To Change Or Not To Change
Are you thinking about starting a new gym business or changing the direction of the one you operate now? If you’re not, I’m not suggesting you should, but if things haven’t worked quite the way you planned or, if the market has peaked and begun to tail off, you might be wondering about making a change.
The choice between staying the course in a mediocre business model and finding a new one that’s better is the conundrum of the ages. There’s even a name for the syndrome that business owners and entrepreneurs face, it’s called the Innovator’s Dilemma.
The Innovator’s Dilemma is the choice between sticking with an old, mature business model or market, and shifting to a new, untested model, which may or may not succeed for you. As much as any struggling mature business facing the prospects of stressful transformation, founding a startup is a dramatic change. As they say, going from zero to one is indeed a transition. Think of a startup as the change that starts from nothing.
The Geometry of Business Models Is A Series of Curves
The S-curve of growth – Growing into a scalable business model is a change too. So is finding a new market as an old one matures and then fades. It is well documented that businesses trends grow in an "S" shaped curve if you plot performance over time.
The innovation adoptions curve – People adopt new ideas in normal distributions, with early adopters, main market majorities, and laggards. This curve is a little deceptive, it accounts for the companies that go on to the big time. I’m simplifying these because there are more stages that marketing experts have identified. The point to note is that there is a gap between the early adopters and the large and profitable majority markets.
The gap comes from the steep rise in interest you have to win to become a success in your marketplace, which applies whether you’re inventing new vacuum cleaners, software applications, or fitness concepts. Not getting across the gap means the S-curve of your innovative fitness system flattens out too soon, which brings us to the final curve in the mix.
The power law distribution – Which business becomes successful follows a power law, also known as the Pareto Principle. The distinctions between good and bad ideas are not obvious until the revenue reports are in. History shows that the companies that get beyond finding a few early adopters are few and far between. It’s the gap that makes it so difficult to achieve a big market, and the results are that many companies have little success, but a few, like magical unicorns, go on to fame and fortune.
Try lots of ideas, as cheaply as possible, and look for the one most likely to catch on. Dip your toe in new opportunities carefully, while your old business coasts to a close. With luck, you’ll find a new business that crosses the gap for you.
Lessons from The Investment Numbers Game
Finding the exciting new ideas hidden in the crowd is something that Silicon Valley venture capitalists (VCs) have raised to high art. They understand that the tech startups that seek funding from them are promoting ideas in the hope that their apps and websites turn out to have economic potential.
VCs know how to recognize the predictable start-up red flags. Founders have to believe in themselves even if they are making obvious beginner mistakes. Experienced investors can see more deeply and make objective appraisals about the chances of each one earning back their investments.
Even so, the startups VCs choose to back each have a relatively low probability of returning a profit. The chances of making back hundreds or thousands of times the investment are so small that VCs, call the big wins, such as Facebook and Uber "Unicorns."
The Dilemma Is Real
Whether you are making the bold decision to found a startup gym business or you need to transform the one you already own, it’s a change, you need a new idea, and new ideas are risky. However, not changing is risky too. To stay in a business model where you’re losing money where membership retention is falling away noticeably is a path to nowhere just as much as throwing caution to the wind and changing to a new but untested model.
Before you give up on your current gym business model, try Gym Insight if you haven’t done so yet. It might be the one thing you need to turn a profit with your existing company, a new system that integrates client accounts, business operations, and point-of-sale payment activity.
Insight will help you maximize your profit margins and minimize customer cancellations. If you can get a few more dollars from each customer relationship, it might be all you need. When you do decide it is time to transition into something new, Gym Insight has the flexibility to go with you and make the most of the new model.
Barlow, Buckley. The S Curve of Business: The Key Levers to Sustaining Momentum for Your Brand. https://www.rocketsource.co/blog/s-curve-of-business/ (accessed November 7, 2018).
Fagan, Lawrence. The Long And Short of The Long Tail. December 27, 2013. https://blog.gyminsight.com/2301-the-long-and-short-of-the-long-tail/ (accessed November 7, 2018).
The Interaction Design Foundation. Understanding Early Adopters and Customer Adoption Patterns. March 8, 2018. https://www.interaction-design.org/literature/article/understanding-early-adopters-and-customer-adoption-patterns (accessed November 7, 2018).
Thrasyvoulou, Xenios. Understanding the Innovator’s Dilemma. December 12, 2014. https://www.wired.com/insights/2014/12/understanding-the-innovators-dilemma/ (accessed November 7, 2018).