The grocery chain Whole Foods has inspired many a lively debate. People who shop there are incredibly loyal to the company, which bills itself as “America’s Healthiest Grocery Store.” People who do not, however, seem to have a field day mocking the store and its penchant for–shall we say, more interesting products.
Case in point: a quick internet search of the phrase “Whole Foods is great” turns up stories about eating organically and about happy employees. But if you search “Whole Foods is terrible” you will come across claims the it is “America’s angriest store,” and the store’s employees are “disgruntled.” You will ask yourself: who has deep-seated feelings about a grocery store? It might seem a bit silly, but thousands of people are willing to devote their free time to cultivating listicles and articles about their opinions.
It is interesting, though, that some of the kindest words anyone has to share about Whole Foods are directly related to its purchase by Amazon, another goliath with a long list of devotees and detractors. Amazon’s acquisition cost the company $13.5 billion, and now the great experiment begins:
- Can Amazon take a sector of business–online grocery sales–that “accounts for less than 5% of the nearly $800 billion in food and beverage sales in the U.S.,” per the Wall Street Journal, and make it both profitable and convenient?
- Or will Amazon be forced to revise its business model, incorporating brick-and mortars into that model on a permanent basis?
In other words, in saving Whole Foods, will Amazon end up destroying a part of what made them a global tour de force in the first place?
Changing your business model
Depending on the type of business you own or operate, when you do a “SWOT” analysis (a technique for figuring out your strengths, weaknesses, opportunities, and threats), you may find that changing your business model is a necessary step to remaining profitable. Whether your products or services changed through M&A-based growth, or you are looking to branch out to a new market on your own, below are some ideas to help you along your way.
Consider your brand identity carefully. If you want to offer a new service or product, some experts will tell you that you are better off creating a new brand identity for that product. After all, rebranding efforts turned Apple from a dying company into a global phenom, and made Old Spice, the aftershave choice of America’s Grandpa into a product for a younger, hipper crowd. But be mindful that not all new brand campaigns work: remember Qwikster, Netflix’s short-lived DVD delivery service? Or PricewaterhouseCoopers calling their offshoot consulting services “Monday”? If your brand works, creating a new identity (for the new product, or for the company as a whole) could be problematic.
Look at different launch options. Today’s smartphones are small computers, without which most business people and professionals cannot survive. But 10 years ago, when the BlackBerry ruled the world, smartphones merely allowed access to email, a calendar and the web. Smartphone features expanded in the mid-2000s to include cameras and touchscreens because their competitors (namely Apple’s iPhone) had such appealing features. While the BlackBerry’s heyday is over (more on that in a moment), their original products offered a few new features that targeted and appealed to a specific clientele whose needs could be met. If you are looking to break into a new market, launching a minimally viable product or service that satisfies the early adopters of new technology can help you get the feet in the door.
Check in with your clients and customers to address their needs. If you already have a minimally viable product or service and wish to expand, get feedback from your customers. Find out what they need AND what they want. Again, we use BlackBerry as an example– this time for what not to do. The innovators at BlackBerry failed at understanding what made its products work in the first place: i.e., the failed Playbook tablet which contained no apps, no email and had no calendar. Had BlackBerry done the appropriate research, they may have developed a product people wanted to use.
Prepare yourself for some level of failure. Every business owner wants to be successful, of course, but new ventures may bring unexpected (and unwanted) surprises. Invest the right amount of money, time and personnel into any new venture, and be prepared if things go awry at first; it can take time to settle in. If your new service or product is not reaching the “success” benchmarks right away, do the necessary market research into why that may be. Speak to the people you intend to help AND those who you did not necessarily target: your product may appeal to an entirely different group of consumers than you realize. As Entrepreneur puts it, “Get comfortable with chaos.”
Make sure you have the help you need
It can be exciting to try something new, and we have worked with a lot of clients who are so ready and raring to go, they rush through some of the more “boring” elements, such as getting their proper documentation and permits in order, or ensuring their assets are liquid enough to sell if needed, and so forth. It took Amazon almost a year to decide on and ultimately purchase Whole Foods, to keep in line with its strategy of expanding its market and customer base.
If you run a small business–especially in a rapidly changing industry, such as technology or entertainment–you may not be able to wait a year before moving forward with a new project. However, you need to make sure that your “Ts” are crossed, your “Is” are dotted, and that you are prepared for any curveballs that might come your way. If your new venture or acquisition will be an offshoot of your existing company or brand, you do not want to screw up the goodwill you have worked hard to build. Working with a General Counsel attorney is one way to ensure that everything falls in place the way it should.
Gene Friedman is a partner at Gertsburg Licata in the transactional practice group. He may be reached at (216) 573-6000 or at [email protected].
Gertsburg Licata is a full-service, strategic growth advisory firm focusing on business transactions and litigation, M&A and executive talent solutions for start-up and middle-market enterprises. It is also the home of CoverMySix®, a unique, anti-litigation audit developed specifically for growing and middle-market companies.
This article is for informational purposes only. It is merely intended to provide a very general overview of a certain area of the law. Nothing in this article is intended to create an attorney-client relationship or provide legal advice. You should not rely on anything in this article without first consulting with an attorney licensed to practice in your jurisdiction. If you have specific questions about your matter, please contact an attorney licensed to practice in your jurisdiction.
