Necessary and mandatory

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Russian business was born in the era of scarcity, and matured in the era of economic growth. This has formed typical business models of Russian companies. However, the situation in the economy, regardless of the crisis, is changing in such a way that in the next few years Russian companies will have to significantly change their business models or disappear.

In short, the business model describes the way a company makes money. The business model answers the question of what is the company's product, who is the consumer, what value does the business create for the consumer and how does it monetize this value. For example, content is valuable for the media, but some media provide access to it for free or for a nominal fee, and earn money from advertising. For other media, on the contrary, the basis of income is the fee for access to materials.

The business model answers the question of what is the company's product, who is the consumer, what value does the business create for the consumer and how does it monetize this value. 

Microsoft previously sold its programs, and now they can be purchased by subscription. And Linux programs are free for the user, and they earn on paid support. Some companies earn money on the sale of goods, some on related accessories, and others on the after-sale service.

In the clothing market, there are companies that only develop clothing models, but sew them abroad. Along with them, there are full-cycle companies that do everything themselves, and there are those who sew more for others. There are companies offering ready-made clothes, and there are sewing to order. The latter usually sell their services through showrooms, but online services have been actively developing in recent years. These are all different business models.

In 2014–2015, Russian business fell into a "perfect storm", a set of negative factors radically changing the structure of demand and consumption patterns. And the answer to them can no longer be simply cost reduction or easy optimization of the assortment. It will be possible to adapt to new opportunities only by radically updating the business model.

What are these factors?

• sanctions and course. On the one hand, imported products have risen in price, but raw materials, components, and equipment have also risen in price;
• natural stagnation of demand. Many markets in Russia were close to saturation even before the economic turmoil. Demand has stopped growing, competition has intensified;
• continued growth in the scale of cross-border trade. Russians have learned to buy goods abroad, depriving local players of income, and so far the legislative measures taken have not greatly affected this;
• significant tightening of state requirements for business. It has become much more difficult to use previously familiar methods of increasing business profitability by optimizing taxes, "gray" customs, etc.;
• "demographic pit". The generation of the 90s entered the labor market, the smallest in Russian history. The influx of labor into the labor market is significantly less than the outflow, and employers, despite the crisis, still find it difficult to attract labor at an acceptable cost;
• rising cost and unavailability of loans– for both entrepreneurs and buyers;
• economy mode. Russians have learned to save, and this is for a long time. Competition between players in most markets has increased significantly.

Reducing costs and fine-tuning business processes, thanks to which Russian companies managed to survive previous crises, will no longer help, a complete restructuring of the business will be required. Here is what will form the basis of successful business models in 2016–2019:

• marketing. Intuitive decision-making about assortment, services, prices, advertising campaigns and promotions will become a thing of the past;
• value. The mere presence of a more or less relevant product in a warehouse or on a store shelf will no longer be enough for success. Companies will have to work hard to create a unique value for consumers and convey its values to customers;
• strategy. Successful companies in 2016 and 2019 will develop not intuitively or spontaneously, but on the basis of long-term plans;
• outsourcing. Successful entrepreneurs of the future will focus only on the main business processes, that is, those that create or increase value for the consumer. They will outsource everything else;
• accounting. In many Russian enterprises, accounting for the movement of inventory is incredibly complex and confusing. The trend of the next three years will be the simplification of accounting processes in order to increase the speed of work with a reduction in accounting costs;
• staff development. It is no longer necessary to hope that you will be able to attract experienced professionals from the labor market or solve increasingly complex tasks facing you with the help of old, insufficiently experienced and qualified employees. The requirements for employees will increase significantly, and companies will have to invest in staff development.

Read the rest in part 2.