one that we sent would be one that we have not dispatched for a long time. The customer most often ended up taking another cab after waiting for a while. Arison also mentioned that one of the biggest mistakes was building this innovative technology on the already-existing Taxi Legacy system.
Taxi Magic missed out on gaining leadership in this industry and a 72 billion dollars valuation because of its faulty methodology.

 SO…
That business that seemed like a great prospect but failed or is failing might be due to a poor approach. Go back to the drawing table, shred it into pieces, identify the problems and think up ways to use them to your benefit; to build a workable model.

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